The American people have consistently voiced their support for affordable energy and the production of domestic energy resources. Polling shows that 52 percent of Democrats, 65 percent of independents, and 89 percent of Republicans support increased offshore energy exploration and development. But just a few short weeks into his administration, President Obama has sent Americans a clear message: the demands of a majority of Americans will be thwarted by a tiny minority opposed to economic growth.
In 45 days, the Obama Administration terminated 77 legitimate oil and gas leases in Utah, scrapped leases to develop America’s two trillion barrel oil shale resource, and kicked the can down the road on a plan to begin developing our abundant offshore energy supplies after 3 decades of moratorium. If observers remained confused about the President’s plans for domestic energy after he unveiled that aggressive and restrictive agenda, he cleared it up when he released his budget proposal last week.
In addition to $989 billion in new taxes, many on affordable energy, the President’s budget includes a $646 billion tax on gasoline, diesel, natural gas, and coal. Washington’s spin doctors dubbed this massive new tax “cap and trade”. Cap and trade amounts to a tax on 85 percent of the energy we use. It will result in higher gasoline prices, higher electricity prices, and higher costs for American businesses—many of which are already struggling to keep the lights on. In short, the President’s budget proposal is an outline of his plan to force Americans to pay more money to buy less energy.
Increasing the cost of gasoline, diesel, natural gas, and coal isn’t an unintended side-effect of President’s plan—it is the point of the President’s plan. Treasury Secretary Timothy Geithner recently told Congress, “Cap and trade will increase the cost of energy on those fuels that are high in carbon [oil, natural gas, and coal]. For people whose behavior in energy use doesn’t change, their costs will go up.”
China, Brazil, and our other competitors around the globe are aggressively seeking and securing the abundant supplies of affordable energy they know they need to grow their economies. Meanwhile, our government passed laws and regulations to keep us away from most of our own domestic energy resources and make the rest more expensive.
In effect, this budget increases the cost of doing business in America at a time when we face unprecedented economic challenges. Instead, the government should work to create conditions that will attract businesses and economic investment—that means low taxes, low fees, and minimal regulatory burdens.
Much of the discussion on President Obama’s budget has focused on his $989 billion tax hike. These provisions overwhelmingly target domestic energy access, including:
- $61 billion – repeal LIFO accounting
- $4 billion – information reporting for rental payments
- $5.3 billion – excise tax on Gulf of Mexico oil and gas
- $3.4 billion – repeal expensing of tangible drilling costs
- $62 million – repeal deduction for tertiary injectants
- $49 million – repeal passive loss exception for working interests in oil and natural gas properties
- $13 billion – repeal manufacturing tax deduction for oil and natural gas companies
- $1 billion – increase to seven years geological and geophysical amortization period for independent producers
- $882 million – eliminate advanced earned income tax credit
The government initially floated the $13 billion “repeal of manufacturing tax deduction for oil and natural gas companies” proposal last year. AEA’s independent affiliate, the Institute for Energy Research, produced a report that examined that plan’s economic impact. IER found that over 10 years, these taxes would lead to:
- 637,000 jobs lost
- $34.9 billion reduction in household income
- $13.6 billion of taxes paid by pension fund holders
- $185.9 billion decrease in total economic output
- Increased U.S. reliance on unstable regimes for oil
Instead of reducing access to our abundant domestic energy resources and increasing taxes on affordable sources of energy President Obama has a job-creating alternative—increasing access to America’s offshore energy resources. AEA recent released a study that found increased offshore production would produce:
- $8 trillion in additional economic output (GDP)
- $2.2 trillion in total tax receipts
- 1.2 million new, well-paying jobs annually across the country
- $70 billion in additional wages each year
Bottom Line: The Obama Administration has a simple choice to make. They can choose policies that increase energy prices and destroy American jobs, or they can allow Americans to access the vast taxpayer-owned energy resources, creating thousands of jobs and trillions of dollars of economic stimulus. One has to wonder if the Administration’s plan is designed to restore the economy or to punish American consumers, evict American businesses, and make us less competitive in the world.