Last week, The Motley Fool’s Tobey Shute made one of the better cases against the administration’s proposed taxes on American natural gas and oil producers, specifically how “Obama’s Plan to Punish Big Oil Will Backfire.”
From his article:
“I’m afraid, however, that our country’s independent energy producers will disproportionately bear the brunt of these proposed changes, which could lead to less domestic production.
Consider the repeal of the manufacturing tax deduction. This deduction is straightforward enough: produce stuff domestically, score a tax break…”
“…Strip a domestic producer like Southwestern Energy of these savings, though, and the money to pay the higher taxes will predictably come right out of the capital budget. The impact gets multiplied as it translates to reduced demand for the services of Dawson Geophysical (Nasdaq: DWSN), Nabors Industries (NYSE: NBR), and the rest of the oil patch’s service providers.
Maybe politicians aren’t paying attention to what’s happening in the oil patch these days, but we energy-focused Fools are following the company implosions, collapsing rig count, and asset fire sales with great concern. This is a heck of a time to put the brakes on productive activity in the energy sector.”
Shute later points out how the proposed taxes would compel larger companies to…
“…shift business abroad, while small fries lacking the scale to move activity outside of the country simply do less drilling. In both cases, we see less domestic energy production (not to mention fewer jobs). I don’t see how this helps us “reduce dependence on foreign oil,” a stated goal of the budget.”
The article is a good example of how in just the span of a month since the budget proposal has been released, even those outside the oil and natural gas industry can see clearly the contradictions and dangerous economic snares in the administration’s plan.
As IPAA prepares for OGIS New York, in the weeks ahead Access Direct will take a look back at some of the economic realities the industry has faced in the past year and ultimately look even closer into what the administration’s plan would do to American production if implemented. It’s important to remember that there are lots of folks out there making the same case (some even specifically for independent producers) and that the range of opposition is not limited to traditional advocates for natural gas and oil interests. Though always important, energy policy issues, particularly regarding economics may have never been as relevant to the entire American population as they are today. Keep checking back to see just why that is and who else has seen the writing on the wall – you may be surprised.