Sullivan: Encourage domestic production to bring gas prices down

An op-ed by Sullivan appeared in the Sunday, May 8, 2011, Washington Examiner.

Sullivan addresses the connection between the price of gas and the obstacles placed in the path of domestic oil and gas exploration by the Obama Administration. He writes:

The best way to moderate gasoline prices is a consistent source of oil and gas -- and not from foreign countries but from our own backyard.

The offshore energy potential of the United States is about 44.4 billion barrels of oil and 183.2 trillion cubic feet of natural gas, according to government estimates. That's enough oil to power 60 million vehicles for almost 25 years and enough natural gas to heat 60 million American homes for 57 years. It is also more than enough to reduce our imports by more than one-third.

However, this administration's energy security policy is to increase the cost of energy for American consumers and to shut the door on new exploration. Officials reversed a 2010 decision to expand offshore energy explorations, and have instead proposed no new exploration in new areas of the Outer Continental Shelf until at least 2017....

Obama's proposal to help lower prices? Remove long-recognized business and operational deductions (similar to deductions for all business and individuals). This will not lower fuel prices, but will actually result in higher costs for consumers.

This kind of logic makes you wonder if the president will tax grocery store owners more because food prices are up. Increased taxes increase the cost of doing business, and when the cost of doing business increases in any industry, those costs are passed on to the consumer.

Sullivan doesn't address his NATGAS Act -- about which more, later -- except in passing and by implication. ("House Republicans will bring up several pieces of legislation to undo that damage caused by the Obama administration's anti-American energy agenda....")

He makes an important point about removing deductions. Deductions are not subsidies. We tax businesses based not on their revenues, but on their profits -- income minus expenses. The tax code defines (in excruciating detail) what constitutes a legitimate business expense and how certain special expenses are treated (acquisition of capital equipment, for example, which is depreciated over several years rather than written off as a one-time expense). How a given piece of capital equipment is categorized -- e.g. three-year depreciation vs. seven -- can have a big impact on a small company's tax bill.

President Obama vowed to find the evildoers who are driving up the cost of energy, which brings to mind O. J. Simpson's vows to find the real killer. (Both of them seem to expect to find the culprits on the golf course, judging from the amount of time they spend there.) Mr. Obama needs to look in the mirror. His energy, budget, and monetary policies are driving up the cost of food and the cost of going to work, a regressive tax on the low-to-middle-income families he says he most wants to help.