* Democrat Baucus says oil prices set in world markets.
* Republican says hearing is a political dog and pony show
* Chevron boss: tax hikes on Big Oil will cost U.S. jobs
By Timothy Gardner and Tom Doggett
WASHINGTON, May 12 Repealing billions of dollars in tax breaks for Big Oil won't raise U.S. fuel prices, Senator Max Baucus said in an opening shot directed at top petroleum executives summoned to Capitol Hill on Thursday to defend their surging profits.
Oil prices are set on a world market and the U.S. share of crude production is less than 10 percent, Baucus said before the CEOs of some of the most powerful companies in the world.
"That makes it difficult -- if not impossible -- to pass on the cost of losing these subsidies to consumers," Baucus, the head of the Senate Finance Committee, told the hearing.
With gasoline prices soaring towards $4 a gallon, Democrats hope to claw back $2 billion a year in breaks from Exxon Mobil (XOM.N), Chevron (CVX.N), ConocoPhillips (COP.N), BP (BP.L) and Royal Dutch Shell (RDSa.L) to help ease the deficit.
The companies made about $35 billion in profits after posting double digit growth in the first quarter as energy prices soared.
High gasoline prices are increasingly a big headache for President Barack Obama as the Democrat gears up for next year's presidential run.
The executives contend their corporations already pay high taxes and ending their incentives would only drive them them to look for oil abroad, costing American jobs. That would eventually raise oil prices and fuel prices in turn, they argued.
"Tax increases on the oil and gas industry... will hinder development of energy supplies needed to moderate energy prices," Chevron's chief John Watson said.
Rex Tillerson, the chief executive of Exxon, said the company's tax rate from 2005 to 2010 averaged 32 percent.
"In some years when our taxes appear low it's because we have recognized the closing of issues with the IRS where we have overpaid," he said.
The Center for American Progress, a liberal think tank, said in a analysis this week that Exxon's federal tax rate last year was 17.2 percent after all the tax breaks and concessions were accounted for, lower than what the average American pays.
DOG AND PONY
Senate Majority Leader Harry Reid said he wants to bring a bill to the floor next week to repeal oil industry tax breaks, to help ease the deficit by about $21 billion over 10 years. [ID:nN10123253]
Repealing the tax breaks the call among Democrats in the Senate has grown louder as the oil price remains near $100 a barrel.
The bill's backers face a hurdle getting the 60 votes needed for passage in the 100-member Senate because of staunch opposition from Republicans and some Democrats from oil-producing states.
But getting Republicans to go on record as supporting Big Oil could be an arrow for Democrats to use in the election campaigns if prices keep rising.
Senator Orrin Hatch, a Republican, said the hearing was purely about politics.
"This hearing should not be used to score cheap political points, but I'm afraid, with all due respect ... that is what we will see today," he said while holding up a picture of a dog and a pony, to underscore his point that's it's all for show.
(Editing by Russell Blinch and David Lawder)