Redstate...
Flashback
to 2009: Administration Policies Sought to Discourage ‘Overproduction’
of Oil
Now: ‘Just
make up some stuff. The rubes will buy it.’
Posted by
Steve Maley
Sunday,
March 18th
In May
2009, four months into the Obama presidency, retail gasoline prices
averaged
$2.32 per gallon. Rep. Charles Boustany (R-LA) wrote Treasury Secretary
Tim
Geithner to express concern about the impact that the Administration’s
budgeted
changes in tax policy would have on the oil and gas industry. Secretary
Geithner clearly laid out the Administration position in his letter of
response
(pdf link).
That was
then, this is now.
In just
three years’ time, retail gasoline prices are up 68%. $4.00+ gasoline
prices
loom as a key reelection vulnerability for the President; in response,
the
Administration’s rhetoric has shifted to “energy friendly”, but its
original
energy-hostile policies have not changed a whit.
From
Secretary Geithner’s May 2009 letter:
The
Administration believes that oil and gas preferences distort markets by
encouraging more investment in the oil and gas industry than would
occur under
a neutral system. To the extent the credit (sic) encourages
overproduction of
oil, it is detrimental to long-term energy security and is also
inconsistent
with the Administration’s policy of reducing carbon emissions and
encouraging
the use of renewable energy sources through a cap-and-trade program.
Moreover,
the credit (sic) must ultimately be financed with taxes that result in
underinvestment
in other, potentially more productive, areas of the economy.
The
President campaigned on the idea that, if we are to finally reduce our
dependence on foreign oil, we need to set aside old political battles
and
instead make the investments in new clean energy technology that will
create
good jobs here at home.
So, to
recap:
1.
Encouraging more investment (drilling) is a bad thing, because
2. More
drilling leads to too much production (!), which is
3…
detrimental to the nation’s long-term energy security (!!)
4. Cheaper
hydrocarbon fuel would work against the Administration’s goal of
reducing
carbon emissions.
5.
Carbon-based fuels were destined cost more (via taxation) under a
cap-and-trade
system anyway.
6. We can
raise the taxes on industry by taking away the deductions (not
“credits”) which
have historically, and successfully, encouraged drilling, and
7. Redirect
that money, and then some, to our political friends who are invested in
“green”
technologies (read: Solyndra, Fisker, et al).
As was pointed
out in my blog at the time, we have a Treasury Secretary who doesn’t
know the
difference between a tax deduction and a tax credit. Given his
difficulties
with TurboTax, perhaps this should not be surprising.
Ladies and
gentlemen, this remains the Obama Administration’s policy; only the
rhetoric
has shifted.
Nowadays,
instead of worrying about “overproduction”, the Adminstration crows
about
success in the oil patch. Success that owes little to government
initiatives.
Interior
Secretary Salazar bragged this week about bringing “ ‘the sweet spot of
America, and that’s the Gulf of Mexico,’ safely back to ‘robust’
production”,
despite the fact that production levels in the Gulf are about 30% less
than the
government’s pre-Macondo forecasts.
On the White
House blog, Energy Czar Deputy Assistant to the President for Energy
and
Climate Change Heather Zichal says: “When it comes to domestic
production, the
President has made clear he wants us to continue to produce more oil
and
natural gas.
Ms. Zichal
cites figures from a recent report by the U.S. Energy Information
Agency: crude
oil production on Federal lands was up 13% for the first three years of
the
Obama Administration, as compared with the last three years of the Bush
Administration . Drilling down (pun intended), we find that nearly all
of the
increase was in the deepwater offshore, and thus was a result of
pre-Obama
decisions. Beyond that, the peak year of production was 2010, the year
of the
BP spill. Offshore production actually declined an alarming 20% from
2010 to
2011; can you say moratorium?
Citing this
set of facts as evidence of the success of Obama’s policies is really
kind of
pathetic. It shows just how sensitive the Administration is to
criticism of its
energy policies.
Administration
rhetoric has changed in other ways. “Cap-and-trade” has been
deep-sixed; “all
of the above” has been co-opted from the Republicans. Out: “green
energy” and
“green jobs”. In: “clean energy” (i.e., renewables plus natural gas;
“clean
energy” was invoked ten times during the 2012 State of the Union
address, green
energy not at all.) Out: cellulosic ethanol. In: algae!
Along the
way, the rationale for implementing punitive tax policies that single
out oil
and gas have changed. In May 2009, it’s clear that the intent was to
curtail
oil drilling. Now, in 2012 with the identical tax changes on the table:
“Have
you seen those oil company profits?”
The
electoral heat is on because of gasoline prices. Increased oil
production is
now perceived (publicly) to be a good thing, but the Administration’s
line has
morphed into “More oil production will not bring gasoline prices down.”
That
logic makes sense only to people who slept through Econ 101. Imagine
how high
prices would be without the production surge led by the private sector.
Oil
prices are set in a global market, but relatively small changes in
supply can
have a disproportionate impact on price. As the world’s #3 crude oil
producer,
U.S. energy policy can certainly affect supply in increments that could
move price.
In the real
world, a call for higher taxes is a call for less drilling. Even
discounting
the impact on price, more domestic drilling would mean more American
jobs. More
domestic drilling also means more domestic supply, which will enhance
the
nation’s energy security.
Cross-posted
at stevemaley.com.
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