Today, the U.S. Senate Committee on Energy and Natural Resources will revisit an all too common topic discussed on Capitol Hill: how changes in domestic oil production, refining and distribution could be affecting U.S. gasoline and fuel prices.
It’s an issue that has an impact on the wallets of nearly every American. So it’s important that lawmakers understand that there are policies that are currently impacting gas prices, namely costly regulatory and tax policies that are ultimately borne by the consumer. And alternatively, there are policies and decisions that can be made to can help dampen increases in fuel prices for all American, such as approving the Keystone XL pipeline.
First, it is no secret that producing more domestic energy can help put downward pressure on energy prices. Recent shale estimates place the U.S and Canada as among the largest emergent oil and gas producing regions in the world. However while technology has made these previously inaccessible reserves reachable, U.S. policies continue to keep our vast resources under lock and key. A Wood Mackenzie report titled “U.S. Supply Forecast and Potential Jobs and Economic Impacts (2012-2030)” finds that policies that encourage the development of new and existing resources could by 2030 increase domestic oil and gas production by over 10 million barrels of oil equivalent per day (mboed), support an additional 1.4 million jobs, and raise over $800 billion of cumulative additional government revenue. Increasing access to resources on federal lands and in the Gulf of Mexico on a timelier basis is essential since resources take many years to develop.
Second, the Keystone XL pipeline slated to stretch from Alberta, Canada to the Gulf Coast would bring more stable Canadian energy to the U.S. market. Crude imports from Canada through the pipeline expansion would bring 800,000 barrels per day to U.S. refiners and could reach 4 million barrels a day by 2020, twice what we currently import from the Persian Gulf.
Seeking to expand energy cooperation with a stable trading partner is in the U.S. national interest. For 5 years the country has awaited a decision from the administration on the pipeline. Approval would be a key ingredient to ensuring not only safe energy resources for future Americans, but would also help address concerns over energy costs. Following numerous federal reviews, the Keystone XL pipeline expansion raises no significant environmental concerns and is among the most studied infrastructure projects in recent history. Every barrel of oil we produce domestically or import from Canada is a barrel that doesn’t come from the Persian Gulf and the dollars not sent there are invested in North America.
Finally, increased regulatory and tax burdens on the oil and gas sector stand to discourage investment and may result in higher production costs, jeopardizing U.S. growth, tax revenues, and job creation. Mandates like the renewable fuel standard have the potential to significantly increase gasoline costs up to 30 percent in 2015, according to a recent study conducted by NERA Economic Consulting. In addition, a 2011 study from Wood Mackenzie found that higher taxes will yield negative economic consequences from 2011-2025, including eclipsing any short-term gains in tax revenue.
Lawmakers would be best served dedicating today’s hearing to discussing policies that support and expand the opportunities of domestic energy production, which will in turn put downward pressure on pricing. Efforts to erect more regulatory or other policy barriers that delay investment and make businesses more uncertain about hiring workers or expanding operations will only put upward pressure on prices.