Why We Don't Want A Federal Energy Policy
Buried in the huge budget-reconciliation bill, on which House and Senate conferees are putting the final touches right now, are a few paragraphs that accomplish an extraordinary feat. They roll back the price of a barrel of crude oil to what it sold for two years ago. They create this pretend price for the benefit of a small group of the politically well connected. You still won't be able to buy gasoline for $1.73 per gal. as you did then, instead of today's $2.28. You still won't be able to buy home heating oil for $1.60 per gal., in place of today's $2.39. But a select group of investors and companies will walk away with billions of dollars in tax subsidies, not from oil but from the marketing of a dubious concoction of synthetic fuel produced from coal and dependent on government tax credits tied to the price of oil.The essence of the thing is this: federal synfuel programs were set with a target price of $50 a barrel as the minimum these operators needed in order to break even. For years, with actual crude prices well below that seemingly-far-away threshold, the synfuel producers got year after year of tax breaks. But with oil well over $50/barrel, and looking to stay that way indefinitely, the producers have started hammering Congress to raise the threshold.
From 2003 through 2005, TIME estimates, the synfuel industry raked in $9 billion in tax credits. That means the lucky few collectively cut their tax bills by that amount, which would be enough to cover a year's worth of federal taxes for 20 million Americans who make less than $20,000 a year and pay income taxes. How important is the tax credit to synfuel producers? In its latest annual report, Headwaters Inc., a Utah-based purveyor of synfuel processes and substances, says flatly, "Headwaters does not believe that production of synthetic fuel will be profitable absent the tax credits."
The culprits appear to be Senators Rick Santorum (R-Penn.) and Gordon Smith (R-Ore.). <Insert crack here about "the best government money can buy".>