On Oil, Instead of Raising Costs Through Taxes, Increase Supply

By April 26, 2011Energy, Taxation

Jay Timmons, president and CEO of the National Association of Manufacturers, issued a statement in response to President Obama’s letter to Congress calling for higher taxes on domestic oil and gas production. Excerpt:

That misguided policy would result in more inflation, higher prices at the pump for already beleaguered Americans, and increased costs for products consumers need and use every day.Manufacturers support efforts to increase the use of clean energy sources and are helping to lead the way in meeting future energy demands with new energy sources. Until those alternative sources are cost-competitive with oil and gas and sufficient to meet this country’s demand for energy, manufacturers believe the United States should expand access to domestic energy by opening additional areas of the country – offshore and onshore – to exploration and development.

Timmons concluded: “President Obama wants to raise taxes on energy companies and, at the same time, reduce the cost of gasoline. He can’t have it both ways.”

John Felmy, chief economist of the American Petroleum Institute, had several pithy comments for the reporters. From USA Today, “Obama, Republicans tangle over oil subsidies“:

This is a proposal born of desperation that would do nothing to reduce gasoline prices,” said American Petroleum Institute chief economist John Felmy. “It would reduce investment in new oil and natural gas projects, cost new jobs and decrease oil and natural gas production.”

Washington Examiner,Obama targets oil companies as gas price soar“:

“There have been dozens of investigations and we’ve been exonerated every time,” said John Felmy, chief economist with the American Petroleum Institute. “It’s unfortunate. It indicts 9.2 million Americans who work directly or indirectly for the oil industry — which we have to remind them is not owned by aliens.”

The editors at National Review Online remind President Obama of market forces in an editorial, “In Search of Petrovillains,” which concludes:

Behind the doublespeak, the reality is that President Obama’s favored policies do nothing to ease fuel prices, and more damning still, he doesn’t care. In 2008, when the national average was last peaking above $4 per gallon, candidate Obama made it clear that while he would have preferred a “gradual” increase, he saw ever-higher petroleum prices as a necessary antecedent and augur of our immaculate, green-energy future. And even now, as oil in the Gulf of Mexico sits and waits for new permits and the EPA scuttles the latest effort to tap the estimated 27 billion barrels of crude sitting below Alaska’s north Arctic coast, the president assures us that “what’s driving oil prices up right now is not the lack of supply. There’s enough supply.” We agree, there is enough supply to meet current demand: at $4 dollars a gallon, and beyond.

CNBC columnist Larry Kudlow wonders at President Obama’s apparent endorsement of natural gas even as he scores the oil industry, and suggests that the President embrace a growth strategy instead of higher taxes. From “The Left Hates Oil Companies“:

[It] would be great if the president understood that you have to drill for natural gas. It also would be great if the president and his pals, instead of harping on a measly $4 billion a year in so-called subsidies (compare that with a $1.5 trillion deficit), focused on real pro-growth corporate-tax reform that drops the rates and includes permanent 100 percent expensing.

That’s pro growth. That’s tax reform. That will create more oil, more natural gas, and more gasoline. That would probably stabilize prices, assuming the Fed doesn’t totally destroy the dollar. That would generate millions of new jobs and lower unemployment. And that would be a good policy.

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