Obama's unhinged energy policy

Bernard Weinstein:

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The Obama administration has now turned its attention to energy policy. But rather than looking at the energy sector as a vehicle for reinvigorating the American economy, the president has proposed hiking the tax burden on oil and gas companies by $45 billion.

At the same time, a new report from the Gas Technology Institute finds that drilling restrictions in Alaska and offshore are blocking access to nine years' worth of oil and gas.

Specifically, the administration is seeking to raise $36.5 billion from fiscal 2011 to 2020 by ending certain tax credits and deductions for domestic oil and gas production. An additional $8.5 billion would be raised by eliminating the credit for taxes paid by oil and gas companies overseas.

A portion of these revenues would be used to provide additional subsidies for "renewables" such as wind, solar and biofuels. In 2011 alone, subsidies for solar energy would increase 22% and wind energy 53% under the Obama plan.

The Sierra Club, a strong advocate of the plan, claims that the tax hikes will "help correct some of the market distortions that unfairly advantage dirty energy at the expense of clean energy." In reality, it's the other way around: On a BTU-equivalent basis, the subsidies for renewable energy sources dwarf those received by fossil fuels.

Another administration proposal would eliminate the domestic manufacturing income deduction for refiners. Because refinery margins are at their lowest level in decades, removal of this deduction would further limit America's ability to produce its own gasoline and diesel fuel while giving an unfair advantage to foreign suppliers.

Hiking taxes on domestic energy companies could also derail the shale gas revolution under way in many parts of the nation.

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The Obama administration needs to wake up to reality when it comes to the nation's energy future. Despite the current love affair with renewables, fossil fuels will still supply more than 75% of our energy needs 20 years hence.

At a time when every respected study agrees on the need to increase all sources of domestic energy, we should be pursuing public policies designed to enhance our own oil and gas production.

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If the Obama administration wants to increase income from the energy sector, it would be wise to get out of the way and stop strangling domestic production of energy. If the government got out of the way the industry would create thousands of jobs and trillions of dollars of royalties for governments at all levels.

The Democrats belief that we can drive up the price of domestic energy so that their favorite magic energy can be competitive is just wrong headed and counter productive. It is also dishonest. It is rank market manipulation in favor of a less efficient product.