Big Oil and the House Select Committee on Energy Independence and Global Warming

If you have been a regular reader of our Comments About Responsible Energy, you know that one of our big concerns is the impact seemingly altruistic initiatives regarding energy and global warming have on the unsuspecting consumers—the citizens who make up much of our membership. Last week the House Select Committee made much ado about bringing the CEO’s from the major oil companies to Washington to research the high gasoline prices. While all their posturing is made to look like they are doing something for the citizens, they may, in fact, do more harm than good. Note the comment about increased production costs raising the price at the pump.

With this insightful posting, we introduce you to a new voice. We believe you’ll want to hear more from his experience! Let us know what you think.

Massachusetts Congressman Ed Markey wants some answers from “Big Oil.” He had five oil company CEOs in front of his House Select Committee on Energy Independence and Global Warming, grilling them on high prices and high profits. Markey said, “This is not an April’s fools joke on Big Oil, because the prices at the pump are no laughing matter.”

He’s right. It’s not a joke on the oil companies.

The joke is on us.

Markey wants to revise the tax structure on U.S. oil producers, increasing their tax burden by some $18 billion. Of course, as Rep. Markey should know, increasing these taxes will simply increase production costs and further raise the pump prices that he’s so concerned about. It will make oil exploration in the U.S. even less competitive and force American companies to do more work overseas, further increasing our reliance on other countries.

All in all, a poorly thought out strategy from someone in charge of a committee with “Energy Independence” in the name.

Oil and natural gas companies don’t make any more on their investment than a lot of other industries. In fact, percentage-wise, they’re only around average.

Energy companies make big profits when prices are high, like they are at present. But in good times and bad, they must invest gigantic sums of money in exploration, production and infrastructure.

They’ve sunk $1.25 trillion into energy production since 1992 and it’s estimated that $6 trillion more will be needed to meet global demand over the next twenty years. If high taxes diminish oil company profits and discourage investors, where does the money for development come from?

As Exxon Mobil Senior VP Stephen Simon told Congress, "Imposing punitive taxes on American companies will discourage the investments needed to safeguard our energy security. The pursuit of alternative fuels must not detract from investments in oil and gas."

He’s right. Developing alternative fuels is smart. Diminishing our supply of traditional fuels in the process is not. Markey needs to rethink his agenda.

Jack Rafuse is the principal of Rafuse Consulting, and a former energy policy advisor for the Nixon Administration in the Office of Management and Budget and the Federal Energy Administration. Rafuse had previously worked at the Navy Department and the Center for Naval Analyses. He subsequently worked for Union Oil of California (Unocal), an international oil and gas company. Currently, Rafuse is an independent consultant on energy and trade. His areas of expertise are Global Energy Trade and Supply, and Energy Regulation and Policy. For more information, visit jackrafuse.com.