President Obama has made a lot of hay lately by claiming that oil and gas production has increased under his watch because of (mostly unspecified) things he has done. Maybe hay is what he has been burning or smoking?
Much of the truth is that production increases have been in North Dakota and Pennsylvannia and similar states where development on private property has found much new oil and gas. Conversely, on federal lands in the Gulf of Mexico and the Western States, the President's negative policies on leasing and permiting and environmental controls have reduced production and drilling significantly.
In terms of economics, the President is also way off base when he says we need to continue subsidies to solar, wind and bio-fuels, while cutting so-called "subsidies" to the oil and gas industry. The latter of course are merely the usual tax write-offs available to all businesses for capital investments and expenses. Worse, the President doesn't seem to understand the role of energy in our country. He doesn't recognize how important it is to the day-to-day life of everyone and every business. He also seems oblivious to the benefits to the government accruing from the oil and gas industry. Last year, for instance, the industry paid about $40 Billion in taxes, more than it made in profits.
For more on the money side of things, the WSJ today had a good editorial, excerpted here:
"President Obama says he wants to end subsidies for what he calls "the fuel of the past," but...His budget-deficit blowout would be so much worse without Big Oil, because the truth is that this industry is subsidizing the government.
Much, much worse, actually. The federal Energy Information Administration reports that the industry paid some $35.7 billion in corporate income taxes in 2009, the latest year for which data are available...That figure also doesn't count excise taxes, state taxes and rents, royalties, fees and bonus payments. All told, the government rakes in $86 million from oil and gas every day—far more than from any other business.
Exxon Mobil...says that in the five years prior to 2010 it paid about $59 billion in total U.S. taxes, while it earned . . . $40.5 billion domestically. Another way of putting it is that for every dollar of net U.S. profits between 2006 and 2010, the company incurred $1.45 in taxes. Exxon's 2010 tax bill was three times larger than its domestic profits. The company can stay in business because it operates globally and earned a total net income after tax of $30.5 billion in 2010 on revenues of $370.1 billion.
Meanwhile, Mr. Obama's 2013 budget—like its 2012, 2011 and 2010 vintages—includes a dozen-odd tax increases that would raise the industry's liability by $44 billion over the next decade, according to the White House, and by $85 billion, according to the trade group the American Petroleum Institute (API). At any rate, the President's economists ought to be weeping for joy for the revenue windfall from an industry that grew 4.5% in 2011, compared to overall GDP growth of 1.7%.
Specific oil and gas investments are also taxed at higher rates than other energy plays...oil drilling clocks in at a 15.2% tax rate, refining at 19.1% and building a natural gas pipeline at 27%. For comparison, nuclear power comes in at minus-99.5%, wind at minus-163.8% and solar thermal at minus-244.7%—and that's before the 2009 Obama-Pelosi stimulus. In other words, the taxpayer loses more the more each of these power sources produces.
What Mr. Obama really means is that he wants to put the risky and capital-intensive process of finding, extracting and producing oil and gas at a competitive disadvantage against other businesses. He does so because he ultimately wants to make them more expensive than his favorites in the wind, solar and ethanol industries."
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