The US oil and gas industry can harvest political benefit from President Barack Obama's jobs speech to a joint session of Congress Sept. 8. The American Petroleum Institute planted useful seeds by publishing, the day before the president spoke, a study about the employment potential of industry operations. Now the group and its industry should deepen the roots.
There's little to be gained from dwelling on Obama's repeat of a proposal to close the "tax loopholes" oil companies supposedly enjoy. He's tilted at this windmill since he took office. He'll keep pressing the rhetoric to score political points, regardless of facts. The gullible will keep believing him.
Populist raid
This time, however, Obama's populist raid on petroleum industry assets counters his promise of tax reform and lower corporate rates. Is his rate-cutting reform supposed to apply to some industries and not others? And if, as he implied, a goal of reform is elimination of deductions and credits, how can he also propose new deductions and credits to shape corporate hiring?
This isn't tax reform. It's just Obama's variation on the same old mess. Most Americans will see through the doubletalk.
The issue is supposed to be jobs. That's "jobs" as in total employment, not jobs related only to government programs. Now as in the past, the best route to real job creation, yielding real growth in net employment, is investment of new wealth, which comes from profits, which come from private companies.
The government doesn't invest; it spends. It gets its money mainly by taxing private activities and incomes and by borrowing. The jobs it "creates" by spending money come at the expense of job-creating investment forgone in the private economy.
Obama's past efforts to expand employment by spending huge sums of public money failed. In fact, they worsened conditions by raising federal debt to smothering levels. The president has sweetened the poison of his employment strategy with suggestions for measured and limited tax rate cuts. Still, the package as a whole remains toxic because of what it neglects.
The economy will create and sustain jobs when it resumes growth at rates above recently meager levels. Responses to 9% unemployment should focus not on government spending, which just deepens the hole, but on reviving private investment in economically sound activities.
The oil and gas business does work like that. The government just needs to get out of the way. Current reluctance to do so results greatly from the Obama administration's infatuation with energy forms that cost much and deliver little. That won't change. But if the economy receives the attention it demands in a national employment crisis, it shouldn't matter.
The study API released on Sept. 7, by the consulting firm Wood Mackenzie, said policy changes related to oil and gas could, by 2030, create 1.4 million jobs. That's one tenth of the number of Americans now out of work. The president might not like oil and gas or the industries that supply them. But how can he ignore so much job-creating potential? How can he ignore the $800 billion in government revenue the study says would be possible or the increase in energy supply?
Policy changes
Policy changes asserted by the study are controversial but shouldn't be. They include opening federal areas to exploration and development, lifting drilling moratoriums in New York, accelerating Gulf of Mexico permitting, approving the Keystone XL pipeline between Alberta and the Gulf Coast, and keeping regulation of shale development at the state level. Environmentalists would squawk about these changes. But they squawk about anything that might raise oil and gas production. When they succeed they prevent wealth creation and stifle employment growth.
The conflict in this issue runs deep. The conversation, therefore, must be about more than job numbers. It should be about the contribution resource development can and should make to employment growth—and why Obama and his supporters persistently snub the potential.
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