Who would be an oil baron these days?
Profits are down, the oil price is bouncing depressingly around in the mid-forties, reserves are running dry, and the promised land of tar sands is not looking that promising after all.
And the global economy is going down the pan, so demand for your product is likely to be low for a while.
But hey there is still lucrative money to be made in the US because of tax incentives and loopholes in the law. But for how much longer?
Yesterday, proclaiming a “once in a generation” opportunity, President Obama proposed a 10-year budget that offers a serious change of direction on many issues to the one taken by his predecessor. Moreover hidden deep in Obama’s budget are proposals to repeal several oil industry tax incentives while imposing new taxes on Gulf of Mexico producers to close “loopholes” that have allowed companies to avoid royalty payments.
The overall budget eliminates a whopping $31.5 billion in “oil and gas company preferences” over a decade. The plan includes a “new excise tax on offshore oil and gas production in the Gulf of Mexico to close loopholes that have given oil companies excessive royalty relief.” The new tax would begin in 2011, which the document says is “after the economy has had time to recover,” and the budget assumes it would bring in nearly $5.3 billion over a decade.
Many of the proposals are likely to face serious resistance from the oil industry and its –in-the-pocket politicians from oil-producing states. It already has oil industry’s most powerful trade group squawking with anger.
“New taxes could mean fewer American jobs and less revenue at a time when we desperately need both,” American Petroleum Institute President Jack Gerard said in a statement. “More taxes also could reduce our nation’s energy security by discouraging new investment in domestic oil and natural gas production and refining capacity and pushing those investments — and American jobs — abroad.”
But what old Jack from the API does not realise is that for too long the industry has had things its way, with the Bush Administration handing tax and incentives like confetti at a wedding. Well those days are gone. If there is to be an alternative energy revolution, those days are gone for good.
Additional article quoted: Greenwire — OIL AND GAS: Obama seeks repeal of industry tax breaks, subsidies (02/26/2009).
I love how oil producers always try to scare people into maintaining the status quo of using oil. I hate how it works on a lot of people.
Obama’s plan is about as stupid as it gets:
1) lumps oil and gas together for taxes
2) favors big oil over smaller independents
3) will force companies overseas to exploit 3rd world countries
4) will cause a major increase in domestic natural gas prices
dumb dumber dumbest
And I thought Shrub was a few tacos short of a combination….
America has to have energy. It is TOTALLY IRRESPONSIBLE to eliminate the domestic oil and gas industry, before alternatives are brought on line.
It is going to take 10 years to bring wind and solar up to speed. Right now wind and solar only contribute 1% to American energy mix. What energy will America use if Obama elimintes the domestic oil and gas industry?
These are logical questions that, for the sake of America’s standar of living must be asked.
Wow, that is some serious hyperbole! First, these slight changes in the economics of oil will simply give taxpayers the money they have deserved for a long time.
Second, this in no way will “eliminate the domestic oil and gas industry”, that is simply inaccurate.
Third, If renewables get the same economic push now that oil got back in its heyday, then we could be solar powered in no time flat. Even if we simply put the royalty money straight to buying panels to power gov’t buildings.
I agree with Al: you can’t judge the future from current economics- changing economic incentives is how you change the future. Take the money from oil, give it to taxpayers or to renewables, and the new market is open.
If we pumped that amount of money into subsidizing renewables we’d be able to give up most of our addiction to dirty fuel (oil, coal, nuclear). AND the payoff would be eventually mega-cheap energy, cleaner air, water and land. If the current oil spill disaster in the gulf of Mexico doesn’t spell this out in gigantic neon letters, for us, we’ll never get it.
Does anyone know where the cash goes for the 5 million barrels of oil a day that Iraq produces?
When they cut subsidies the price will rise to offset the difference, as a drop in production will increase value in an already tight market. So in the end it will not matter to the industry. It may hurt the independent for a short time, but price equilibrium will happen. It may be a good thing for the producers as subsidies never work as planned.
How about this, effective immediately, all gas subsidies are cut off. But, the oil companies can get 90 to 99% of all the subsidies back if they reduce the cost of Premium gas to $2.50/gallon.