WASHINGTON -- As Democratic leaders in Congress prepare efforts to roll back subsidies to oil companies in favor of investing in renewable energy and conservation, conservative analysts warn that the approach will likely hit consumers at the gasoline pump.
House Speaker Nancy Pelosi's plan to attain energy independence "doesn't address the problem of energy affordability," Ben Lieberman, senior policy analyst for energy and the environment at the Heritage Foundation, told Cybercast News Service.
When the House addresses the issue [image-nocss] on January 18, the Democrats will likely try to amend or repeal several tax code provisions with the effect of raising the overall taxes paid by the energy sector, Lieberman said. But tax breaks to oil companies "weren't the reason we saw $3-per-gallon gas last summer, so tinkering with tax-code provisions really isn't going to do much good," he added.
America's demand for energy is growing with its economy, so it needs more domestic oil and natural gas production in the years ahead, not less, he said. Higher taxes would move the country in the opposite direction, because they would leave the industry with less revenue to reinvest in new exploration and production.
"The goal for energy policy shouldn't be to help big oil companies per se or hurt them per se," Lieberman added. "It should be to help consumers, and whatever impact they have on energy companies ought to be incidental."
As an example of attempting to hurt oil companies through higher levies, Lieberman pointed to the windfall profit tax on oil imposed under President Jimmy Carter's administration in 1980 and repealed eight years later by President Ronald Reagan.
"The desire to hurt Big Oil through higher taxes back then actually backfired, because the higher taxes discouraged domestic production," Lieberman said. "In fact, a Congressional Research Service study afterwards estimated it reduced domestic oil production and gave a comparative advantage to OPEC imports."
While acknowledging that the measures Pelosi is discussing are much smaller than the Carter tax, Lieberman said, "America learned the hard way that this approach does not benefit consumers, and the concern is that we're starting to go down that road again."
High prices at the pump last April caused Pelosi to lash out lash out at what she called the "Republican rubber-stamp Congress," which she said "passed two energy bills costing taxpayers $12 billion for giveaways to big oil companies" but had done "nothing to lower gas prices."
In July, Senator Harry Reid (D-Nev.), then serving as minority leader, called oil company profits a "backhand to the American people."
During the 2006 midterm elections, Pelosi said that "Democrats have a plan to energize America by achieving energy independence while rolling back the multi-billion-dollar subsidies for Big Oil."
"Calling for real investments in alternative fuels and tapping into America's vast resources and ingenuity, we will send our dollars to the Midwest, not the Middle East, and achieve energy independence within 10 years," she added.
Regarding alternative energies, Lieberman told the news service, We have to be realistic, especially about the time it's going to take to bring along a truly viable alternative economically and technologically. Ethanol, mostly produced from corn, costs more than gasoline, so it actually adds to the cost at the pump. It's good news for corn farmers and ethanol producers, but it's not good news any time you drive up to the pump. That said, research will continue into alternatives, and breakthroughs are possible. Over the long term, we may see some cost-effective alternatives come onboard, but in the meantime, we're going to continue to be using oil, and we ought to be taking steps to make sure that that oil is as affordable as possible."
Lieberman proposed a different solution to America's energy woesincreased domestic production. "There is more oil and natural gas we can get here in the U.S., places like the Alaska National Wildlife Reserve, places like 85% of our offshore areas that are off limits," he said.
He conceded that with Democrats setting the agenda, any movement in that area was unlikely.
Click here for more comments from Lieberman.
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