Monday night, Neil Cavuto chastised Congress for not being able to multitask and simultaneously deal with both our financial needs and our energy needs. It’s too bad, because increased domestic energy production will help with our current financial problems.
On Monday, the financial markets responded to the financial bailout plans and as a result, the dollar took its biggest hit in seven years, crude oil recorded its largest one-day price increase in history, and other commodities rose as well. The problem with the financial bailout is that it is generally seen as directly leading to inflation. It’s easy to see why. All told the up-front tab for the bailout could reach $1.8 trillion. There is no way for the Federal government to pay for such a staggeringly expensive plan.
If only Congress could multitask, they could easily find a source of billions of dollars for additional funding—royalties from energy production. While these royalties can’t match the scope of the bailout this year, they will produce hundreds of billions over time. [Disclaimer: the Institute for Energy Research does not endorse the financial bailout, only describing one way to finance part of it.]
The taxpayer’s total return from royalty payments was $11.4 billion in fiscal year 2007and is projected to increase this year. According to the Congressional Research Service, if Congress were to allow production in ANWR, and ANWR produces 10.3 billion barrels of oil at current oil prices of $125 a barrel, then the Federal government would collect $191 billion.
Opening more of the Outer Continental Shelf and ANWR to energy production will also create more jobs. Energy exploration and production is expensive and labor intensive. Allowing companies to spend money on American energy production will lead to more jobs for Americans.
But that’s not all. Energy companies are heavily taxed and are paying record taxes. In 2006 (the most recent and complete data available) the major energy company earned $64.7 billion from U.S. production activities and paid $23.5 billion in federal, state and local income taxes. That’s an effective tax rate of 36.3 percent. Increasing domestic production will lead to the major energy companies paying even more than $64.7 billion in taxes.