Obama Administration: US Has Overinvested In Oil, Gas
WASHINGTON (Dow Jones Newswires), Sept. 11, 2009
The Obama administration opened a new front in its effort to impose $31.5 billion in taxes on oil and gas companies, saying that the nation puts too much emphasis on oil and gas at the expense of other industries.
The chief economist in the Obama administration's Treasury Department testified before a Senate panel that current subsidies "lead to overinvestment" in the oil and gas industry. That went beyond previous statements about the need to protect taxpayers and was the clearest signal yet that the federal government hopes to end its role in nurturing domestic oil and gas production.
"To the extent that current subsidies for the oil and gas industry encourage the overproduction of oil and natural gas, they divert resources from other, potentially more efficient investments, and they are inconsistent with the Obama administration's goals to reduce greenhouse-gas emissions and build a new, clean energy economy," Alan Krueger, the Treasury's chief economist, told the panel.
"That's absurd," said Devon Energy Corp. (DVN) Chief Executive Larry Nichols, the chairman of the American Petroleum Institute, before the panel. "At a time when respected energy studies agree on the need to increase all sources of domestic energy, it makes absolutely no sense to discourage production of our leading sources, oil and natural gas."
For years, Republicans encouraged oil as part of an "all of the above" strategy intended to reduce reliance on imports, especially from unstable parts of the world. But the Obama administration is trying to shift the debate amid a focus on global warming. Oil is viewed by the Obama administration as part of the problem because transportation accounts for more than a quarter of U.S. greenhouse gas emissions.
The new rhetoric isn't sitting well with Congress. Sen. Orrin Hatch, R-Utah, warned that the U.S. would be "at a tremendous disadvantage" if the country turned its back on oil, gas and coal. Jeff Bingaman, D-N.M., a moderate voice in the Democratic party, cited "concerns" about some of the proposals, urging sensitivity to regional interests. Sen. Jim Bunning, R-Ky., used stronger language.
"We are 62% imported from not very friendly countries right now on oil," Bunning said. Krueger replied: "That's correct. The best way for us to reduce" -- but Bunning cut him off. "Is to become less independent -- is that what you're saying?" Bunning said.
The Obama administration also may run into inconsistencies as it shapes its own energy program. By taking away tax incentives for gas production, the U.S. would be discouraging a cleaner-burning fossil fuel that is seen by some environmentalists as central to transitioning away from coal.
"This counterproductive approach is also at odds with the administration's own carbon reduction policy because it would discourage the production of natural gas, our cleanest fossil fuel," said Nichols.
Copyright (c) 2009 Dow Jones & Company, Inc.
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Stability of the Middle East & North Africa (MENA) is important, and that needs to be achieved through political engagement rather than forceful engagement. By putting in subsidies and other protection methods in the US E&P industry, on one part the US is wasting a considerable amount of its valuable resources for a wrong cause (which otherwise could be used in other areas) and on the other hand leading to excessive creation of wealth in MENA, which given the political instabilities and other reasons could be ending up in wrong hands. Therefore, the US needs to make radical shift in both the energy consumption pattern through efficient technology and alternative energy with a more sustainable foreign policy, rather than spending large amounts subsidizing the E&P industry on the context of self-reliance. This will also lead to more energy security in the long run, rather than short term self reliance.
So now they're loaning money to the Brazilians to drill for oil to sell to the USA instead of clean ethanol to blend into gasoline to reduce greenhouse gases. So you lose jobs in the oil business, drive up the price of corn and subsidize someone else to provide you oil and increase greenhouse gases (a little by the way -- it's all a load of claptrap) at the same time? I thought that charity begins at home? Why not loan the money to the domestic industry to create oil jobs at home, buy Brazilian ethanol and stop starving the world's very poorest.
What I want to know is why Obama has it in for us who are drilling and producing here oil and gas at HOME in the USA?
This smacks of a poorly thought through, ill-advised effort to "stimulate" alternative energy sources and reduce carbon emissions.
Doesn't Harvard require Economics 101 for all of its students?
By forcing the closure of refineries, pipelines, and production wells, Obama just makes us more dependent on foreign oil. Of course, we will not be able to afford it, so instead of a growing economy, we will be in poverty.
Get the technology out of the movies and military, and into the workplace... Promote it and support it!
I say to the politicians: "walk the walk" then "talk the talk".
Organize a union or join the union of oil and atomic workers. Think outside the box! Wal-Mart reinvented retailing. The companies that reinvent the oil and gas business will change and prosper.
1) According to the United States EIA, over the past three years the Oil and Gas industry has paid $242 billion in federal income taxes.
2) Oil companies pay more than 40 percent in income taxes as a share of their income. Source: United States Internal Revenue Service.
3) 6 million Americans -- 2% of the entire U.S. population -- works in the oil and gas industry.
4) Final point, the United States' jobless rate in August jumped to 9.7 percent, the highest in 23 years.
When the power transmission line alone from the Oxbow / Dixie valley NV geothermal plant to a substation in Bishop CA costs $232 million, the president's grant money won't go very far. $350 BILLION would be more like it. We have lots of geothermal potential in Oregon, Washington, Alaska, Hawaii, and numerous other "hot rock" areas in the US. We need to really go after this very clean and green source of power.
I guess the American people will just have to grin and bear the burden of Obamanomics until they build all these NEW GREEN jobs and industry in about 20 years.
Prices of oil and natural gas will rise. Believe me the oil companies are going to pass along the costs.
The only time "real money" is invested in alternative fuels is when the energy companies are making money. Its an historical fact!!!
Anyone remember gasoline lines? My goodness, why would anyone want to be anything other than self-sufficient?
We need those resources to build and start the alternative fuel way of life. Making it more cost effective to import coal, oil, and natural gas will not end dependency.
100K?-----500K?
We need a concerted effort to develop the resources that will be sustainable (not to mention available) such as that recommended by Robert Hirsch in his report. The fact that we are starting too late cannot be used as an excuse not to start at all.
We need to be putting our subsidy monies into real alternatives, not just more burnables that we have a few more years with. Nat Gas won't pull off the job and using government funds to support industries that have been making record profits in the years that fed this disaster we now enjoy contradicts the appeals of Fiscal Conservatives who would otherwise limit federal spending on unworthy recipients.
Taxing the Oil industry heavily is one good way to get money into the financially depleted coffers of the Federal Government so that it can be used as seed money in alternative energy and mass transportation projects.
My suggestion to the folks in the fossil fuel energy business sector: wake up and smell the coffee, you will all have to admit reality sooner or later. Ask not what your country can do for you, but what you can do for your country!
If you can't lead the way into a new social paradigm then get the heck out of the way and let the a new crop of entrepreneurs and forward thinking individuals do what you can't or won't!
1. The economy
2. Energy independence
3. Job stability/growth
Aren't these things this administration has said they seek?