Yesterday, through Declaration of Independents, IPAA released its analysis on the impact of market factors and energy policy on the hot-button political topic of gasoline prices. In particular, IPAA warned that this is “not a 5-second sound bite” and that many attempts to condense it to simple jargon actually ignore the complexities of the issue.
Part of the problem that complicates the increased oil production and lower gasoline prices relationship is the fact that the U.S. market is part of the global market – just like every other industry operating in this global economy. Interestingly, increased oil production actually does lower the price of crude oil on a regional basis. As a result of increased oil production in places like North Dakota’s Bakken shale play, “relatively abundant supplies in the mid-continent have in recent times put market prices for West Texas Intermediate (WTI) crude at some $10-$20/barrel cheaper than imported Brent crude.”
IPAA demonstrated how taxes on gasoline and burdensome regulations can harm producers and consumers, and how appropriate energy transportation infrastructure is a key component of a successful energy policy that promotes domestic development and eases supply issues.
- The U.S. market is a part of the global market.
- Increased U.S. production does lower price of oil—regionally.
- U.S. oil market reflects supply and demand.
- Taxes on Gasoline Matter.
- Burdensome Regulations Matter.
- Infrastructure matters.
IPAA closed with the importance of an energy policy that “encourages the American oil production that has a direct effect on jobs, economic revitalization, and energy security.” Policies like Senator Robert Menendez’s bill, which targets five key tax provisions of the oil and natural gas industry unveiled a bill to target five key tax provisions of the oil and natural gas industry, is not a sound energy policy. This is in direct response to President Obama urging Congress to repeal what he calls “subsidies.” However, this is a gross mischaracterization. These provisions, particularly intangible drilling costs and percentage depletion are not subsidies at all – in fact, they are typical business deductions that all manufacturing and mining industries receive.
Killing these deductions would kill new projects – costing jobs and energy supply in the process. This is no way to help the gasoline price issue. Senate Majority Leader Harry Reid (D-NV) expressed his support for the bill and planned that the Senate will vote on it in the coming weeks.
As the analysis summed up, “hitting our nation’s energy producers hard with increased taxes and burdensome regulations will certainly make producing – and consuming – American energy more expensive. This results in lost jobs and investment in the American economy, makes us more reliant on foreign imports and increasingly vulnerable to an oil supply shock.” Please read the full analysis, complete with original maps and graphs, for more information.