Parties Seeking to Blame Each Other’s Policies for Gas Prices

President Obama touched off the latest flurry with a letter to Congressional leaders last week calling for the repeal of $4 billion a year in tax incentives for domestic oil and gas production, saying the industry was doing very well, thank you, and needed no help from the government. Republicans responded that the president’s proposal would only raise the cost of production and the price of gasoline, which now tops $4 a gallon in many parts of the country.

Both parties are planning legislative maneuvers this week to try to caricature their opponents as either in the pockets of the oil companies or hostile to domestic energy production.

The debate may generate a fair amount of noise that provides one side or the other with a temporary political advantage but is unlikely in the end to have an appreciable impact on gasoline prices.

“Every time Americans have to shell out $60 or $80 to fill their tanks, they mutter under their breaths about government and it puts pressure on Congress and the White House to do something,” said Byron L. Dorgan, the former Democratic senator from North Dakota who is now co-chairman of an energy project at the Bipartisan Policy Center in Washington. “But it’s just howling at the moon. The basic laws of supply and demand haven’t changed.”

House Speaker John Boehner unwittingly gave the Democrats a political opening to pile on the oil companies by saying in an interview with ABC News last week that oil companies should “pay their fair share in taxes” and that Congress ought to reconsider some of the tax incentives they enjoy. He has since walked away from those remarks and said that raising any taxes would choke off the economic recovery and lead to higher prices of gasoline and other goods.

His comments came as lawmakers from both parties were home on recess, hearing a torrent of constituent complaints about the high cost of gasoline at the same time major oil companies were reporting near-record quarterly profits. Exxon Mobil, the world’s largest oil company, said it earned $10.7 billion in the first three months of the year, and other companies reported similarly robust earnings.

Mr. Obama seized on the opportunity to try to deflect some of the heat he has been feeling as gas prices have steadily climbed. He noted wryly at a political fund-raiser last weekend that his poll numbers tend to go up and down with pump prices, even as he admitted he had no “silver bullet” to bring those prices down in the short term. But he found ammunition in the tax breaks the oil industry has enjoyed for decades, portraying the industry as undeserving of them at a time when government needs all the revenue it can get.

“As we work together to reduce our deficits,” Mr. Obama said in a letter to Congressional leaders last week, “we simply can’t afford these wasteful subsidies.” Mr. Obama says the money saved should be used to finance more research into clean energy alternatives — a proposal he has made in his last two budget requests that has largely been ignored.

“The odds are low that the tax repeal goes through as a stand-alone measure, but you might see it as part of a broader deal,” said Michael A. Levi, an energy and environment specialist at the Council on Foreign Relations. He said it was in Mr. Obama’s interest to keep the issue alive both to align Republicans with the unpopular oil companies and to use as leverage as new budget negotiations begin.

Harry Reid, the Senate Democratic leader, said he would press for a vote as early as next week on repealing the tax subsidies. Democrats hope to paint Republicans who vote against the plan as tools of the industry.

“Now is not the time to stand idly by while large oil and gas companies get billions of dollars in tax breaks,” said Senator Max Baucus, Democrat of Montana and chairman of the finance committee. “Now is the time to take concrete steps toward cleaner, more affordable, domestically produced energy.”

The measure could well pass in the Democratic Senate, although some Democrats from oil-producing states, like Mary Landrieu of Louisiana and Mark Begich of Alaska, are likely to oppose it.

But it has little chance of even coming to a vote in the Republican-run House, where Speaker Boehner is orchestrating a fresh chorus of “drill, baby, drill” with a series of votes on bills to allow new oil and gas exploration in the Gulf of Mexico and off the coast of Virginia.

“Our goal is to expand the supply of American energy to lower gas prices and create jobs,” said Michael Steel, spokesman for Mr. Boehner. “Raising taxes would have the opposite effect.”

Neither the Senate tax measure nor the House drilling bills is likely to become law because of the fierce partisan calculus of the current Congress. But some Republicans, including Representative Paul Ryan of Wisconsin, the party’s leader on budget matters, have left open the door for rethinking a range of government tax breaks as part of an agreement on the federal budget and deficit ceiling.

Some conservatives oppose energy subsidies of all sorts — including those for ethanol, wind, nuclear and solar power — and would be willing to see them all repealed as part of a reform of the business tax code.

Oil industry tax breaks — some of them dating back a century — have been debated for years but have survived every elimination attempt. According to a breakdown by the nonpartisan Joint Committee on Taxation, oil companies receive about $4 billion a year in federal subsidies and can avail themselves of tax breaks at virtually every stage of the prospecting and drilling process.

One lingering provision from the Tariff Act of 1913 — enacted to encourage exploration at a time when drilling often led to dry holes — allows many small and midsize oil companies to claim deductions for tapped oil fields far beyond the amount the companies actually paid for them.

Another subsidy, devised by the State Department in the 1950s, allows U.S.-based oil companies to reclassify the royalties they are charged by foreign governments as taxes — which can be deducted dollar-for-dollar from their domestic tax bill. That provision alone will cost the federal government $8.2 billion over the next decade, according to the Treasury department.

David Kocieniewski contributed reporting from New York.

 

E.U. to Review Mobile Operators' Policies on Web Access

BERLIN — The European Commission is planning to investigate whether European mobile operators are managing wireless Internet traffic to discriminate against competitors or consumers who use data-intensive services.

Neelie Kroes, the European Union’s telecommunications commissioner, on Tuesday will ask an advisory panel of national regulators to examine whether mobile operators are upholding the principle of network neutrality, which calls for all data traffic to be treated equally.

In a 10-page summary of remarks she intends to present in Brussels, which was obtained by the International Herald Tribune, Ms. Kroes said she was so far unconvinced that a serious problem existed or that new legal consumer safeguards were needed.

Referring to consumer complaints over blocking or throttling of certain types of mobile Internet use, Ms. Kroes, in her prepared remarks, said, “The commission does not have evidence to conclude that these concerns are justified at this stage but should be borne in mind in a more exhaustive, fact-finding exercise.”

Advocates of network neutrality criticized the inquiry as insufficient, saying that the fact-finding mission was superfluous and ignored obvious, continuing problems with the mobile Internet. Operators, for example, do not connect Skype calls over their networks because the Internet calling company’s services would siphon revenue from their own businesses.

“The European Union appears to be alone in the developed world in tolerating on such a wide scale these types of arbitrary restrictions on Internet use,” said Jean-Jacques Sahel, the director of government and regulatory affairs for Skype in London. “It has to cease and we look to European authorities to unambiguously protect consumers.”

The review will ask regulators from E.U. member states to examine whether a European telecommunications law that takes effect on May 25 is sufficient to ensure an open Internet. The law requires operators to disclose traffic management practices to consumers, gives consumers the right to switch operators in a single day and gives national regulators the power to set minimum levels of service for mobile Internet operators.

Lawmakers in Europe, unlike those in the United States, have taken a relatively hands-off approach to network neutrality, allowing the Continent’s mobile operators, which are typically former national monopolies, to manage and prioritize data to ensure smooth flowing traffic.

In the United States, the Federal Communications Commission last year adopted network neutrality rules that forbid operators to block content on their networks. But the commission’s legal authority has been questioned, and the U.S. House of Representatives voted on April 8 to restrict the F.C.C.’s ability to manage operator practices.

In Europe, the European Parliament and the Council of Ministers debated network neutrality in 2009 and amended telecommunications laws to enshrine the concept as a fundamental right, but imposed only weak restrictions on operators. The Body of European Regulators for Electronic Communications, an advisory panel of 27 E.U. national regulators, will examine whether the new law safeguards consumers.

Luigi Gambardella, the chairman of the European Network Operators’ Association, which is based in Brussels and represents mobile operators, said his group supported Mrs. Kroes’s view that “any additional regulation should avoid deterring investment, or innovative business models, leading to a more efficient use of the networks and creating new business opportunities.”

John Phelan, a spokesman for the European Consumers’ Organization, a Brussels group, said Mrs. Kroes’s fact-finding mission overlooked a wealth of evidence that European operators were discriminating against rival services and high-volume mobile users.

Mr. Phelan pointed to a new network neutrality law adopted this year in Norway, a country that is not a member of the European Union, which was supposed to protect consumers from discriminatory treatment by mobile operators. The new rules have had no effect on the market leader, Telenor, and other operators, which continue to downgrade or block traffic from commercial rivals, he said.

“We think the approach Ms. Kroes is choosing is a missed opportunity,” Mr. Phelan said. “There is plenty of evidence that a problem exists and that we need strong action. This soft approach to the issue is not producing the necessary result.”

The panel of regulators, Berec, will not complete its work until the end of the year. Ms. Kroes would not propose new regulations, if any, until 2012.

Copies of her prepared remarks were circulated over the weekend.

“Judging from what we’ve seen of her report so far, it appears that Mrs. Kroes is not even convinced there is a problem,” said Jérémie Zimmermann, a spokesman for La Quadrature du Net, a French group that opposes restrictions to the Internet.

Last week in Paris, a bipartisan, 86-page report by three members of the French Parliament criticized the data traffic management practices of Frence mobile operators and recommended new consumer safeguards be adopted.

Mr. Zimmermann said all three French mobile operators, Orange, SFR and Bouyges Telecom, continued to ban competing Internet voice services like Skype.

But even in France, which was the first European country last year to systematically police and fine Internet users for illegal downloads of copyrighted films, music and other forms of entertainment, new pro-consumer legislation is not guaranteed.

“I am not certain that the French report will lead to any concrete action to protect consumers,” Mr. Zimmermann said.