The recent debt ceiling debate has prompted increased focus on deficit reduction, with President Obama and congressional leaders proposing various cuts and tax increases aimed at moving the budget towards balance. As has become typical, for President Obama and his friends in Congress, this means targeting the oil and gas industry with proposals to nix tax credits and deductions that are broadly available across industries well beyond oil and gas.
Ironically, however, two new studies indicate that if Obama wanted to boost revenues from the oil and gas industry, he would not need to do it via pursuing tax hikes. Rather, according to a new study commissioned by the Gulf Economic Survival Team (GEST), an organization dedicated to helping rebuild the Gulf Coast’s flagging economy, returning to normal drilling levels in Gulf waters would boost revenues demonstrably.
Since the BP Gulf Oil spill – which happened over one year ago – the Administration has been dragging its feet in allowing American companies to drill in American waters. Approvals for shallow- and deep-water exploration permits are down by over 50 percent and 80 percent respectively. But a resumption of drilling would pour $44 billion into the American economy, create 230,000 jobs and, what’s more, increase tax revenues from American oil and natural gas companies by $12 billion, according to GEST.
This tallies with the overall conclusions of Dr. Joseph Mason, who considers that we could achieve $8 trillion in new economic output over the next 40 years, meaning $2.2 trillion in tax and royalty revenues, from new drilling.
Obama favored increased offshore drilling as a candidate, however, as president, his preferred policy has been to limit oil and gas production and target the industry for enhanced taxation, despite the fact that a more robust industry would likely contribute to driving the deficit down during this presidential term.