The price at the pump has increased 28% in just the last four months, 116% since Barack Obama took office.
The reaction from the White House and the Democrats?
Punish the energy industry with $85.5 billion in new taxes – a penalty that will further discourage domestic production and sure to be passed on to consumers driving prices even higher.
The President says that oil and gas should pay their "fair share." I did a little checking and found that the industry pays an average 41.1% of net income in taxes compared to 26.5% for all other S&P industrials. Only the most died-in-the-wool oil and gas haters can possibly think 15% more isn't enough.
Oil and gas also ponies up billions of dollars each year in royalties, rents, and leases. Back in 2008 when the last gas price spike occurred, the Bush Administration encouraged more domestic production by issuing new leases and permitting new wells.
Production went up, prices at the pump fell, and those royalty revenues more than doubled from the previous several years to $23.3 billion, according to the Office of Natural Resources Revenue (ONRR).
But, when the Obama Administration took over, one of the first actions by Interior Secretary Ken Salazar was to cancel many of those leases. Then after the Deep Horizon well explosion, Salazar put a moratorium in place in the gulf as well as many other restrictions and drilling bans throughout the nation and offshore.
In 2010, royalty, rent, and lease payments declined to just $8.6 billion from oil and gas companies; a decline of $14.7 billion from 2008.
In the gulf alone, the Administration's policies have led to a decline in production of 300,000 barrels per day, and the Energy Information Administration projects another 300,000 bpd decline this year. That means a 35% decline in production in the region that supplies about a third of all domestic supply. In February, 2011 of 126 drilling rigs in the Gulf of Mexico, only 25 were operating; half the total prior to Salazar's moratorium.
The oil and gas industry pumps $85 million into the U.S. Treasury every day in taxes and production fees. They also employee over 9 million people and invest about $300 billion each year in capital projects that benefit local communities and our struggling national economy.
Instead of limiting regulations and punishing taxes, the Administration should encourage and unleash the industry, just as Bush did. Instead of declining revenue to the U.S. Treasury, there would be more, and we might get a little relief at the pump, too.
Ronald Reagan reminded us that you get more of what gets incentivized, and less of what is penalized, and his economic policies proved it. So did the Kennedy and Bush tax cuts. But, Obama and the Democrats seem obsessed with defying history, as well as common-sense, by pillorying oil and gas with more taxes, regulations, and punishing rhetoric.
Capital is fungible- that is, it can move from one place to another quickly- and energy production is the prototypical global industry. Plenty of nations around the world are providing a far more welcoming business environment for energy production than the U.S. where the corporate tax rate is the highest in the world and more than 81,000 pages of federal regulations control every move.
While Obama's policies were busy choking off domestic production and driving up prices at the pump, his administration agreed to underwrite a $2 billion off-shore project in Brazil. In March he flew to Rio de Janeiro to announce the deal, and rubbed salt in the wound of U.S. energy workers when he told the Brazilians, "When you're ready to start selling, we want to be one of your best customers." That likely didn't set well with workers idled by the moratorium in the gulf.
The U.S. has also loaned $2.84 billion for upgrades to an oil refinery in Cartagena, Columbia. Because the permitting regulations are so excessively onerous and radical environmentalists keep proposed projects tied up in litigation, there has not been a new major refinery built in the U.S. in 35 years, so increasingly we are forced to not only import crude oil, but refined gasoline, as well.
By now, the White House must be tracking jobs "saved or created" in foreign nations, too.
The President likes to demonize the oil-and-gas industry for what he says are $4.3 billion of "tax giveaways". He's referring to various tax credits and deductions also available to every other business in America, like Microsoft, Coca-Cola, and Ford.
While he pours out his venom against what he calls the oil and gas companies "huge profits," he doesn't bother to point out that the energy industry's profit margin (5.7%) is nearly identical to manufacturing, aerospace and food, and only about one-third as much as the beverage industry (21.7%), pharmaceuticals (19.4%), and computers (17.3%).
For a President that seems obsessed with being "fair" his hypocrisy knows no bounds.
While Obama rails against the energy companies, he is strangely silent about companies like General Electric that reportedly paid no taxes at all in 2010; in fact GE scored a $3.2 billion tax benefit. But, then GE plays Obama's favored "green" energy game and applies a lot of grease to the Obama campaign machine, so "subsidies" and special favors for them are just fine.
GE's complete tax avoidance is because of "fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore," according to the New York Times. Obama even rewarded Jeff Immelt, the CEO of General Electric, by choosing him to lead his Council on Jobs and Competitiveness.
Immelt was a curious choice for a post supposedly to address "U.S. job growth" because GE not only concentrated profits offshore, their jobs have gone there, too. Over the last decade, GE's overseas workforce increased to 154,000 even through the recent global recession. However, their domestic labor force declined by 16%. So, Obama put an American jobs slasher, Immelt, in charge of job creation. Understand?
If Obama were really concerned about addressing the price of gas, job creation, or getting our economy back on its feet, instead of attacking U.S. companies with more taxes, regulations, and his white-hot rhetoric, he'd give them some relief and breathing room. He could really champion reducing the corporate tax rate, as he has intimated he might support.
He could remove Lisa Jackson at the EPA who has turned a "regulatory firehose" on the energy industry and U.S. business according to the Wall Street Journal. In just two years, Jackson has proposed or finalized 29 major regulations and 172 policy rules. A new Secretary of Interior that would actually issue drilling permits, offer new leases, and bring an end to what Steve Forbes called the "most anti-oil and gas record in American history" would be helpful, too.
But, Obama is more focused on campaigning for re-election than doing something really helpful for Americans struggling though the recession and the impact of his failed policies. He has no real intention of doing something right for America; he's just looking for enough votes to keep his job. He'll continue to employ Saul Alinsky's "Rules for Radicals" strategy creating divisions, inciting class warfare, and tearing down the great American free-market economy.
Such is the truth of the Hope-and-Change fraud that was perpetrated on America in 2008.
End Bailout Nation: Larry Kudlow
Obama, Your Jimmy Carter is Showing: John Ransom
Housing Claims Drop: Zacks Investment Research
The NATO of East Europe Shuns U.S.: George Friedman
Obama Can't Feel Your Pain at the Pump: Bob Beauprez
Housing Experts Wrong Again: Kathy Fettke
Bankers as Clowns: Mike Shedlock
See more daily market commentary by John Ransom, Mike Shedlock, Gil Morales and Chris Karcher at the Tioker
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