Obama's and Argentina's Misguided Approaches to 'Big Oil'

Obama tries to deflect attention from some of the real competition problems hobbling our oil and gas industry with talk of another crackdown on speculators.


Pete Sepp is executive vice president of the National Taxpayers Union.

It's a coincidence, but it cannot help but invite comparisons. Last week, Argentine President Cristina Fernandez de Kirchner made a stunning announcement that she would renationalize the once-privatized oil company YPF, which is responsible for most of her nation's home-grown production. Barely a day or so afterward, President Obama launched into a blistering attack against "speculators" whom he blamed for rising oil prices, and proposed a new series of regulatory initiatives.

No, these two developments don't seem linked by anything but the proximity of time. Yet, the actions of both presidents represent different forms of political posturing, neither of which is helpful for consumers or taxpayers anywhere in the world.

[Read the U.S. News debate: Will Obama's Plan to Enforce Oil Market Regulations Lower Gas Prices?]

Fernandez de Kirchner's takeover policy, which she called "the recuperation of the sovereignty of Argentina's natural resources," immediately drew criticism from Spain-based stakeholders in YPF, Argentina's neighbors, and international investment experts. President Obama's State Department rightly joined the chorus, calling Argentina's move a "negative development" that could "ultimately have an adverse effect on the Argentine economy."

The resulting downgrade in Argentina's credit from rating agencies is a troubling enough development for American taxpayers. As my organization has long documented, that nation's government-dominated economy and shaky finances have already left our own taxpaying citizens on the short end of the stick.

[Michael Lynch: Argentina Should Know That Nationalizing Oil Doesn't Work]

But Kirchner's policy only sheds light on a fact that most Americans will never hear from the White House or detractors of the U.S. oil and gas industry. Much of the competition our companies face abroad in the race to develop resources comes from state-owned actors. These national oil companies, based in Russia, China, and elsewhere, account for about three-fourths of reserves, according to a Wall Street Journal article, and enjoy major subsidies as well as guaranteed political insider status—advantages that critics of American energy companies (who pay large tax bills here and abroad) seem to overlook.

Which brings us back to our president who, even as his spokespeople at State express justifiable concern over Argentina's actions, tries to deflect attention from some of the real competition problems hobbling our oil and gas industry with talk of another crackdown on speculators. But the link between speculation activity and rising oil prices does not seem clear, and attacking speculation could have unintended consequences.

[See a collection of political cartoons on gas prices.]

So what are these real competition problems? Exhibit one is the corporate tax code itself, which President Obama says he wants to make less burdensome for all, even as he seeks more punitive and discriminatory tax hikes on oil and gas. His plan starts with stripping these firms alone of deductions and credits that other industries can claim, and ends with conferring additional favors on so-called "green energy."

Giving all U.S. companies—including oil and gas—a simpler, less burdensome tax law would help to offset the competitive edges that state-owned foreign companies receive from their governments, in a way that avoids the counterproductive command-economics Argentina's leaders have most recently embraced. Why can't President Obama see this connection?

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