From GPA Midstream President Joel Moxley:
President Biden has threatened to tax what he deems to be excess oil profits if companies don’t invest in new production. Unfortunately, boosting production isn’t as simple as turning a dial. Oil and gas production projects take years to plan, permit and build. Midstream pipelines and facilities that move oil and gas from producing regions to markets across the U.S. and around the world also require years to develop. These activities require billions in capital to bring increased production to market.
America’s midstream companies are already investing in increased capacity in the Permian and other US hydrocarbon basins to make it easier to move oil and gas from the fields to customers. During the three-year period of 2019-21, GPA Midstream member companies poured out $100 billion in capital expenditures to expand the nation’s energy infrastructure. In 2021, these companies paid $16.9 billion in local, state, and federal taxes.
The president’s demand is counterproductive because he’s asking companies to make long-term investments totaling billions of dollars at a time when governments around the world are working to decrease future demand for hydrocarbons. If the president wants to expand US production and distribution capacity, he could start by addressing the cumbersome, time-consuming, and expensive permitting process. Doing so could give companies the certainty that they’ll be able to develop energy projects in a timely manner, avoid costly delays, and accelerate oil and gas growth.
A so-called windfall tax won’t change the prices set in global commodities market and will do nothing to ease the immediate supply crunch. What could help prevent this situation in the future is a balanced energy policy that gives proper weight to environmental concerns, reliability, and affordability.