Oil Price Hearings and Barriers to Investment

By May 21, 2008Energy

The Senate Judiciary Committee has joined the angry array of congressional panels holding hearings into the oil prices and today’s announced $130 a barrel price will no doubt goose the rhetoric of this morning’s session, “Exploring the Skyrocketing Price of Oil.”

Peter J. Robertson, vice chairman of Chevron, spoke to energy bloggers yesterday afternoon about some of the topics he expects to encounter today. The primary cause of high gas prices is high crude oil prices, he said, noting that the refining business has been very constrained.

And what would the effect of higher taxes on the energy producers be, we asked. Robertson responded by citing the axiom, if you tax something, you get less of it.

Chevron has invested all of its earnings. In the last six years after we formed this new company after the merger with Texaco, we’ve earned $72 billion after tax, and we’ve invested $73 billion. So we’ve invested all of our earnings.

And I would just say, I can’t point to any specific project which wouldn’t get done, it seems to me like you probably end up reducing our investment. Certainly, in a big chunk, taxing our earnings reduces investment, and reduces production, reduces supply – and if you reduce supply, prices go up. And it seems like it’s the wrong approach…

We’re not out there looking for subsidies. What we need is the reduction of barriers to investment. I mean, there are a bunch of barriers of investment to the United States: Eighty-five percent of the offshore is off-limits. I’m now four years into trying to get a permit to expand the refinery in California. Four years! (Or, we’re into our fourth year, so I guess it’s three or three point.something years.) In that same time Reliance Energy in India has built a 600,000 barrel a day refinery from scratch, and they’re about to start it up.

There are barriers all over the place to investment, and what these guys it seems to me ought to be working on is allowing us to invest more of our money in the United States and less about taxing it away.

The Senate hearing starts at 10 a.m. and is being webcast here. C-SPAN has the hearing listed on C-SPAN3.

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