Daniel Simmons is the director of state affairs at the Institute for Energy Research.
Earlier this week the International Energy Agency (IEA) made news by announcing that the United States will become the world's largest oil producer by 2017, and North America will become a net oil exporter by 2035. It is certainly the case that the United States has vast oil and natural gas resources, as we pointed out last year in our North American Energy Inventory. The challenge to increasing domestic energy production is not a lack of oil or natural gas, but policies that limit our access to those resources.
In our North American Energy Inventory, we explained that the United States had truly enormous oil, natural gas, and coal resources. The United States has enough recoverable oil to fuel our country for the next 200 years, enough natural gas for over 100 years, and enough coal for over 400 years. We noted that among the keys to developing these resources are technological advancements such as hydraulic fracturing and directional drilling as well as changes in government policies that have embargoed our own energy supplies from the American people. These technologies provide access to resources that have not been accessible in the past, and so would new government policies.
The new report from the IEA shows how hydraulic fracturing is already remaking the world energy picture. For over 100 years people have said that the United States is running out of oil. We have seen time and time again that we not only have more energy resources that previously thought, but that American ingenuity and private enterprise continue to unlock more resources.
The remaining question is whether the federal government will stand in the way of growing oil production. After the election, talk about imposing a carbon tax has been de rigueur in Washington, D.C. The White House recently stated that they will not propose a carbon tax, but they did not say one way or the other whether they support a carbon tax. The Department of Treasury and other federal agencies have looked extensively into a carbon tax and supported the "cap-and-tax" carbon tax plan and the Obama administration almost certainly would support a carbon tax.
But the problems with a carbon tax are legion. This week, Robert P. Murphy released a new paper on carbon taxes. Murphy found that many of the claims about carbon taxes don't hold up. One popular claim is that it would make the tax system more efficient and that it would be "revenue neutral," meaning taxes wouldn't go up. When Murphy examined the peer reviewed economic literature about the tax, he found that swapping some of an income tax with a carbon tax actually makes the tax system less efficient. He also found that it is highly unlikely that the tax, once imposed, would remain low. The best historical example is the imposition of the federal income tax. The income tax was introduced with a 7 percent top rate in 1913, but that increased to a whopping 77 percent in a mere 5 years.
The federal government should get out of the way and allow the shale oil and shale gas boom to continue. The United States has a great opportunity if we don't strangle the golden goose through new taxes and hobble its legs with new regulations.
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