April 27, 2011 / 10:14 PM / 7 years ago

UPDATE 1-Oil firm tax breaks must end quickly-US Sen. Reid

* Democratic leader says will seek a Senate vote soon

* Measure not seen lowering high gasoline prices (Adds quotes, details, analysts reactions)

By Richard Cowan and Timothy Gardner

WASHINGTON, April 27 (Reuters) - U.S. Senate Majority Leader Harry Reid said he would move quickly to pass legislation ending tax breaks for major U.S. oil companies, as President Barack Obama requested this week.

“We need to take away the subisidies of these five major oil companies,” Reid told reporters, adding that the companies have “broken all records” for profits.

Reid’s remarks came on the same day BP (BP.L), one of the major oil companies, reported first quarter profits of $5.5 billion despite setbacks from last year’s massive oil spill in the Gulf of Mexico.

However, any repeal passed by the Senate would likely be blocked in the Republican-controlled House of Representatives.

Republicans argue that killing the tax breaks ultimately would increase, not lower, retail gasoline prices.

Lawmakers are searching for ways to battle rising gasoline prices, which come amid continued high unemployment.

Both Democrats and Republicans are hoping to tap into voter anger over gasoline prices, which at a national average of $3.88 a gallon are about $1 a gallon more than a year ago.

“We have to do something about these soaring gas prices,” Reid said.

On Tuesday, U.S. Attorney General Eric Holder voiced concerns about some “disturbing” developments in energy markets that the Justice Department will look into.

Repealing the long-held oil firm tax breaks could give the federal government additional revenues, which some want to use for deficit-reduction and others want to invest in clean energy sources.

    Don Stewart, a spokesman for Senate Republican leader Mitch McConnell, noted that the Senate rejected a move earlier this year to end some oil company tax breaks, with seven Democrats joining Republicans in opposition.

    One analyst said the bill could pass in the Senate because the price of oil has become such a hot button issue among voters.

    “The bill does stand some chance as Republicans as well as Democrats are hearing from their constituents that Big Oil is somehow manipulating oil prices,” said Charles Ebinger, a senior fellow at the Brookings Institution.

    But he said stripping the major oil companies of the subsidies would do little to cut crude prices.

    “The bill is great politics, but it represents an abnegation of responsibility because it doesn’t explain to the American people that it’s not going to change the oil price.”

    Christine Tezak, an energy policy analyst at Robert W. Baird & Co., said the bill could gain support if the money saved was used for a popular initiative such as supporting the transformation of vehicles to run on natural gas.

    White House economic adviser Gene Sperling said on Tuesday part of the subsidies to the oil industry could be used for deficit reduction and some could be used for research and development of renewable energy. [ID:nN26289394]

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