On Thursday, Democrats in the House passed legislation that will repeal taxes and increase certain fees for oil drillers, while reserving the money earned for alternative energy sources. It is estimated that this bill will repeal $14 dollars in tax breaks and subsidies for oil drillers. This initiative has a few problems.
The first problem seems to be a basic economics issue. Increasing fees on the producer usually leads to increased costs for the consumer. As recently as this summer, gasoline prices at the pump were reaching record highs. Prices have declined since then, certainly helping others who rely on gasoline such as farmers, ranchers, and truck drivers. Increasing the costs of production of American oil is a terrible idea that will likely lead to an increase in prices for the long term.
Next, these fees are applied to domestic oil drillers. This means that the price of American produced oil will be more expensice. This will likely lead to further dependence on foreign oil. Since many in Congress have talked about the need to reduce our dependence on foreign oil, it seems to go against their own principles to support such legislation. While there is some logic in focusing on alternative energy development, Congress should not increase the costs on consumers by taxing producers to develop new means of energy production. Especially at this crucial time when our dependence on foreign oil is a significant threats to the American economy.
Note that Representative Herseth supports this legislation. Here is the first paragraph of a press release from her website:
The House of Representatives today approved H.R. 6, the CLEAN Energy Act of 2007, which repeals $14 billion in giveaways and tax breaks for the oil industry in order to invest in homegrown, renewable biofuels like ethanol and biodiesel. U.S. Rep. Stephanie Herseth supported the bill as part of her strong commitment to renewable biofuels as a means to decreasing our dependence on foreign oil, enhancing our national security, protecting our environment and revitalizing rural American economies.
I appreciate that Representative Herseth is focused on revitalizing rural American economies, and focusing on renewable biofeuls to reduce our dependence on foreign oil. However, this legislation seems to point towards an increase in energy prices which will hurt rural, agricultural economies (farm equipment doesn't power itself). Further, increasing the prices for American producers and drillers will potentially lead to a further dependence on foreign oil. I fully support researching renewable feuls. It will likely lead to better energy prices and dependence on our own energy sources. But I do not support increasing taxes and costs on our primary sources energy in the mean time. I hope the Senate gives this bill more careful consideration.
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