During the first 28 months of the Obama Administration, the average price of a gasoline has increased from $1.84 to $3.96 per gallon – a 115 percent increase.1 The average family is now paying $368 per month on gasoline – almost double what they paid in 2009.2 Unfortunately, the Obama Administration has taken countless steps to make domestic energy production more difficult and more expensive.
Senate Democrats are now pushing forward with $21 billion of the President’s proposed energy tax increases in response to higher gasoline prices. These tax increases include repealing the domestic manufacturing tax credit, the dual capacity tax credit, and other tax increases on large domestic energy companies.
Senate Republicans have proposed targeted legislation to increase offshore oil and gas production in a safe and responsible manner, which will lower imports, create domestic jobs, and reduce energy costs for families and businesses. The Republican plan codifies new offshore drilling safety guidelines; reinstates cancelled oil and gas lease sales in the Gulf of Mexico, Alaska outer continental shelf (OCS), and Virginia OCS; and ends the Administration’s offshore “permitorium” by requiring the Department of Interior to act upon pending drilling permits.
Gasoline Prices: According to the non-partisan Congressional Research Service (CRS), tax increases such as those in the Democrat plan “would make oil and natural gas more expensive for U.S. consumers.”3
Increased production, such as that included in the Republican plan, could have a positive short-term impact on gasoline prices or could help minimize future increases in gasoline prices. 4
Energy Security: The tax increases in the Democrat plan will make producing domestic oil and refining gasoline more expensive, which would likely lead to an increase in oil imports and imported gasoline. According to CRS, permanent energy tax increases “may have the effect of decreasing exploration, development, and production, while increasing prices and increasing the nation's foreign oil dependence.”5
The Republican plan will lead to additional domestic oil and natural gas production. Alaska’s OCS has approximately 27 billion barrels of recoverable oil, and another 45 billion barrels lie beneath the Gulf of Mexico.6 Each additional barrel produced in the United States is one less barrel that must be imported from foreign markets such as the Middle East.
Jobs: U.S. energy companies already pay an effective tax rate that is 10 percent greater than their foreign competitors.7 Additional tax increases on domestic energy companies will only send more investment and jobs overseas. Repealing the Section 199 deduction and dual-capacity tax credit for U.S. oil and gas companies could destroy 154,000 jobs and $68 billion in wages nationwide.8
The Republican plan will put Americans back to work developing domestic energy sources. The Administration’s permitorium has already cost 20,000 jobs.9 More access to domestic energy resources could support an additional 530,000 jobs by 2025.10
Economic Growth: Higher energy taxes similar to those in the Democrat plan could reduce U.S. economic output by $341 billion over the next 10 years.11
The Republican plan will drive private sector investment toward developing more domestic energy resources. Robust development of offshore oil and gas resources would generate $8.7 trillion in economic growth over the life span of production.12
Revenue: A recent Wood Mackenzie study concluded that expanding access to domestic energy sources could raise $194 billion in revenue by 2025.13 In particular, the Republican plan would reinstate several lease sales that were cancelled by the Obama Administration. Recently, a single lease sale in the Central Gulf of Mexico generated a $3.67 billion bonus bid, which does not include the rent and potential royalties from that lease sale in future years.14
1“Weekly U.S. Regular All Formulations Retail Gasoline Prices,” Energy Information Administration, http://goo.gl/43hp2
2“Your monthly gasoline bill: $368,” Ben Rooney, CNNMoney, May 6, 2011, http://goo.gl/2CkoC
3“Oil And Natural Gas Industry Tax Issues In The FY2012 Budget Proposal,” Congressional Research Service, March 3, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41669
4Testimony of Lucian Pugliaresi, President of the Energy Policy Research Foundation, before the U.S. House Committee on Energy and Commerce, March 17, 2011, http://goo.gl/ucmNk
5“Oil And Natural Gas Industry Tax Issues In The FY2012 Budget Proposal,” Congressional Research Service, March 3, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41669
6“ Energizing America Facts for Addressing Energy Policy,” American Petroleum Institute, May 2, 2011, http://www.api.org/aboutoilgas/upload/truth_primer4.pdf
7“Global Effective Tax Rates,” Business Roundtable, April 14, 2011
8“Regional and National Impact of Repealing Section 199 Tax Deduction and Dual Capacity Credit for Oil and Gas Producers,” by Joseph R. Mason, for American Energy Alliance, September 2010, http://goo.gl/qI8T1
9“The Economic Cost of a Moratorium on Offshore Oil and Gas Exploration to the Gulf Region” by Joseph R. Mason, July 2010, http://goo.gl/Ah3zw
10“An Assessment of the Impacts of Increased Access Versus Higher Taxes on U.S. Oil and Natural Gas Production, Government Revenue and Employment,” Wood Mackenzie, January 2011, http://goo.gl/Br9Zj
11“Regional and National Impact of Repealing Section 199 Tax Deduction and Dual Capacity Credit for Oil and Gas Producers,” by Joseph R. Mason, for American Energy Alliance, September 2010, http://goo.gl/qI8T1
12“The Economic Contribution of Increased Offshore Oil Exploration and Production to Regional and National Economies,” American Energy Alliance, February 2009, http://goo.gl/U1x83
13“An Assessment of the Impacts of Increased Access Versus Higher Taxes on U.S. Oil and Natural Gas Production, Government Revenue and Employment,” Wood Mackenzie, January 2011, http://goo.gl/Br9Zj
14“Oil and Gas Lease Sale 206, Final Bid Recap,” U.S. Department of Interior, March 19, 2008, http://goo.gl/1D0d2