With the major oil and gas companies reporting massive third quarter profits, the industry is scrambling to explain why it still needs billions of dollars in taxpayer subsidies. The American Petroleum Institute has released a study arguing that oil profits are good for the “middle class Americans” because mutual funds, IRAs and pension plans hold most of the oil and natural gas shares.

It's an argument that has been denounced as “ridiculous” by a fiscal watchdog group, but U.S. News repeated API's claims without an ounce of skepticism. Instead, U.S. News & World Report claimed that API "[d]ebunk[ed] Democrats' argument that Republican-support for the oil and gas industry hurt the middle class in favor of the rich."

Responding to an interim version of the same study rolled out after oil companies announced huge first quarter profits, The Center on Budget and Policy Priorities, pointed out that “the reason why oil and gas stocks go up is because energy prices are going up, and that hurts the same people they're talking about.”

Indeed, oil companies' soaring third quarter profits are a result of higher oil prices that Americans have to pay for at the pump this year. “Merrill Lynch estimates that every penny increase at the pump is equal to $1 billion in lost consumer spending” that could be helping the economy recover, ABC News reported. Economist Kathy Bostjancic characterized higher gasoline prices as a “tax” on consumers and businesses.

Indeed, the fact that we use so much of the product API is selling has us “locked into a situation where even modest bumps in gas prices end up torching the middle class,” in the words of the Washington Post's Brad Plumer.

As E&E News reported, Steve Ellis of Taxpayers for Common Sense called API's argument “preposterous”:

“It's the most ridiculous argument I've ever heard to justify subsidies for an industry,” said Steve Ellis, vice president with Taxpayers for Common Sense. If pension funds also hold Microsoft or Intel stocks, he said, “does that mean the government should turn around and should subsidize Microsoft or Intel to boost the pension funds?”

“It's really a preposterous sort of proposal,” Ellis added. “It makes no sense from a public policy standpoint.”

Taxpayers for Common Sense was among 29 conservative and watchdog groups that last month sent a letter to Congress taking broad aim at all types of energy benefits, including tax breaks, loan guarantees and direct payments

CBPP's Chad Stone also noted that the richest one percent own a large chunk of the investments that API attributes to the “middle-class”:

The statistic on stock ownership omits very important data, said Chad Stone, chief economist at the nonprofit Center on Budget and Policy Priorities. While a large share of people might hold some oil and gas stock either directly or in broad-based funds, he said, the largest amounts of stock in general are held by the very rich.

The richest 1 percent of the country holds a third of the country's total wealth, including stocks, bonds, real estates and other investments, Stone said.