Obama to raise gas prices and inflation by raising taxes on oil companies

Obama is now saying that he wants to cut subsidies to oil companies (H/T Lonely Conservative), which will just increase their costs for extracting and processing oil. They will pass those costs directly on to the consumer. Obama will then blame the oil companies, even though he is the cause of the higher costs in the first place.

Excerpt:

The White House has sent officials to the G20 summit in Seol, South Korea and part of the message those officials are carrying from the PResident is a promise to join “joint efforts to phase out fossil fuel subsidies.”

But, what subsidies to fossil fuels get? Mostly tax breaks, which are hardly subsidies at all. Letting people or companies keep more of their own money isn’t “subsidy.” It’s tax relief. America’s policies amount to tax breaks aimed at driving capital investment in the energy markets, and frankly these sort of tax breaks are available to a lot of industries.

[…]What’s going on here is a bit of sleight-of-hand. Obama and other world leaders are talking about “ending subsidies” for fossil fuels. What they really mean is raising taxes on fossil fuels so that the so-called “green energy” projects they’re all so drippy about are more competitive in world energy markets.

What this means for you and me is higher energy prices and, by extension, a higher cost of living across our entire economy as those higher energy prices translate into higher prices for goods and services (everyone has to pay their power/fuel bills).

And it won’t just be the taxes adding to our expenses. If higher taxes drive more fossil fuel producers out of the market (and that’s clearly the goal here), they will be replaced by much more expensive and much less reliable “green energy” producers. That, again, means a bigger hit to the wallets of Americans.

Meanwhile, this report concludes that cumulative US subsidies of biofuels could reach $1 trillion over the next two decades. And that’s just biofuels, not other initiatives like wind power or solar power.

In summary, these people want to hamstring cheap, reliable fossil fuels in order to promote heavily-subsidized, expensive, unreliable green power.

Next time, don’t vote for a Marxist community organizer to be President. Pick someone who actually has run a business and met payroll.

UPDATE: A commenter adds:

What the President is talking about when he mentions oil “subsidies” is not a “subsidy,” it’s fair accounting. The primary “subsidy” is the oil depletion allowance, which is simply proper accounting for depleting in-ground assets.

The oil depletion allowance is nothing more than how the oil company computes how much an oil well decreases in total value when they pump oil out of it. There’s a finite amount of oil in a well, but the total amount is really an estimate. When it drills the well, the oil company declares what the oil in the ground is worth. When it pumps the oil out of the ground, the company takes a “depletion allowance” to account for the reduced value of the oil in the ground, and subtracts that value from their profits, thus reducing the amount of profit they have to declare for tax purposes. This is no different from, say, a paper company subtracting the cost of the logs they used in making paper from the profit they earned selling the paper. It’s calculated something like depreciation because the actual amount of the oil in a well is impossible to measure.

What’s happening is that the President, in an attempt to create demons that his dupes can hate, is deliberately misleading people into thinking that oil companies get special treatment. Just using the word “subsidy” regarding the depletion allowance is a lie, plain and simple. Worse, even: it’s defamation, and a declaration that the government really owns everything.

4 thoughts on “Obama to raise gas prices and inflation by raising taxes on oil companies”

  1. “But, what subsidies to fossil fuels get? Mostly tax breaks, which are hardly subsidies at all.”

    Stated in such a way as to LOSE the debate from the start. And fundamentally wrong to boot.

    What the President is talking about when he mentions oil “subsidies” is not a “subsidy,” it’s fair accounting. The primary “subsidy” is the oil depletion allowance, which is simply proper accounting for depleting in-ground assets.

    The oil depletion allowance is nothing more than how the oil company computes how much an oil well decreases in total value when they pump oil out of it. There’s a finite amount of oil in a well, but the total amount is really an estimate. When it drills the well, the oil company declares what the oil in the ground is worth. When it pumps the oil out of the ground, the company takes a “depletion allowance” to account for the reduced value of the oil in the ground, and subtracts that value from their profits, thus reducing the amount of profit they have to declare for tax purposes. This is no different from, say, a paper company subtracting the cost of the logs they used in making paper from the profit they earned selling the paper. It’s calculated something like depreciation because the actual amount of the oil in a well is impossible to measure.

    What’s happening is that the President, in an attempt to create demons that his dupes can hate, is deliberately misleading people into thinking that oil companies get special treatment. Just using the word “subsidy” regarding the depletion allowance is a lie, plain and simple. Worse, even: it’s defamation, and a declaration that the government really owns everything.

    Like

  2. There’s no need to fix it – philwynk is also “stretching” the truth. The “depletion” claim he is making is ludicrous at best. The GOP has claimed (http://tpmdc.talkingpointsmemo.com/2011/04/john-boehner-gop-could-ditch-oil-subsidies.php) that stopping the tax breaks would be a good idea while the NY Times (http://www.nytimes.com/2010/07/04/business/04bptax.html) actually talks about the magnitude of the tax breaks. It discusses (and references) that the oil industry spends 340 million in lobbying efforts to preserve their breaks.

    In most other parts of your blog you advocate free market and here you worry about prices rising if we don’t subsidize it…why are you against letting the free market decide gas prices and by extension vehicle sizes or energy decisions. I’ve never understood the far rights obsession with the mid-east – are you hoping that by funding them you can bring extreme islam to america?

    Like

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