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Guest Post: Will Obama Destroy Any Hope Of U.S. Energy Independence?
Submitted by Charles S. Brant, Energy Correspondent, Casey Research
The U.S. consumes nearly three times the amount of oil that it produces domestically on a daily basis. How can this statistic get any worse, you might ask?
Imagine in 2010 the Obama administration persuades Congress to pass a budget that results in a reduction of domestic oil production by 10% - 20%, making the supply/demand imbalance even more lopsided. Foreign oil companies will gain a distinct advantage over American domestic operators as an unintended consequence of these proposals.
Sound farfetched? It’s closer to reality than you may think… If it comes to pass, it will likely be the biggest structural change in the U.S. domestic oil and gas industry in decades and have far-reaching implications for investors and for the entire country.
In early 2009, the Obama administration proposed to eliminate significant tax incentives for the oil and gas industry. These tax benefits were put in place decades ago to incentivize oil and gas producers to develop domestic sources of energy, while recognizing that oil and gas exploration entailed special risks. Two of the proposed repeals with the most potential impact relate to what the industry refers to as “percentage depletion” as well as “intangible drilling costs” (IDC).
Tax incentives explained
The first proposal involves eliminating the deduction for percentage depletion. Currently, the tax code allows small oil and gas producers to choose between two different tax deductions, percentage depletion or cost depletion (Big Oil’s ability to use percentage depletion was severely limited years ago).
Percentage depletion allows a tax deduction of 15% of the annual gross revenue of a well, continuing as long as the well produces and even after 100% of the costs have been recovered. On the other hand, cost depletion is calculated as the amount of oil or gas produced annually as a percentage of the total reserves of the reservoir. This deduction ceases when 100% of costs have been recovered (after which the producer may switch to percentage depletion).
From a practical standpoint, this means many small stakeholders, including investors and lessors who are not directly involved in the operations of the wells, will lose their ability to deduct depletion altogether, putting them at a significant disadvantage to their larger competitors.
And cost depletion is pretty much out of the question for most small stakeholders, as it’s extremely difficult for them to calculate. Small stakeholders in wells often aren’t entitled to the proprietary reservoir data developed by the operator of the well, which is necessary to calculate cost depletion. While the operators do disclose reservoir data in their annual reports, they rarely contain enough detail for a small stakeholder to locate information relating to a small field or well in which the stakeholder has an interest. Oil and gas stakeholders – such as individual royalty owners, royalty trust investors, and landowners, who all benefit from leasing land to oil and gas explorers – will immediately see the value of their investment decrease while simultaneously paying more in taxes every year.
The other proposal relates to drilling costs. Under current rules, oil and gas producers can elect to deduct certain intangible costs related to the drilling and workover of wells, including labor, drilling fluids, and drilling rig time. By electing to deduct instead of capitalizing and amortizing expenses, explorers recoup their costs faster. If the Obama administration does away with intangible drilling costs, oil and gas producers will no longer be incentivized to reinvest in new drilling projects, and new exploration will decline.
Small oil and gas producers will also rethink their decisions to pursue riskier prospects if drilling incentives are reduced. The only projects that will be worthwhile to undertake will be the “sure win deals.” And if they do decide to drill, they won’t recoup their costs as quickly, which means they’ll be slower to start new projects. Without the tax incentives, marginal producing wells, which might otherwise be reworked and continue to produce for years, will be more likely to be plugged and abandoned.
So what if marginal wells are no longer subsidized? Taxpayers shouldn’t be supporting bad assets and small oil and gas companies that operate them.
That’s a fair point. But it’s significant to note that 85% of the total oil wells in the U.S. are marginal producers, and these wells account for approximately 10% of total oil production from the lower 48 states. For natural gas, marginal wells produce nearly 9% of the total. And it’s not just small companies operating these wells. These subsidies are deeply embedded in the economics of the U.S. independent oil and gas industry. Cutting the tax incentives will drastically change the industry. The chairman of the Independent Petroleum Association of America thinks these proposals will cost independent oil and gas producers over $30 billion.
Back in May 2009, when it came time to include the president’s proposals limiting oil and gas tax incentives in the FY2010 budget, cooler heads prevailed in Congress and the proposals were not enacted. However, you can bet that similar policies affecting the industry will be enacted sooner rather than later.
Profiting from the mayhem
All independent, non-integrated U.S. explorers and producers will be affected if these proposals become a reality. At first, profits of oil and gas producers across the board will decline precipitously, impacting companies’ bottom lines and hammering investor returns. Producers that primarily operate marginal wells will be forced to plug and abandon newly uneconomical wells as a result of the policy changes. Without cash flow to support high fixed costs and precarious balances sheets, these companies will quickly become distressed.
Next, oil services companies will suffer as their small and medium-sized customer bases shrivel up. Regardless of size, all exploration and production companies with significant exposure to U.S. oil and gas assets will get hurt.
It’s also almost guaranteed the market will overreact and punish any U.S. company that has anything to do with oil and gas, whether or not it’s fundamentally justified. However, once the initial panic subsides, expect to find some screaming bargains among the surviving companies.
Oil and gas companies with conservative balance sheets, diversified assets outside of the U.S., spare cash, and opportunistic management will have a heyday picking up quality assets at fire sale prices. The trick is to identify the companies that will survive the turmoil and be able to capitalize on their competitors’ misfortune. Initially these strong companies will suffer stock declines along with every other oil and gas company. But they will recover quickly, and as they acquire new assets at attractive prices, their growth and profitability will be better than before. The window of opportunity to get into these stocks at bargain prices will be brief, as the market will quickly correct and the value will disappear.
Big Oil identified the United States as a hostile political environment years ago and has moved most of its production overseas, so they’re less likely to be negatively affected by these changes. However, bargain prices will be too tempting for these giants to stay on the sidelines. They’ll wade into the fray in a big way, picking up great assets even though it means they’ll be subjected to the stifling regulatory environment that comes with doing business in America.
Energy prices across the board will explode upwards and stay high until the production void left by oil and gas can be replaced by renewable energies, nuclear, or coal. The coming energy crisis will present you with plenty of opportunities to profit if your portfolio is correctly positioned.
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Do we really need the Department of Energy (Destruction)?
The DOE's Mission statement:
The Department of Energy's overarching mission is to advance the national, economic, and energy security of the United States; to promote scientific and technological innovation in support of that mission; and to ensure the environmental cleanup of the national nuclear weapons complex.
Yeah, I'd say so. We just need them to do their job correctly, and be empowered to do so.
I disagree. I could prolly list off 40 acronyms of federal agencies we dont need. Start by looking at ones created after 1930.
(as in never let a crisis go to waste excuse)
I prefer to start with the one created in 1913.
+1
There were 2 created in 1913.
We just need them to do their job correctly..
Pull out the Ben Franklin balance sheet and define the PROS/CONS of this cretin alphabet agency....
Are you young??
When has any government agency done its job correctly? Why do we keep expecting that to happen? Are we insane? Doing the same thing over and over again expecting a different result?
PierreLegrand....
You understand I'm responding to Missing Link.......
charles brant
respectfully disagree, not with your analysis
but with the conclusion
short term, true we wont be energy independent...but longer term withdrawing depletion allowance tax incentives will help move us from petro-chemical energy based economy to renewable energy based economy
as for the oil companies seeing usa as politically unfriendly, i say great, lets deplete foreign sources first and conserve domestic supplies
Yes.
Could somebody tell me how much energy it takes to convert a typical east coast coal deposit into liquid fuel and how much it would cost per barrel.
Would a hypothetical America spend more to subsidise these industries then it spends to garrison the Persian gulf ?
Sasol in South Africa has been doing this for over 50 years using a Fischer-Tropsch process developed by the Germans. Rentech in Colorado is the only plant in the US currently doing coal to liquid fuel(CTL).
DOE says CTL can turn a profit at $50/ barrel or over. Carbon capture would probably add another $5 to that so $55-$60/bbl http://www.aaas.org/spp/cstc/briefs/coaltoliquid/#costsThank you for the info although I am a bit sceptical of the $50/barrel figure - it always struck me that you could neutralise the coal lobby by announcing coal to liquid schemes while engaging in a ambitious nuclear programme for electrical power
The disadvantage would be that you would have to come up with trillions of dollars in capital for these capital intensive programs , oh wait you just did that for lloyd and co.
are you pricing the water required as free?
many years ago my brother worked for a company in la jolla california, sgi international
as part of a consortium they developed a process invented by a scientist named, estavar (sp?) and put together a demonstration plant in the powder river basin of wyoming
in round numbers, adjusted for the years of inflation since then, i would guesstimate oil above 100$ a bbl makes LFC (liquid fuel from coal) technology competitive including CO2 sequestration at around $20 if projected methods pan out
Well the ethanol producers have been screaming about the unfairness of these petroleum tax breaks for years. It'll be interesting to see if they can capitalize on this.
There goes the water supply
Pot calling the kettle black.
The ethanol producers have been garnering a ton of subsidies. Geez, first level of subsidies goes to the corn growers, then a second goes to the processors. And with the economic downturn they're screaming for help.
Unless the fuel is used where it's produced, it's a HUGE missappropriation of capital.
Is it any wonder why we've got no idea on how to proceed? With all these direct and indirect subsidies it's not clear what solutions are the most efficient.
Sorry the void will not be filled by our choice but what the oil companies choose to allow.
They are the "Microsoft" of energy after all.
So no discussion of a change to ethanol is allowed.
Even though we grow things really well and just 5% of unusable farmland could provide our transport needs.
No instead our money goes to prop up the M.E. sheiks and their 40 wives. Oh the M.E. citizens make out too. Each one gets between $3000-$10,000 per month. Funded by each American-
tankful by tankful.
So why not Ethanol? The money stays here and we get the $3000-$10000 per month.
Ethanol it works just ask Brazil. A country with the balls to kick the M.E. sheiks in the balls.
Do you have any Idea how many Gallons of fresh potable water it takes to produce 1 gal. of Ethanol? Try over 100.
Water...the new oil!
bingo! not to mention the amount of carbon release to slash/burn areas to grow feed stocks, and then distill it.
Ethanol will not work for us without massive changes. Ethanol only works for Brazil for 2 important reasons.
1. They use sugar. This is a far superior material to make ethanol then corn. We cannot use sugar because sugar is difficult to grow and is almost a monopoly in the US including hurting imports for both the sugar producers locally as well as the corn lobby.
2. Water. Brazil has an INSANE amount of water. We are running out of water in most places in the US. We are pumping an unreal amount of groundwater and it is not sustainable in the long term. The water is needed to grow the crops to make the the ethanol.
America has energy options but ethanol is really not one of them.
If Congress would stop blocking the importation of Brazilian cane juice into the US, and we made ethanol in the parts of the country where water is not a problem, we could use some ethanol.
Ethanol is a waste of good agricultural land ,also you put more energy in then you put out - I like to think of it as one summers photosynthesis rather then the 100 million years of stored solar energy in fossil fuels
The EROEI is like 1:1 with ethanol, another problem is there simply is not enough arable land to grow enough to replace oil.
Good luck beating the corn lobby. Also remember that shipping this cane juice to be used in ethanol takes power as well. I just don't see this as a valid option. If we really wanted to focus on a lobby it would be opening up natural gas or building nuke plans or both. Both have a better bang for the buck then ethanol and don't involve going after the powerful farm lobby.
Ethanol production and use would be viable if we used hemp. It could be harvested three times yearly from one plot with no need to displace food crops... and it grows anywhere. It also produces exponentially more oil than both cane sugar and corn from the same amount of land.
It's just too bad that too many industries are against its production... Police Assoc., Textiles, Big Pharm., Oil & Gas... etc. etc.
We could fully fund our domestic solar, wind and geothermal industries to rid ourselves petroleum consumption if we would just factor in the actual cost of a gallon of gas.
I'm talking about the cost of sending our armed services overseas and the adverse health effects we suffer because we use oil for transportation.
The biggest obstacle is political will.
bio-diesel, is the only current bio-fuel alternative, that is feasible. non food crop feedstock, can be grown on marginal land with little irrigation, no fertilizer, or pesticide, and the refining process, is simple, and cheap. also, mixing bio-diesel, with petro-diesel, is a great way, to reduce emissions. small regional facilities, would be ideal, and most farm equipment runs on diesel. distance, from production, to point of use, adds a lot to fuel prices.
non food crop feedstock, can be grown on marginal land with little irrigation, no fertilizer, or pesticide, and the refining process, is simple, and cheap.
Garbage in, garbage out. Marginal land grows marginal stuff! And, usually, it's in marginal quantity! Collection, therefore, is intensive (energy-wise); this is why the switch-grass BS (bio-mass) will never work- logistics!
also, mixing bio-diesel, with petro-diesel, is a great way, to reduce emissions.
Is this a primary goal? If so, then a better "solution" is to start first with wasting less liquid fuels!
The entire transportation-centric paradigm is going to crash. What about the roads (asphalt), tires, components etc. etc. It's NOT just fuel that we need to be concerned about.
People need to understand Jevons Paradox. They also need to watch Dr. Albert Bartlett's presentation Arithmetic, Population and Energy.
One comment about Brazil. They're energy independent because of oil! Yes, it's not ethanol that's their big liquid fuel source, that only represents about 8% of all of its liquid fuel consumption! They also use, per-capita, 1/4 of the energy that the US uses! Of course, this isn't an eternal situation; as they deplete their oil reserves They too will lose their energy independence (as shown, their 8% ethanol production, from better crops mind you, ethanol production/consumption [sugar cane also doesn't deplete soils as does corn]).
Well I know the US has a lot of natural gas and it is possible to run cars on them. However there is a lot of power in not moving over to that so we will have to wait till oil is running all the way out before we will have alternatives. And I know the US will not get serious about nuclear power till we either build breeder reactors like the French or we restart work on Yucca Mountain.
No ... Not until we get rid of the liberal/Big Oil cabal
The Liberal/Big Oil cabal? I can honestly say I've never heard those two things linked like that before.
Yes we do have LOTS of natgas. PERU has a large part of its small car fleet that runs on gas. If Peru can do it, so can we.
Nuclear also would help. France generates some 80% of their electric power from nuclear.
Gas for the cars & trucks (I've read proposals of putting natgas stations on the Interstates) and nuclear for more electricity. Do these 2, and a lot of our energy problems are solved.
So, what's say Obama?
The man from Hawaii says no we can't it will cost to much - where are we going to get the money after bailing out all those nice boys in the banking industry
T. Boone Pickens is all over this plan esp. for trucks. Unfortunately this was an initiative that was spearheaded by the last administration and is not political fashionable in this one.
Don't be fooled by the "corporate raider."
His alt-energy plans are merely a beard for his water company. Look it up.
Water will be the real problem as some have pointed out. I can go without driving my car. water? Not so much.
propane, is natural gas, and there's stations all over america, already. you can convert a car, for $2000, but if you want to do it as a business, the permits are cost prohibitive, thanks to big oil lobbyists.
Looks like we have the option already in the US:
http://automobiles.honda.com/civic-gx/
Re-fueling sites listed here:
http://www.afdc.energy.gov/afdc/locator/stations/
I think the new Audi/VW "clean diesels" run on the bio-diesel with good milage and performance. Been meaning to take a test drive.
The French nuclear industry was built around a American designed PWR reactor (ironic yes) although they did build two breeders , one retired for political reasons , the other a smaller research unit.
This looks promising:
http://en.wikipedia.org/wiki/Traveling_wave_reactor
yucca mtn, is dead in the water. lng (propane) would be better as a motor fuel, than cng. the infrastructure already exists, and the operating tank pressure, is much lower
Yucca Mtn is only dead for political reasons. Everyone using electricity has been paying for it for years. Now it is ready to go. Not using it is just another Obama screw job on the public and part of the trickle up poverty plan.
Exactly. Burned my ass when Chu came out, after Obama's state of the Union address, and stated that they were looking for alternatives, for nuclear waste storage,
to Yucca Mountain. How many billions did we spend on Yucca
Mountain? Apparently, money and people's time mean nothing to this administration, I can't wait to start voting them out in November's midterm. And if the republicans that get voted in pull the same bullshit they have been pulling for
years, I'll vote them out too.
Rinse and repeat until both parties get the fucking message.
I fully understand the French Revolution now.....
Uh, yes.
They can't own how bad the problem is or they will lose their job, at least that is how I think they see it.
Obama will continue to say he 'supports' nuclear development and then do all he can to subvert it's expansion. Remember last year Mr. Obama said that he was not opposed to high ($5/gal) gas prices just as long as they don't go up too fast.
We need nuclear. As in, yesterday.
No, no, no, green energy is the answer.
Look how much it helped Spain!
What big business thing HASN'T he supported?
Geez, this party politics/ideological crap gets tiring! (never mind logic, just blab party gibberish)
As far as nuclear goes, yeah, right, just pretend that there really aren't externalized costs and that there's an endless supply of uranium*.
* Before clamouring about how much there is, watch Dr. Albert Bartlett's presentation Arithmetic, Population and Energy. It's percent growth that's the biggie: and, as we know, the capitalist system cannot operate without growth- sets up for an interesting conclusion on this finite planet.
Remember last year Mr. Obama said that he was not opposed to high ($5/gal) gas prices just as long as they don't go up too fast.
What, he controls the world's oil markets? Come on! What he says is meaningless; the only inlfuence that he has is in maintaining wars (or starting new ones). How different is this, stating the fact that gasoline will be less and less affordable, than with all the talk (by the "free market" capitalists) that it's OK to have 10% unemployment, something that CAN be altered? (not that I support any mucking around with the markets [I think that they should be allowed to drive civilization over the ledge, in that way we'll once and for all see what a fricking nutty hoax we've played on ourselves]).
Yeah, thanks for playing!
Yep. The Kenyan Barry is an ideologue. God help us.
What is Texas doing to consume twice as much oil as California?
Probably has something to do with all the refineries (using the oil to make RBOB and such) and with the petro-chemical operations down there.
SUVs and air conditioning?
I don't think that mean the population of that state is consuming that much oil. If it did, then according to the chart, the people of Louisiana (which has a fifth of the population) is using more oil than New York.
Not possible.
I think the numbers must have something to do with the fact that a large part of the oil refining industry is located in states like Texas and Louisiana. And they probably count those refineries as "consumers" of oil - even though they're just taking the oil and converting it to something else and shipping it back out.
The petrochemical industry is located in Texas. California consumes the output without recognizing the inputs as theirs also.
The Prez has windmills in his head!
THORIUM, Bitches!!!
http://www.wired.com/magazine/2009/12/ff_new_nukes/
PBMR
emailed that article to my Senator (the one that i like). this is what i will be hoping for.
Mr. L H:
Scroll down in this one.
http://www.encyclopedia.com/doc/1G1-195732556.html
Maybe it just needs support.
It is worth noting that US Aircraft Carriers and subs are powered by nuclear. The Russians have had nuclear since the 60's as well.
Chemically thorium might form oxides more readily than plutonium making it a little harder to work with. But today that should not be a barrier.
foreign lobbyists own the wh.
The U.S. will be energy independent after the net oil exports dry up. Export Land Model will burn through those relatively quickly when coupled with a global decline in oil extraction rates. You are not going to undue the 1970 U.S. production peak.
Nuclear works, we need that, but transportation will be a serious issue, Fischer-Tropsch process will not have the flow rates to replace oil. Two decades from now, if we are driving automobiles they will not be oil powered. Too bad there isn't enough lithium in the world for us all to drive EVs, and the lithium that does exist mostly comes from China. Obama should play nice with them.
I say no tax incentives for oil and gas producing companies in America, but heavy import tax on foreign oil. Heavy consumption tax too. That would close some budget gaps.
No thank you. Some of us live in the untamed west and need to drive to be able to get around. Bicycling under a boiling sun is not my idea of a good time, that and I kinda like goods being able to show up in the town I live in and there not as many rail lines as I would like. I'm all for no subsidies but I'm anti-subsidy across the board, but taxing oil is a direct tax on us working slobs.
Sorry to bring you the bad news, but eliminating all subsidies will result in you bicycling under a boiling sun.
As to taxing imported oil? WTF? It's an issue of global markets (and then there's IMF shit to deal with).
People need to learn to pay the REAL price for oil! Part of this means reflecting the costs of our military at the pump.
I strongly doubt that, can you provide evidence that shows that our imported oil will skyrocket if we don't subsidize local producers?
And our military is not protecting oil we use. Look it up, we get basically all our oil from this hemisphere. the majority from Canada and Mexico, and NAFTA is forcing a gun to their heads on it. Again look it up, they can't stop selling to us by treaty unless they cut their domestic use by a corresponding amount. We are in the middle east for power projection and to set up for future containment of other rising powers IE China and Russia. Of course our oligarchs like Cheney getting to wet his beak it gravy for them. Well and drugs from Afghanistan for the CIA to move, nice how poppy production exploded after we took over.
Agreed if you are going to tax the best tax is to reduce consumption but you have to give people public transport options or else they will become prisoners in their own neighbourhood - In the US with its low density the bus is the best option.
You must be joking. Buses are not an effective option in the US save for a few eastern cities. Our cities were designed for individual motoring, and cannot be serviced by buses.
With obesity becoming a growing problem perhaps bicycles would be more appropriate?
Kind of hard to do that if you're shopping for your family at Costco.
All members of you family consume the stuff from Costo, right? Then all members can help haul the shit from Costco.
2/3 of the world's population lives on $3/day or less. Do you see THEM jumping in big SUVs to load them up with crap from Costo?
Someday you'll understand why bicycles are so widely used in the world.
Everyone has an excuse. Oil is a drug!
Have you weaned yourself off the drug? Are you bicycling around and not using a car for shopping?
I have not owned a car and I can cycle 10 miles to work every day. Rain, shine or bloody blizzard and I feel like I'm crazy. All this for a principle and to see if it can be done as easily as some people think.
Great suggestions above some seemingly self-serving but certainly within them the solution.
Now all that's needed is a disinterested human or a robot to synthesize all this information, come up with the ideal program, and order that it be done, leaving those affected negatively by it to find another way to earn a living.
Don't know what I think of this:
http://blogs.forbes.com/energysource/2010/02/10/peak-oil-solution-the-simmons-plan/
but the idea of converting the electricity to a potable source without further loss makes sense...as long as you get a decent amount out after what's put in
Sorry folks, but there's just no way to replace oil. Nuclear, nat gas, solar, wind, biomass - yes we need ALL that on-line, yesterday.
But its just not nearly enough to replace our needs for oil - not for a long long time. Oil is VERY efficient BTU density. It is easy to manipulate and transport. It can be easily refined and transformed into a multitude of products.
We need to QUICKLY figure out how to economically harvest heavy oil and tar sands that are right here in the USA and CANADA.
The idea of an "oil free future" is dangerous and delusional.
Well, you started off great until the last two paragraphs.
The idea of an oil free future is inevitable. You can't avoid it. The only question is how we get there.
a small nuclear reactor, adjacent to the tar sands project, and a recycling system, for the water, injected, seems like a reasonable approach, the nuclear plant, could also power the adjacent communities. full utilization, would bring down costs.
You all DON'T GET IT!
The US wants to use the REST of the world's supply BEFORE WE HAVE TO USE UP WHAT WE HAVE LEFT DOMESTICALLY.
This shit Ain't hard to figure out.
(OF course we want to use other people's Oil up FIRST, before we burn the last that we have on our own soil, What is ya, Ignirent?)
Madcow, Mugabe Jr. is dangerous and delusional.
Palin wants to drill everywhere and she is called an idiot for it. Obama wants to have a mythical "green economy" that guarantees high energy prices. OH BOY.
Guarantees a US default...
Maybe BUT ... given that oil is a finite resource it makes more sense to use other people's cheap oil until oil actually gets expensive, then and only then would you use your own. Considering Peak Oil is likely near I'd suggest not producing for a couple of years would actually make sense economically. Why produce oil and sell it for $75 when in two years you will be able to sell it for $150?
That's exactly what Forbes (which one?) said back in the early 70s. In effect, from one of the all-time big capitalists, nationalize oil (that's what you'd have to do to hold back local production).
Switch to today, well, just recently, when everyone trashes Iran for wanting to go nuclear to reduce its internal consumption of oil (saving more of it I'd imagine).
But, back to your statement on price... That assumes that there will be an economy that can absorb oil at that price. It is, as I've argued for quite some time, an issue of affordability: if oil is $32/bbl and you're unemployed, then it just might as well be $150/bbl.
1. Currently, there are no scalable alternatives to fossil fuels. Not by a longshot.
2. The last time the US was independent of energy imports was 1949. The US peak oil event in 1970 didn't smarten us up.
3. The US will never be energy independent as long as fossil fuels run the show. Policy must be adjusted to reflect this reality.
Read Robert Bryce's "Gusher of Lies: The Dangerous Delusions of Energy Independence".
"These tax benefits were put in place decades ago to incentivize oil and gas producers to develop domestic sources of energy,"
No, they were put in place because the oil industry lobbied for them. There was no reasoned deliberation that resulted in something good for the country. It was and is always money and lobbying. And the tax breaks will go away because someone else is now better at lobbying.
Oil and gas shold be no different than any other bussiness in how they recover capital costs.
Those Bushy oil men shure have been part a da system fo a long time. Not just lobbying.
Anyone, individual or company, producing over 1,000 BOE per day cannot use percentage depletion. There are also limits on the intangible drilling costs immediate deductions. The IDC deductions are legitimate deductions, it is only the accelerated timing that is a preference. People get their panties in a wad over "Big Oil" when it not applicable to those companies. Anyone in business that pays for services or materials necessary for the business can deduct those costs. Nothing preferential or tax subsidized about that in any way.
A real subsidy is a case like Mikey Moore. He films a movie in New York using temporary workers. When he hires a bend over boy to fetch his hot dogs he gets to charge that as an expense of production. The costs of the film are charged off very quickly as it has no box office appeal. then Mikey sends in the paperwork to the state to get a refund check payment related to the costs, hot dog boy and all. That is a subsidy.
When any business spends money to produce a product they are allowed to deduct the expenses. Oil and gas generally has the same rules. There are some preferences for producers which produce less than 1,000 BOE per day - small producers with marginal wells as noted. Larger companies don't get any subsidies, they pay monsterous taxes. The IDC preference allows immediate write off of the services and labor part of the drilling costs. They are going to get written off anyway, just not in the first year. Hard costs of pipe, pumps, valves, etc are capitalized. Percentage depletion was set up to solve a book keeping problem. What are the reserves and life of a well? No one knows until the last barrell is produced. A change is simply an invitation for an IRS argument. It only applies to the small producers anyway so it sure is not something that "big oil" is getting.
A real subsidy is what Mikey Moore gets. He writes off the costs of the hot dog boy on the set and the rest of the temp workers he uses. Then sends a bill to the state for some kickback money in the form of a direct check.
Mickey's hotdogs are a LOT cheaper than the wars in the middle east... just saying...
It's easy to overlook the indirect subsidies. (like the road systems, which, seems to me, go a long way to helping the oil companies make profits)
Is that supposed to be an intelligent comment? Roads were built so that oil companies could sell oil? Then horse trails were so that horse breeders could get rich? And tearing all of that out and forcing people to walk would be because the shoemakers would have more business? Nonsense to all of it.
I once heard a nutty commentator on NPR relate that the electric generation industry was a scam that got people hooked on electric lights and appliances so they could make money from power plants. Swallow much of that and you will be confined in an institution.
I guess I would be attributing too much foresight and intelligence to the gov't to think that they see peak oil coming, and want to save the local reserves to fuel the military after the world's wells dry up.
That may be why they're not letting the Alaskans drill on the North Slope.
Go away Todd Palin!
The big O is pro Nuke. His largest corporate sponsor and they were there at the beginning is Exelon. Exelon also happens to have a huge nuclear fleet of reactors. Guess who also would benefit from cap & trade. Just saying.
The big O is pro Nuke. His largest corporate sponsor and they were there at the beginning is Exelon. Exelon also happens to have a huge nuclear fleet of reactors. Guess who also would benefit from cap & trade. Obama does have an energy policy ....Just saying.
I would welcome 6-8 dollar a gallon then maybe people would wake up and change things. Cheaper oil is just enabling us to become more dependent. Its like having an addiction and knowing you should quit but unfortunately it usually takes some kind of trauma to help you or force you to change.
The title of this article is wholly wrong and doesn't even fit its content. All Obama is going to do is remove bullsh!t "oil subsidies" to big oil which earns hundreds of billions in profits. What has already happened is that previous Presidents and Administrations (almost all republican) have already Destroyed America's Energy Independence Now and for the future.
Obama's policies are the only ones which have a chance of reversing that dangerous trend that endangers the national security of America and makes Iran rich!
To have energy independence we need to reduce US demand for oil, ie prices need to rise. Obama also is providing loans to build the first nuclear power plants in lifetimes. Bush did nothing. Obama is also building a real non-oil based energy infrastructure. Under Bush and republicans, we become greater slaves of Islam and their oil each year. Obama is also forcing the largest vehicle fuel economy rise in lifetimes, while Bush and republicans repeated sold America out to the Oil and Auto companies making us oil slaves to Islam which funded Al Qaeda and other Islamic terrorists! The redneck ironically funds his enemy as he drives around his empty F150 with a US flag on it.
If you love America and hate Islamic radicals, then root for a large gas tax, much higher MPG requirements, nuclear plants, offshore wind and offshore drilling, natural gas vehicles, electric vehicles, and wind and solar energy.
That's how we get off Arab oil. Not driving your pickup and always voting Republican.
The title of this article is wholly wrong and doesn't even fit its content. All Obama is going to do is remove bullsh!t "oil subsidies" to big oil which earns hundreds of billions in profits. What has already happened is that previous Presidents and Administrations (almost all republican) have already Destroyed America's Energy Independence Now and for the future.
Obama's policies are the only ones which have a chance of reversing that dangerous trend that endangers the national security of America and makes Iran rich!
To have energy independence we need to reduce US demand for oil, ie prices need to rise. Obama also is providing loans to build the first nuclear power plants in lifetimes. Bush did nothing. Obama is also building a real non-oil based energy infrastructure. Under Bush and republicans, we become greater slaves of Islam and their oil each year. Obama is also forcing the largest vehicle fuel economy rise in lifetimes, while Bush and republicans repeated sold America out to the Oil and Auto companies making us oil slaves to Islam which funded Al Qaeda and other Islamic terrorists! The redneck ironically funds his enemy as he drives around his empty F150 with a US flag on it.
If you love America and hate Islamic radicals, then root for a large gas tax, much higher MPG requirements, nuclear plants, offshore wind and offshore drilling, natural gas vehicles, electric vehicles, and wind and solar energy.
That's how we get off Arab oil. Not driving your pickup and always voting Republican.
This is a joke, right?
Here it is....
As long as governments cater to populism....there will never be good economics.....especially when the individuals do not have a proper business/economic background....
How can the outcome be good when one staffs its manufacturing plant with not a single person that has any background in manufacturung ?
The US tax structure....must be totally restructured to a simple 15% consumption tax....no other taxes period....
The govt. must remove itself from distorting prices....and minimize its price imprint....while enabling business planning to be long term....Who in theri right mind would committ heavy capital in the face of a populist with a legal pen ?
Obama is a populist...nothing more ...nothing less...and evreyone is finding this out that did not already know....
The second major item is defragmenting and making truly universal and efficient....a new securities exchange that is focused on RETAIL....
Proper tax structure....and a proper securities exchange....then the US enters the Golden Age....
Why would top management engage in long-term business planning when they could juice the stock price by announcing buybacks, cash their 7 figure bonus check along with their 8 figure golden parachute, and then move on the the next company and do it all over again because they have experience?
How is this "iamned" douche getting all these log-ins and I still haven't gotten one?
The US shouldn't provide extra tax credits to oil and gas producers. It artificially lowers the price of gas since the price is now partially subsidized by taxpayers and results in increased consumption and imports.
If the US wants to encourage domestic production and send a price signal to consumers it should set a minimum floor price for imported oil. The extra tax revenue generated on the spread when oil is trading below the floor price wouldn't hurt either.
Do Texan's power their homes using a Hummer as a mobile generator?
Seriously, that production vs. consumption chart is crazy. Texas had just under 25 million people in the state for 2009. California had just under 37 million. Look at the disparity in consumption. It is these under-appreciated distortions to equillibrium, that have plagued western economies for decades, that can also lead to bubbles.
Texas www.dshs.state.tx.us/CHS/popdat/ST2009.shtm
California http://wiki.answers.com/Q/What_is_the_population_of_california_in_2009
Excuse me, I'm a Progressive and I say tax them out of existence for their evil ways.
My bicycle works fine.
This actually may not be bad. We need to get off oil altogether, and making it more expensive is good.
Tesla Motors is going public and I'll be watching their progress with Model S - a decently looking fully electric car. On the other side of the spectrum is e-Solar with their industrial level solar power plant.
If the two are successfully, then we won't need oil. Or, actually, the remaining oil in the US might end up being the last oil out there, and it will be required to power our military. Shifting M1s to electric power doesn't seem feasible at this point.
So, I don't know what the real reasoning behind this decision is, but the consequences, even if unintended, might not be bad..
I and we should definitely charge a huge premium for the rest of the world to get access to this tech.
Sorry guys Ethanol is the solution because.
But not with corn. That was just a start like the Prius.
There are tons of crops better than corn .
Each region has it's crop . Cali can use sugar beets. Just as good as sugar cane. The South sugar cane , fodder beans again better than corn in yield.
Cali could supply all our energy needs with Kelp the fastest growing plant around. Using no fertilizer or water.
The Texas Panhandle has enough Mesquite trees to provide 17% of our transport needs using the pods. Again no water no fertlizer needed. Add some of those and the yield zooms
But done wisely like the Israelis did with drip irrigation.
Yeah the farmers have to learn to conserve water too not just dump it on the fields.
BTW stop bringing up how much water it takes to make ethanol.
It takes 1700 gals of water to refine 1 barrel of oil to finished products.
To date over 80% of all the oil wells EVER drilled, in the WHOLE WIDE WORLD, have been drilled in the good ol USA. The reason? Long term stability of the dollar, private property rights and freedom to profit on your investment.
We have plenty of oil. (http://books.google.com/books?id=nALO2-D8RFoC&pg=PA311&lpg=PA311&dq=wann...)
The same crap was on display back when Nixon floated the dollar. We contract long term with the oil producers at $10/barrel then slash the value of the dollar by 2/3. Then we get all pissy when they jack the price up 2/3. Peak oil is just another BS notion brought about by a unstable dollar & enviro-nazis.
I saw an old clip from Meet the Press last year where they had oil company execs on talking about the "oil shortage' back in the 70's. It was instructive how they pointed out the impact of a unstable dollar and how it impacts long term investments with oil & gas. Even today, they can only protect investments by going to the "JIT" (just-in-time) model of supply. Does that sound familiar to any other industries?
To date over 80% of all the oil wells EVER drilled, in the WHOLE WIDE WORLD, have been drilled in the good ol USA. The reason? Long term stability of the dollar, private property rights and freedom to profit on your investment.
We have plenty of oil. (http://books.google.com/books?id=nALO2-D8RFoC&pg=PA311&lpg=PA311&dq=wann...)
The same crap was on display back when Nixon floated the dollar. We contract long term with the oil producers at $10/barrel then slash the value of the dollar by 2/3. Then we get all pissy when they jack the price up 2/3. Peak oil is just another BS notion brought about by a unstable dollar & enviro-nazis.
I saw an old clip from Meet the Press last year where they had oil company execs on talking about the "oil shortage' back in the 70's. It was instructive how they pointed out the impact of a unstable dollar and how it impacts long term investments with oil & gas. Even today, they can only protect investments by going to the JIT model of supply.
Big Oil identified the United States as a hostile political environment years ago and has moved most of its production overseas,
You mean when it was ruled by an Oil rich family?
Yawn. Nuclear power, bio-diesel, wind, natural gas. Why not work on the future instead of bitching about the past and tax credits.
Yawn. Bio-diesel, wind, ethanol, and solar only exist because of tax credits. Oil and gas don't get them. Big oil gets the production from overseas because that is where the reserves are. It is a lot better to drill where they can get production. The alternative energy folks are drilling the govt and taxpayers. It works for them to get the bucks. Not so good for energy supply as the produce almost nothing.
you can add solar and tidal to your list, too.
hat tip to: http://www.iamned.com
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