Exploring the president’s budget: Energy
By JR Hoeft | Tuesday, March 31st, 2009 | PolicyIf you hadn’t noticed, gas prices are slowly creeping up again. What was $1.90 on average last month is now $2.04 this month, according to the Energy Information Administration..
Yet, what is the Obama administration interested in doing with its most recent budget?
How about slapping more than $400 billion in added taxes and fees on the natural gas and oil industry.
“This energy policy, set in place by the Democrat Majority, exemplifies the Democrat motto through and through – Tax and Spend,” said Rep. Bob Goodlatte (R-VA06). “Let’s make no mistake, an increased tax doesn’t just hurt energy companies, it hurts every American- individual, farm, or company- that consumes energy.”
The issue is that when taxes and fees are levied on oil and gas, at least a portion of those taxes and fees are passed onto the consumer. And, during a time of economic recession and increased energy bills – does it make much sense to raise the price further? Estimates are that the energy tax included in the budget will cost households up to $3,128.
“Some are suggesting a cap-and-trade system, a major component of the President’s budget currently before Congress,” said Rep. Randy Forbes (R-VA04). “Unfortunately, this system will result in tax increases for consumers, causing energy bills to skyrocket to up to $3,100 for a family per year at a time when families are already facing strained budgets, and will undermine our competitiveness as a nation.”
Yet Democrats not only are raising taxes in the budget, but stifling any chance of lowering the cost by being lock-step in opposition to exploring our own domestic resources.
A few weeks ago Republican gubernatorial candidate Bob McDonnell proposed opening up Virginia’s coast more than fifty miles off shore to oil and gas – and all his Democratic rivals balked. It is estimated that Virginia’s windfall from off shore drilling would create 2,578 new jobs, induce capital investment of $7.84 billion, yield $644 million in direct and indirect payroll, and result in $271 million in state and local taxes.
“Offshore production of natural gas and oil is not the entire solution to our economic and energy challenges, but it is part of the solution and we need to stop with the delays and start making progress,” said McDonnell. “Along with nuclear, solar, renewable and other sources offshore production helps us move toward energy independence and create jobs to get our economy moving again.”
Yet dissuading energy exploration and extraction is exactly what Democrats intend to do with this budget.
“The taxes contained in the Democrats’ budget resolution will impede new domestic oil and gas production, will discourage investment in new refinery capacity, and will make it more expensive for domestic energy companies to operate in the U.S. than their foreign competitors, making the price at the pump rise even higher,” said Goodlatte.
But while Democrats are trying to make energy more expensive in America with higher taxes and restriction in development and production, Republicans are offering alternative plans based on creativity and innovation that can help jump-start the economy, such as Forbes’ “New Manhattan” project.
“We should approach alternative energy development with a commonsense, incentive-based solution that encourages competition and ingenuity among Americans,” said Forbes. “The New Manhattan Project sets a goal of reaching 50% energy independence in 10 years and 100% in 20 years.”
The lines are pretty obvious in this debate: Democrats continue to look to a centrally-managed, centrally-controlled bureaucratic government for answers – all the while piling-on taxes and restricting the exploration and development of our own resources; while Republicans are looking to reduce energy costs, maximize alternative forms of energy, and encourage and foster the innovation and creativity that comes from the free market.
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Conservative to the core; liberal with his opinion! J.R. has been involved in politics for over a decade and has worked on several campaigns in Hampton Roads. He has served on the Executive Committee of the Republican Party of Chesapeake and the Central Committee of the Republican Party of Virginia. He is also the director of “Blogs United” in Virginia. E-mail J.R.. Follow J.R. on Twitter.
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2 Responses to "Exploring the president’s budget: Energy"
Gas prices started to go up because the stock market moved up and with it concurrently the price of commodies like oil which go up when the anticipation in our capitalist society is that those comodities will be utilized again.
So no the price of gas going up .14 has nothing to do with Obama’s energy plan.
Though, I think it would be ok if he did institute a tax or other measure to increase the cost of gasoline – to reduce our dependence on oil (particulary $$ going to nations that want to kill us), to provide stability for the auto makers and buyers (so long as oil goes up and down dramatically the manufacturers don’t know if they should built Yukons or Fiestas – this is something that the auto builders have been very clear about)
On this entire tax argument, this is really nothing. Even with these increases, we are still the most profitable place to produce oil and natural gas. Other countries essentially expropriate close to all oil revenues for themselves. Increasingly the profit problem for folks like Exxon Mobil, Shell, BP, and Chevron is that the remaining lucrative fields are all in places with national oil companies. When Obama proposes nationalizing some fields like Chavez did, then we’ll have something to talk about here. But raising some royalty revenues on some contracts that the government poorly negotiated to begin with, not a story.
Also, the production tax credit is a giveaway to oil companies. What correlation is there between any tax credit and its intended effect (I mean really will someone demonstrate for me how MACRS really produces more capital investments)? The majors were going to drill wells in the Gulf because there was oil to be found and even with MMS royalties, the profit is far greater than drilling a well in Nigeria (Nigeria’s Petroleum Profits Tax is something like 85%). So, when I hear Shell, BP, or XOM execs complaining about this, give me a break! What’s that I hear? Why it’s the smallest violin in the world!
I agree we should open up Florida’s coast to offshore drilling, that is where the money is. Virginia’s coast is a joke in terms of estimated reserves. One, some people want to explore for gas only, which only happens in fairytales. Second is that estimated reserves are tiny; and if it turns out the wells are in federal waters, MMS gets all of that royalty revenue. Whatever politicians who see dollar signs and have dreams of lining state coffers with oil royalties are having, I want some of that too. We will never be Louisiana or Texas, give it up! Florida might be able to rake in a lot dough, but not us.
2k jobs seems dubious to me too. The geologists and exploration workers are all going to come from Houston (so money for Texans, yay!). The offshore jobs are probably going to come from gulf coast worker too. I may be much mistaken, but I don’t think the skill set exists here in VA. And when these folks fly back home, their dollars are going to be spent in those home states. They live on those platform, they won’t be dining out in Virginia Beach. And an underwater pipeline that hooks to an interconnect doesn’t require a lot of folks to operate. And the controllers don’t even have to be in Virginia thanks to SCADA systems!
The Cap & Trade System is something that has worked successfully to reduce Sulfur Dioxide (SOX) emissions. This is something that the Edison Electrical Institute (EEI) a trade association representing all of the major investor-owned electric utilities in the nation supports. Also, it is a market-based solution rather than a strict mandate. Personally, I favor a carbon tax (in agreement with Rex Tillerson, CEO of Exxon Mobil on this one) because it is cheaper and easier to administer. You still get the same effect out of it. But people hear tax and they go crazy. So, you have to come up with more complex system like Cap & Trade. Such is life.
I don’t know what Forbes is proposing, but I’d like to take a look at the details if you have a link.
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