Energy Subsidies and other Boondoggles

President Obama responded to higher oil prices by calling for repeal of tax subsidies on oil companies.

Never mind that oil prices are set by global commodity markets and keep supply and demand in balance using price movement to restore equilibrium—a process as old as time. The more it costs the less we use and price comes down to clear the market demand.

Investigations were announced and months from now when commodity prices fall again the panel investigating will report they found no basis for market price manipulation.

But in today’s economic climate any call for subsidy cuts sends a panic rushing along K Street where lobbyists turn their meter on and go press the political flesh to count votes and and protect their clients from irrational political behavior.  But the Daily Caller’s Chris Moody ran a story about a new Federal subsidy being proposed:

“The House is expected to consider a bill soon that would offer $5 billion in tax credits to the natural gas industry, a proposal that is causing a split among conservative members and groups.

The bill, called The New Alternative Transportation to Give Americans Solutions, or NAT GAS Act, would provide a generous tax credit to transportation companies that buy a vehicle that runs on natural gas. The measure has 180 bipartisan co-sponsors, including many of the chamber’s most conservative Republican members.

But some are crying foul over the special treatment that the government would be providing to the natural gas industry, arguing that it is not Washington’s role to “choose winners and losers” by offering tax credits to promote one energy industry over another. The bill’s proponents, however, say promoting natural gas — a plentiful resource in the United States — will help wean the country off foreign oil, provide resources to alternative energy sources and increase the nation’s energy security. A coalition of nearly two dozen free-market and conservative groups sent a letter to members of Congress in March urging them to avoid new subsidies and tax credits, and they plan to blast anyone — especially Republicans — who do.”

What are they thinking?

There is an energy revolution going on in the United States right now and it is being led by the amazing success of unconventional oil and natural gas exploration and development.  Even the US Energy information Administration called unconventional oil and gas a “game changer”.  US domestic supply of oil and gas is actually going UP despite the best efforts of the Administration to stall or kill-off deep water drilling in the Gulf of Mexico and anywhere else in the country.  Meanwhile, President Obama goes to Brazil and announces the US wants to be a ‘customer’ of new Brazilian deep water oil output. DUH!

The oil and gas industry does not need a new Federal subsidy—it needs for the government to get out of the way and let the revolution happen!

I could almost turn into a Ron Paul supporter over issues like this.  Let’s hope nothing comes of this.

America’s failed “industrial policy” of picking winners and losers among fuels, technology and companies is undermining our national security making us weaker and more vulnerable to unreliable but politically correct choices.  It is driving up our costs and weakening our competitive advantage.

Once upon a time we had markets for the purpose of forcing business to actually compete for customers, compete to reduce costs and increase quality.  Today the core competency of many firms is the hiring and managing of K Street lobbyists.

For the record, I favor the elimination of the subsidies for oil and gas companies.  I also favor eliminating those for ethanol, for wind, for solar and coal and nuclear all replaced by a level playing field where ‘least cost, best fit’ is the Darwinian industrial policy and the role of government is to create a level playing field where all can compete.

If our environmental strategy would strike a reasonable balance between protecting our environment with clean air and water, reasonable habitat protections and mitigation of damage while simultaneously balancing those environmental interests with our compelling national interest in economic growth and development and a thriving industrial base creating jobs—my forecast is we’d see the clean energy economy take off.

And if we would change the tax code to make repatriating earnings and investing in America more attractive than keeping investment, manufacturing and earnings off shore our economy would keep growing here at home rather than in China or Far-off-istan!

There ends the rant.


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