weekly response

Four Billion Dollars in Context
By Leo Brown
[President Obama's Weekly Address]

In the interest of developing an "all-of-the-above" approach to American energy, President Obama has reissued his call to end oil subsidies. Without such generous tax breaks, more money could be invested in the development of alternative energy sources or used to pay off the deficit.

But by reducing the oil company's profits, we will, in the short term, reduce domestic production and increasingly rely on foreign oil. Gas prices will rise due to transit costs and tariffs. Without the ability to produce our own energy, our influence in negotiations with foreign governments will dwindle.

Furthermore, the money that oil companies lose will not be taken from monstrous corporate salaries and bonuses. Big oil will simply save the difference by investing in oil production abroad, thereby dodging the matter. The rich will remain rich, and many American refineries will go the way of mid-century mills and plants.

Alternatively, if these companies were incentivized to drill in America, they would be subject to the rules and regulations of the Environmental Protection Agency, the US Internal Revenue Code, and US labor laws. But unless there is some impetus to produce domestic oil, profit-driven transnational corporations will inevitably opt for the lax environmental regulations and labor laws of production of Russia, the OPEC nations, and international waters.

"Drill, baby, drill," crooned the GOP, at least until the Deepwater Horizon BP Gulf oil spill of 2010. This call to drilling has been mocked, rightly, as economically backwards, Islamophobic, and ignorant of environmental risks. However, an anti-oil backlash, too, would yield economic and environmental devastation, so long as Americans continue to use oil. We often hear about the quest for energy independence, but an equally important priority is the collection of tax revenues from oil companies - revenues that can be invested in the development of alternative energy sources and used to pay off the deficit.

American oil production, along with the extraction of natural gas (fracking) from Marcellus Shale, can ease our reliance on foreign oil. If the government seriously considers the warnings of scientists and environmental activists, these endeavors can be less environmentally dangerous than foreign extraction, cut down on wasteful transit, and support the American economy.

So, with any luck, President Obama will not spend the entire election season playing word games about saving "four billion dollars of your money" by eliminating tax breaks for oil companies. Surely, he realizes that we could save a great deal more by investing in stringent regulations, incentivizing oil companies to stay in America with tax breaks, and using the revenue to ease the tax burden and invest in alternative energy. Unfortunately, this is not a logical opportunity for the 99% to take their revenge against wealthy CEOs, who will simply take their business abroad if we give them no reason not to.

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For a more detailed analysis of the economic consequences of these options, you might like to read Scott McNally's guest post on Scientific American's PluggedIn blog.