A recent Rasmussen poll found that 76 percent of U.S. voters believe we should be doing more to develop our own oil and natural gas resources. But an NBC-Wall Street Journal survey shows 74 percent are in favor of cutting important tax provisions for oil and natural gas producers. As a nation, it seems, we are not making the connection between asking the energy industry to increase domestic production and adopting policies that will enable it to do so.
With prices approaching record levels, raising the tax burden on U.S. oil and natural gas companies makes no economic sense. Higher taxes on energy producers will simply be passed on to consumers, further eating into their disposable income. At the same time, those taxes will siphon off capital that could otherwise be invested in infrastructure and exploration essential to increasing our domestic fuel output.
Without question, America has the ability to make a significant dent in the amount of energy we buy from foreign, often state-owned, energy companies. The Energy Information Administration believes more than 59 billion barrels of recoverable oil reside in U.S. offshore waters. The U.S. Geological Survey recently estimated total recoverable oil reserves in North Dakota, home to the Bakken Formation, at four billion barrels. Alaska, California, Pennsylvania, and Texas also possess great potential for additional oil and gas recovery, if only we have the political will to allow American energy companies to tap these resources.
First, we must put U.S. producers back to work in the Gulf of Mexico. It is foolish to continue denying Americans this bountiful energy resource when it can be provided by an industry that has proven its competence by safely completing 50,000 wells in the Gulf. What’s more, unless the Department of Interior accelerates the issuance of drilling permits, rigs will continue to relocate to other countries.
Second, politicians must drop their illogical calls for tax hikes on U.S. oil and natural gas producers. U.S. producers already fight an uphill battle against foreign firms who receive sweetheart tax and regulatory deals from their home governments. Trying to reduce our budget deficit with new taxes on America’s oil and natural gas companies will surely backfire, hindering our ability to produce more domestic energy.
It’s difficult to predict where energy prices will peak. $4 gasoline has already arrived, and $5 or even $6 is not out of the question. Prices at these levels could derail our nascent economic recovery and even plunge us back into recession. To avoid this scenario, we must get serious about developing all of our domestic energy resources. Time is running out.
Bernard L. Weinstein is associate director of the Maguire Energy Institute and an adjunct professor of business economics in the Cox School of Business at Southern Methodist University.