6/15/2006 - Raise energy supplies, not taxes

By Jay C. Moon, CEcD MMA President and CEO Special to The Clarion-Ledger June 15, 2006 The solution to our energy woes is not more taxes, but more energy from any of several sources, the most immediate being increased oil and gas production in the United States. There have been numerous articles and opinion pieces in The Clarion-Ledger recently urging increased taxes on gasoline or supporting a windfall profits tax on the oil companies. These are bad ideas for several reasons, the main one being that the burden will be born by the consumer either way and manufacturers are the nation’s largest energy consumers. Adequate, affordable and reliable energy supplies are essential to the growth of the U.S. economy and to our quality of life. Today, America faces tight energy supplies caused by a fundamental imbalance of supply and demand, particularly for natural gas. Future energy needs far outstrip present levels of production. The solution is to produce more, and we have it to produce. The northern Gulf of Mexico has been supplying the nation with oil and gas for years without an environmental incident, even in the teeth of Hurricane Katrina. Vast fields of oil and natural gas underlie the Atlantic and Pacific outer continental shelf, the Rocky Mountains and Alaska. However, Congress has declared these areas off-limits. Now is the time to use the expertise gained in the Gulf of Mexico to tap these domestic supplies. We should start with what we have when it comes to solving the imbalance between supply and demand. To develop our own known resources provides economic security for our nation at a time of increasing instability in the countries that we increasingly rely on for our energy needs. At this time, there are several pieces of legislation under consideration in Congress to increase the U.S. energy supply by opening the OCS to deep water exploration of natural gas and oil. Our entire congressional delegation needs to sign on to these bills. Raising taxes on an already expensive and necessary product is the wrong approach and will surely put more American jobs at risk. American manufacturers face intense foreign competition from countries where companies have a cost advantage over U.S. companies. A study by the National Association of Manufacturers found that external overhead costs from taxes, health and pension benefits, tort litigation, regulation and rising energy prices add approximately 22 percent to U.S. manufacturers’ unit labor costs (nearly $5 per hour worked) relative to their major foreign competitors. Adding to that cost differential would only make things worse for business and the consumer. One-third of the nation’s natural gas is consumed by manufacturers. Last November, the association released the results of a national survey showing that high natural gas prices are beginning to cause significant job losses, salary freezes and lost market share for U.S. manufacturers. Nearly 45 percent of those surveyed said they will be forced to lay off workers or impose wage freezes or reductions. About 22 percent of respondents said their companies would cut health care or benefits in an attempt to keep up with energy costs. In addition to manufacturers, other consumers don’t need the added cost of more taxes on thousands of products made from oil and natural gas. As I have read articles calling for raising taxes on gasoline or on oil company profits, I have also read the problems that school districts and police departments have had in keeping buses and patrol cars on the roads. A new tax would make it even more difficult for all levels of government to provide services. When there is an imbalance between supply and demand, the answer is not to increase taxes, but to increase supply. Increasing our domestic supply of oil is a jobs issue, a national security issue and just good old fashioned Economics 101.

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