Over the next year, the Obama Administration and Congress will debate how to address a wide variety of energy tax and fee issues. This comes on the heels of last year’s high oil and gas prices and record profits for companies in the industry which had Congress deliberating windfall taxes and more drastic action. Now that prices have dropped (at least for the moment), a more nuanced energy policy debate seems to be underway.
The Administration has begun the debate by outlining a plan in its budget that would amend taxes on the oil and gas industry. However, the Administration appears willing to negotiate with Congress on some of the details, which will eventually have to balance incentives, taxes, fees and access to resources. Even though the legislation will affect tax revenue and domestic energy production levels years into the future, it will be a product of oil prices and domestic economic activity when the legislation is passed. After all, Congress will not push a windfall tax when corporate profits aren’t at their peak or raise fuel taxes in a recession, regardless of the long-term implications.
What is needed is foresight. The President once commented:
I will tell you with $55 oil, we don’t need incentives to oil and gas companies to explore. There’s plenty of incentive. What we need is to put a strategy in place that will help this country over time become less dependent. It’s really important. It’s an important part of our economic security and it’s an important part of our national security.
When President George W. Bush said this in April 2005 he could have added that a strategy is an important part of environmental and fiscal policy, too.
Times have changed since then. Fluctuations in the price of oil have tested our wallets, but they have not changed our relationship with the commodity. Moreover, they have highlighted our need for a long-term strategy.