* Democratic senator says Big Oil will win on tax breaks
* Republican says hearing is a political dog and pony show
* Chevron boss: tax hikes on Big Oil will cost U.S. jobs (Updates with lawmakers telling oil companies they are out of touch with suffering consumers)
By Tom Doggett and Timothy Gardner
WASHINGTON, May 12 (Reuters) - U.S. oil executives defended the billions of dollars they get in tax breaks on Capitol Hill, only to be chastised by senators, who said their huge profits put them out of touch with consumers facing high gas prices.
Democratic lawmakers slammed executives on Thursday over their refusal to give up tax breaks after their companies earned $35 billion during the first quarter of this year as gasoline prices rose to $4 a gallon.
“I think you’re out of touch — deeply, profoundly out of touch and deeply and profoundly committed to sharing nothing,” Senator Jay Rockefeller told executives from Exxon Mobil (XOM.N), Chevron (CVX.N), ConocoPhillips (COP.N), BP (BP.L) and Royal Dutch Shell (RDSa.L) at the Senate Finance Committee hearing.
Rockefeller predicted the oil companies would keep their prized tax breaks because of the industry’s investments in lobbying and campaign contributions to lawmakers.
“You have a great sense of assurance. I don’t think you feel threatened by anything that’s going on here,” Rockefeller said. “You always prevail in the halls of Congress.”
Drivers will pay an average $825 more for gasoline this year, a growing headache for President Barack Obama and his fellow Democrats ahead of next year’s elections.
Democrats have introduced legislation to strip about $2 billion annually in tax breaks from the five biggest oil companies over a decade and use the money to ease the federal deficit.
They face a hurdle in finding the 60 votes needed in the Senate to pass the measure without threat of a filibuster blocking maneuver, as some Democrats from oil-producing states also oppose the bill.
But getting Republicans to go on record as supporting Big Oil could be an arrow for Democrats to use in the 2012 election campaigns if prices keep rising.
Republicans are seeking to fight high oil prices by opening up more U.S. offshore drilling areas. They say Obama’s regulations after last year’s BP oil spill have cut access to the resource.
The House approved legislation on Thursday requiring the administration to open offshore areas in the Atlantic and off Southern California and Alaska to drilling.
Exxon Mobil Chief Executive Rex Tillerson shot back at Rockefeller: “I want to assure you I’m not out of touch at all. We understand the enormous challenges confronting the American people with respect to this enormous deficit that has to be dealt with.”
His company paid its fair share of taxes, he said.
Tillerson said the company’s effective tax rate averaged 32 percent from 2005 to 2010.
The Center for American Progress, a liberal think tank, said 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.
The executives said ending tax incentives for the top five companies would drive them to look for oil abroad, costing American jobs. That could 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.
Senate Majority Leader Harry Reid 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].
On Thursday he blasted Republicans for supporting oil companies.
“The only thing more mind-boggling than Republicans’ defense of their oil company allies is that they would rather end Medicare than stop giving taxpayer dollars to oil companies that don’t need them,” he said.
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 large picture of a dog riding on the back of a pony to underscore his point that it’s all for show.
Editing by Russell Blinch and David Lawder