9/4/2007 10:08:00 AM Higher oil company taxes hurt consumers
Marc Kilmer
At a time when almost every presidential candidate is talking about "energy independence," it seems strange that Congress is moving in the opposite direction with the energy bill being considered by the Senate.
Sure, those supporting it claim that it will help our nation wean itself from foreign oil. The tax provisions in the bill, however, will hurt domestic oil production. And to add insult to injury, the revenue from these taxes will be used to prop up inefficient "renewable energy" industries that will, in reality, produce little energy.
The notion of "energy independence" has been around for a while. Most public officials pay lip service to the notion that our nation should try and fulfill its energy needs through domestic sources.
Whether or not this is sound public policy is a debate best left for another day. Since politicians claim they want such independence, it makes sense to see if the legislation they support will provide it.
The Senate energy bill, touted by politicians from both parties as putting us on the path of energy independence, is a hodgepodge of tax credits, tax increases, and giveaways to special interest groups. It is unlikely that any of its provisions will actually help increase domestic energy production.
Some of its tax increases, in fact, will likely increase our nation's imports of foreign oil.
The bill raises taxes on oil production within the United States. As our nation learned with the Windfall Profits Tax imposed during the Carter Administration, when you increase taxes on domestic oil producers you reduce the amount of domestic oil. And that means buying more oil from overseas.
Of course, raising taxes on oil companies also means that consumers will likely pay more at the pump. These oil companies are almost certain to pass along any tax increase as part of the price of gasoline. So you can add this hidden tax onto the federal excise tax on gas (over 18 cents a gallon) and the Ohio state gas tax (26 cents a gallon). That's a lot of money going to the government for every gallon of gas you put in your vehicle.
As if that were not bad enough, the energy bill proposes to use this money to subsidize energy sources like biofuels, windmills, and solar power. Biofuels like ethanol do little, if anything, to reduce oil consumption or pollution. Their main purpose is as another agriculture subsidy. And wind and solar power may sound good on paper, but they have little potential as large-scale energy sources.
It is too bad that this energy bill is written in a way designed to allow politicians to act like they are "doing something" about the "energy crisis."
The best energy policy for our country is, paradoxically, no energy policy. We would be better off without government trying to shape our energy choices through tax hikes and tax credits.
Instead, the government should let consumers decide which energy source is best for them. It should give businesses the freedom to explore for new energy sources (and, yes, continue exploring for petroleum) without trying to steer funds to politically-connected industries. And it should stop trying to subsidize farmers by propping up the biofuels industry. Doing this would end the wasteful government spending and inefficient tax schemes that characterize federal energy policy.
It is unclear if the energy bill will be passed by the Senate. If it is, though, it is a testament to the fact that only in Washington do people think that "energy independence" can be achieved by increasing taxes on domestic energy production. With this kind of thinking, we're better off without guidance from Washington, D.C., on how we use our energy.
Marc Kilmer is a research associate specializing in technology issues with the Buckeye Institute for Public Policy Solutions, a research and educational institute located in Columbus.
