Develop domestic oil reserves for energy independence

May 21, 2009

 Diana Furchtgott-Roth– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. —

President Obama is in favor of moving towards “energy independence,” but his new 2010 Budget specifically seeks to raise taxes on domestic oil exploration by $31 billion over 10 years, a larger tax increase than on any other industry. In addition, oil and gas producers would bear a disproportionately heavy share of other tax increases on business, more than $320 billion.

Surely a president who desires energy independence would leave oil companies alone so that America could develop greater domestic reserves.  But this is not the case.

The ostensible rationale for the tax increases is that the current tax system “distorts markets by encouraging more investment in the oil and gas industry than would occur under a neutral system. To the extent expensing encourages overproduction of oil and gas, it is detrimental to long-term energy security…” This wording, with reference to credits, lower tax rates, special treatment, and accelerated depreciation, is repeated eight times in the Treasury Department’s Green Book, a description of proposed spending and revenue changes in the budget.

President Obama believes that subsidies for renewable energy are acceptable, even though renewable energy is only responsible for 4 percent of America’s supply.  He does not consider expenditures of $60 billion on “clean energy investments” to be distortions.  But oil, which accounts for almost 40 percent of America’s energy usage, is a different matter, apparently deserving of higher taxes to limit overproduction. With fuel prices close to $5 a gallon last summer, we could have used a little overproduction.

If America is to reduce use of imported fuels, it needs to raise domestic production to increase long-term energy security. Every additional barrel of oil produced in America is one barrel fewer that needs to be imported.  The oil and gas industry already employs more than 1.5 million workers, and has the potential to employ many more.

Estimates of American oil and natural gas reserves keep growing, potentially generating more job opportunities.  In 2007, 200 trillion cubic feet of natural gas, equivalent to 33 billion barrels of oil, or about 18 years of U.S. oil production, were found in the Haynesville Shale, a rock formation in northern Louisiana. Discoveries have also been made in Texas, Arkansas, and Pennsylvania. New optimism about U.S. gas reserves and production capacity has been pushing natural gas prices down.  Since the fuel is there, why propose new taxes to discourage production?

President Obama’s new tax proposals, rather than leading towards energy independence, would drive oil and gas production abroad.  New taxes would place American producers at a disadvantage in the global market, punishing domestic American oil and gas companies and benefiting countries with large reserves such as Venezuela, Saudi Arabia, Iran and Russia.  Does President Obama really want these countries, all under fire for their neglect of basic human rights, to get richer at our expense?

Moving towards energy independence is under attack from another quarter—extreme environmentalists. After Tuesday’s failure of California ballot initiatives to cut spending, Californians might take seriously Governor Arnold Schwarzenegger proposal to allow additional offshore drilling from Platform Irene, off the coast of Santa Barbara, which would raise $1.8 billion. But drilling on the Outer Continental Shelf remains unpopular. It’s telling that residents find it preferable to release 40,000 prisoners from jail or fire thousands of teachers—rather than drill offshore, which could bring in a steady stream of revenue to the state capital of Sacramento.

Until the United States has the technology to operate its 250 million motor vehicles without gasoline and natural gas, we need more domestic exploration, not less.  At some point, maybe later this year, maybe in 2010, our economy is going to shift to post-recession recovery, and oil and gas consumption are going to rise.  We don’t want a repeat of $5 gasoline and sky-high home heating bills.

38 comments

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This article is an embarassment! Energy independence through pumping DOMESTIC oil? If we had that much oil then why would we pay Saudi Arabia trillions to supply us????? Do people really believe we would do that for no reason? Did we invade Iraq to get something we already have at home? WHAT A JOKE! The US might have alot of oil but no where near enough to feed the nation. I’d be surprised if it lasted us a decade! It’s like trying to satisfy a fatass with ONE big mac. This woman ALWAYS argues against people who do the slightest actions against the elite. The ultimate energy independence will never be in the mainstream. Energy independence is to be able produce fuel in your home to satisfy all our needs (never to be invented because energy corporations are buying all alternative energy patents). If we could produce the energy at home then the energy corporations wouldn’t have too much of a practical purpose. It would cost a lot at first but would save us so much more in the future because it would be cheap, plentiful, and environmentally-friendly. Fossil fuels and Nuclear Energy are unsustainable in the long run because they both produce toxic waste that we can’t control. I like biomass but with the ballooning world population it’s also unsustainable. These “solutions” are advocated to keep the present state of affairs going as long as possible and to keep making the Third World suffer. Imagine a world where everyone is a producer, no need to trade energy thus eliminating corruption. All we need is the infrastructure. I advice this lady to look up FUTURISTIC, SCIENTIFIC, and GLOBAL SOLUTIONS not REGRESSIVE, BIASED, OLIGARCHICAL FAILURES!!!!!!!!!!!!

Posted by Eldon Lopes | Report as abusive

http://chrisdwalker.deviantart.com/

In the mean time, as we develop more eco-friendly energy, we could be employing people in the making of solar panels and small wind generators, both of which should be placed on every home in America. The reduction in energy needed from Mega Energy would reduce the Fossil Fuels they use, putting less waste into the air while lowering demand, thus prices. AND, the homeowner would see an immediate drop in his electric bill. A much need stimulus, and much better in the long run of this nations needs.

Imagine in the case of emergency, a winter storm in the north knocks out power from Mega Energy. Those with solar panels and a small wind generator can provide themselves with heat, and hot water, and help their friends and neighbors who are in need. Sounds like a good AMERICA idea of charity, kindness, and responsibility to ourselves, our friends, and our country.

Posted by C. D. Walker | Report as abusive

You clearly don’t get the market dynamics at play in the oil industry. It is all about “lifting cost”. It costs too much to lift the oil in the US. It is cheaper to get it over seas and have it shipped here. Only an increased tariff or more favorable will be able to have the US use more of the domestic supply. But if we do that too soon, we risk exhausting our supply. Its a game of who has the last oil. Its better to drain the enemy. Currently, oil prices are artificially deflated because the US is using its military and the taxpayers are absorbing the costs of having a secure oil supply abroad. If the oil companies had to pay for their own protection, we’d be paying much more at the pump. The market will find the right time to start pulling for US deposits…

Posted by Jason | Report as abusive

Hey C. D. Walker,

“a winter storm in the north knocks out power from Mega Energy. Those with solar panels and a small wind generator can provide themselves with heat, and hot water”

1. Solar panels don’t work during storm :).
2. Do you know how may sq.ft of solar panels you need to heat a house after storm is over? Lets talk about Vermont :).
3. Wind turbine sound more promising, keep dreaming.

Posted by SKV | Report as abusive

SKV-

Oh my goodness.

How about a battery or two?

Posted by C.D. Walker | Report as abusive

jason-

“You clearly don’t get the market dynamics at play in the oil industry. It is all about “lifting cost”. It costs too much to lift the oil in the US. It is cheaper to get it over seas and have it shipped here.”

Is that just fancy speak for price rigging? Price per barrel is hardly rising, so why the disproportionate rise in domestic price per gallon? Can you say “Speculation” and “Price Gouging” and “Anti-Competition” since all the oil sisters rise together?

Posted by C.D. Walker | Report as abusive

Hybrids, renewables, nukes, whatever – we’ll still need oil. I can imagine a plug-in car being in my garage a few years down the road, but there’s no way to make plug-in jet liner (or jet fighter) even if all the promises of nascent technologies come true. Don’t get me wrong – I’m all for energy conserving tech when it offers real life oil conserving benefits, not bogus ones like ethanol.
Even if we stop using oil to extract energy, it still is needed to make plastics, fertilizer, whatnot – many things you don’t notice in your daily life but would feel hit very hard if they disappear.
It’s not that I oppose developing our national oil resources. Contrary to that, they need to be explored, documented, and made ready to be pumped and delivered. And then left where they are for future use.
Oil reserves are finite. As long as we can exchange dollars – a renewable product (can you say “printing press”?) for oil we should do it while conserving our own oil reserves for future generations. I hope I will live to see the day when Saudis and Iranians are left with empty wells, and our tanks are still fueled up.
Oh, quite symbolically, the anti-spam word this time around is “way”. Conservation – way to go.

Posted by Anonymous | Report as abusive

Anon-

Your right and wrong, we will need oil for a defense industry for a while, and for that reason, for national defense, for security, we need to get off of oil as FAST as possible.
as for needing oil for plastics, that is old news;
http://www.smithsonianmag.com/science-na ture/plastic.html
instead of wasting corn for ethenol(Which seems a scheme from Big Oil and Big Agra to me) we can make plastic from corn. GO AMERICAN SCIENCE. But seriously, we need to get away from being a throwaway society.
I love the beauty of this land, why are we destroying our resources, only to throw them away, then waste resources only to throw away, repeat. In the business sense, recyclables make better sense in how it saves money.

Anyone remember when all soda and beer came in glass bottles and a deposit?
Was the Aluminum can a scam from the Metal industry to make them money at the expense of Humanity and the Environment?
Why did we go away from glass? If it was because it broke easy, we have come a long way in strengthening glass and can eliminate that problem, if it was a problem.

Posted by C.D. Walker | Report as abusive

C.D. Walker,
At least there’s something we agree on. Pollution is our common enemy. Waste is our common enemy. If you ask me, no fine on polluters can be too steep. And I mean all of them, from a smoker throwing out the car window a butt with filter made of plastic, to big companies dumping their industrial waste, and everyone in between.
The plastic waste issue can be solved relatively easily. Tax the plastics, and everything made of it, especially packaging, will become so expensive that the prices of everything packaged will go up and, as a result, sales will go down. But I imagine both sides of the isle hopping mad. Republicans because they are against any and all taxes. Dems because it will hurt their low-income constituency more than others. So, unfortunately, it’s a non-starter because of politicians (these, unlike lawyers and bankers you hate so much, are real scum).
As for switching back to glass, it’s not exactly the solution for all plastic bottle ills. Have you seen fed police posted at national park entrance searching bags and coolers of every visitor for – bombs? guns? drugs? nope – glass containers. Glass is strictly prohibited there. I’ve been searched – not that I object, because I understand why. Have you ever walked barefoot and stepped on a shard of glass? Happened to me once on a beach, and I don’t want a repeat. Also please note that glass manufacturing is energy hungry. Glass weighs more than comparable plastic/Al container, so there will be higher transportation costs in both money and fuel. And while glass bottle can be made to survive an occasional drop on the floor, it can’t stand against a kid who just drank too much beer out of it.
Nor is corn-derived plastic the magic bullet. It requires high temp to “bio-degrade”, and it can’t replace oil-derived plastics for all applications. For instance, would you like your car’s bumper to bio-degrade? If you leave your car out in the sun, the temp will be just right.

Posted by Anonymous | Report as abusive

I have to dissagree with going after the smoker in his car, the but is cotton and will degrade; eventually, but the waste these Major Firms dump, then hide, or litigate to eternity (See Chevron’s 15 year lawsuit in South America) need to be stopped immediately.

Taxing is never going to work because the “Tax” put on the product will be used (like it always is) as an excuse to charge the consumer more, thus not effecting the Plastic manufacturers way of doing business. We have to Make these businesses do the right thing, because OBVIOUSLY they are not going to be RESPONSIBLE for their actions, HIDE behind Lawyers, and courts, and paperwork, and lies, like they always have.

Posted by C.D. Walker | Report as abusive

“I have to dissagree with going after the smoker in his car, the but is cotton and will degrade” – Posted by C. D. Walker
___________________________
Either you never smoked or things changed a lot since I quit. As far as I remember, the filter would melt if the cigarette smoked all the way. Melting is not exactly what you’d expect from cotton, but perfectly consistent with synthetic fibers which are, well, plastic.
As for taxing not working, you admitted yourself that it would be “used (like it always is) as an excuse to charge the consumer more”. Higher prices inevitably result in lesser sales volume. Case in point – smokes. Lots of people quit because a pack is over $7 (I quit when it was still under $2, but at $7 probably would not have started at all). Besides, if higher taxes on polluting packaging like plastic or laminated paper (hate this – it can’t be recycled with either plastic or paper) make it too expensive, it will be abandoned in favor of old good cardboard boxes – at least these are fully recyclable and biodegradable. The flashy glossy packaging is usually just another marketing ploy to make the wares “stick out” from store shelf. If it’s eliminated, the goods will compete more on the merit of content rather than the package looks. Also there will be less buying on a sudden urge provoked by flashy packaging, meaning less overall consumption. Which is good, because most of consumption these days means more money to China Commies.

Posted by Anonymous | Report as abusive

Anon-
“Higher prices inevitably result in lesser sales volume.”

Not if your talking about necessities of life like ENERGY!
Energy companies, (Electricity, gas, oil) have us by the balls because we NEED energy to heat our homes, our places of work, our cars, for cooking. These industries can continually raise prices KNOWING we cannot live the life we have become used to. And those Executive BASTARDS know this fact and keep EXTORTING more and more out of us each year.

Who are you defending and why? You like being used by these people? If you do, go to China and be a slave wage maker, this is a free country.

Posted by C.D. Walker | Report as abusive

C.D. Walker,
Before replying please read the posts you replying with a bit of attention.
I didn’t advocate taxing necessities. However I would applaud taxing unnecessary pollutants, like packaging, disposable plates, cups, and utensils, plastic bottles, and tons of other stuff destined to end up in landfills – in best case. In worst case they are thrown, blown by the wind, carried by drainage, and end up polluting our forests, lakes, and seas.
I would like to see deposit prices on plastic, Al, and glass containers comparable with the price of content, not just a mere nickel or dime. While these deposits are technically not tax, they work similarly. I’d like to see taxes on chewing gum at the same scale as tobacco taxes. If you ever stepped on that gum spat by someone, you’d understand. And fines on the gum chewers who spit it indiscriminately, too. It worked in Singapore, why not here?
In fact, I wouldn’t mind energy taxes, but only under condition they are accompanied by equally sized income tax cut. Then – what the hell – I might bite the bullet and use these income tax savings (and then some – it’d be not cheap) to insulate my house – it was built when fiber glass insulation wasn’t common yet. I might even replace my old trusty Volvo with one of those smaller hybrids. At least energy tax, unlike income tax, give you a choice to conserve or pay up. Just like tobacco tax gives you a choice to quit smoking or pay up.
As for “Executive BASTARDS”, I’m not defending them a single bit. Even more, I wouldn’t shed a tear if they end up right there with your “friend” Dennis Kozlowski of Tyco, where they belong.

Posted by Anonymous | Report as abusive

Anon-

You need to take your own advice about reading posts.

“I didn’t advocate taxing necessities. However I would applaud taxing unnecessary pollutants, like packaging, disposable plates, cups, and utensils, plastic bottles, and tons of other stuff destined to end up in landfills – in best case”

Like i said earlier, putting a tax on any of the items you listed will do nothing to make the producers of such items change their ways of manufacturing, or their business model of a “Throwaway” society. If government puts a tax on “Business” why doesn’t “Business” be responsible for that tax? Instead they ALWAYS, ALWAYS place that burden on the Consumer, THEN, like the bastards they are, place the blame on government, when Business is the one who is supposed to pay the TAX!

Business screws us twice! The first time is placing the extra cost on US.
The second is by not paying the TAX themselves.

Posted by C.D. Walker | Report as abusive

C.D. Walker,
If taxing any particular type of goods doesn’t work, why it is working with tobacco? Federal tax, state tax, local tax, the lawsuit settlement costs that is just another way of taxing cigarettes – as a result the price of a pack is what – $7? $8? – and still rising. I don’t pay attention to the price because I’m not interested anymore. But the stats (at least as represented in radio news I listen to when commute) tell that the proportion of smokers is going down. I bet when the price of a pack will go over $20 there will be much less smokers. And when it goes up above $100 there will be probably as many smokers as there are Rolls Royce drivers.
I bet taxing the disposables will result in much lesser consumption of these – exactly because the manufacturers/distributors will pass the costs to consumers. If Styrofoam cups and plates cost as much as stoneware, you’ll see people taking to the parks old style picnic baskets with actual stoneware and silverware instead of packs of disposables that often are left right where they were used, making picnic areas disgusting mess.

Posted by Anonymous | Report as abusive

Both the “drill here drill now” types and the extreme greens are wrong.

Mideastern oil is not only staggeringly more abundant than ours, it is also much easier and cheaper to extract.

The US has only 4% of the world’s known energy reserves, while the Mideast has 70%. At current rates, by 2020 we’ll have 1% and they will have over 80%. It’s imperative to get off oil before we grow even more dependent on the Mideast.

But greens embrace a gaggle of solutions that are either sub-optimal (natural gas), not ready yet (electric cars), ineffective (emphasizing conservation and high MPG cars), or irrelevant (solar and wind power etc which have nothing to do with cars), or outright frauds (hydrogen fuel cells).

The real solution is the proposal put forward by former NASA rocket scientist and nuclear engineer Dr. Robert Zubrin in his book “Energy Victory”

The plan is shockingly simple, affordable, practical, effective, and ready now, with no need to wait years, lavish billions on research, or force us into crippling austerity and painfully expensive and/or slow, frail, cramped cars.

It is to mandate that all new cars sold in America be fully flex-fueled, able to run equally easily on gasoline or on any alcohol-based fuel, including methanal, ethanol, propanol, butanol, etc. Methanol is extremely cheap and can be made from coal, natural gas, or any biomass without exception, including weeds, trash, and sewage.

This technology has existed since the early 90s and is refined, reliable, and costs only $130 per car for automakers to implement.

Within a few years there would be enough alcohol compatible cars on the road for alcohol fuel to be routinely available at gas stations.

And note – sold, not made, so as to include imports – thus fully flex fueled becomes the international standard as all major automakers switch their production lines. Gasoline is then forced to compete with alcohol around the world, everywhere, not just here and Brazil, and OPEC’s inflated profits and the mischief budgets of its member states are slashed drastically and permanently.

Posted by Carney | Report as abusive

“If taxing any particular type of goods doesn’t work, why it is working with tobacco?”

Like i have said before, a couple of times now i believe, the “Business” making the “Product” is being taxed by the Government. Instead of the “Business” eating that tax imposed on it, like it should, “Business” places that extra burden on the “Consumer”. People just don’t have the money to pay for a LUXURY like cigs.

But NECESSITIES like gas for cooking and home heating, electricity for the home, and gas for the car, when they are taxed, “Business” again passes that burden onto the “Consumer” like they ALWAYS ALWAYS do.
With necessities, those bastards KNOW we need them, and like the soulless SOB’s they are, keep raising prices.
It is called EXTORTION, look it up, but instead of an “official” is it “Business” as usual.

Posted by C.D. Walker | Report as abusive

The greatest supply of oil – that outstrips even the Arabian countries – lies under our northernmost states. Extracting ourselves from the onus of the Middle Eastern dependence should be first on our list of “must do’s.” By being able to supply our own needs, we can then look for other, better ways to implement alternative energy options.

Am I the only one who noticed how oil prices plummeted last year/early this year when the possibility of accessing our own reserves was suddenly a reality that the “oil producing nations” wanted to stave off? They understand that an energy-independent America is a stronger America, and they don’t want either.

Because as long as we are dependent upon regimes that have no compunction on raising their prices to our detriment, then we will be forever under their thumb.

Posted by Irene | Report as abusive