President Barack Obama's eagerness to eliminate what he calls "costly tax cuts for oil companies" will make life much tougher for U.S. consumers, says the Manhattan Institute's Robert Bryce.
The reason? The president's 2012 budget calls for eliminating a dozen tax incentives that benefit producers of coal, oil and natural gas.
"Big Oil has long been a plump piñata for politicos and environmental groups, but a simple cost-benefit analysis shows that eliminating decades-old tax rules for oil and gas could be a lousy deal for consumers," Bryce writes in The Wall Street Journal.
|President Barack Obama
Moreover, the president also wants to "break our dependence on oil with biofuels," says Bryce, but using biofuels to displace oil requires massive subsidies.
Last year, Bryce points out, the Congressional Budget Office (CBO) reported that the cost to taxpayers of using corn ethanol to reduce gas consumption by one gallon is $1.78.
“This year, the corn ethanol sector will produce about 13.8 billion gallons of ethanol, the energy equivalent of about 9.1 billion gallons of gasoline,” he says.
“Using the CBO's numbers, that means the total cost to taxpayers this year for the ethanol boondoggle will be about $16.2 billion” as compared to the $4.4 billion in foregone tax revenue for oil and gas tax rules.
Changing the tax rules could also slow the surprising resurgence of the U.S. oil industry. After decades of declining production, domestic drillers are increasing their oil output because they are tapping shale deposits with the same new techniques that have helped increase gas production.
PR Newswire reports that Charles T. Drevna, president the National Petrochemical and Refiners Association, called Obama’s proposal "a sweetheart deal for the state-owned oil companies in Russia, Iran, China and other competitor nations, and for the Chinese who produce almost all the rare earth minerals needed to make batteries for electric vehicles.”
"Oil companies do not get subsidies,” Drevna noted. “Like other American businesses, oil companies get tax deductions for the products they produce and the jobs they create.”
© 2017 Newsmax Finance. All rights reserved.