Too Much Domestic Oil and Gas?

Jane Van Ryan
Posted September 18, 2009

Did you know that the top economist at the U.S. Treasury believes the United States is producing too much oil and natural gas?

As Alan Krueger recently told a Senate panel, the United States has an "overproduction of oil and natural gas" because U.S. tax policies encourage "an over investment in domestic resources in this industry." Krueger said taxes should be raised on the oil and natural gas industry to make it more "efficient" and to meet the administration's goal of reducing the consumption of fossil fuels.

It doesn't take a government economist to understand the impact of Krueger's words. Common sense indicates that by raising taxes, the government would raise the cost of doing business. And as costs rise, companies have less capital to grow their businesses and hire more workers.

Not to worry, Krueger says. He believes the impact would be minuscule, and he brushes away these concerns as though he's brushing a fly off his sleeve. His views clearly contradict the government analysis from the Congressional Research Service that noted the loss of production and increase in imports of oil due to the last major tax increases imposed on the industry in the 1980s. It was George Santayana who said, "Those who forget the past are doomed to repeat it."

Right now the United States imports nearly two-thirds of the oil it uses every day. And clean-burning natural gas is viewed by many as a bridge fuel that can power our nation as it makes a transition to a new energy future. Additionally, Department of Energy projections show we need all of the energy we can get from all sources, including oil and natural gas.

Yet, Krueger believes we're producing too much domestic oil and gas? Tell that to consumers who've paid $4.00 per gallon for gasoline.

Yesterday, Sept. 17, energy blogger Geoff Styles posted his thoughts on Krueger's testimony. Hat tip to Geoff for an excellent post!