Eliminating a set of long-standing tax breaks for the oil and gas industry would have a small impact on global oil prices and U.S. production, according to a new study by the Council on Foreign Relations.
The tax incentives, which allow for percentage depletion, expensing of intangible drilling costs and manufacturing deductions, have been a point of contention for years. Industry groups argue the tax breaks are critical for sustaining production, while opponents say they cost the government an inordinate amount of revenue.
In the report, Tufts University Professor Gilbert Metcalf said removing the tax breaks would increase global oil prices by 1% by 2030 and reduce domestic oil production by 5% in that time frame. Meanwhile, natural gas prices would increase as much as 10%.
Metcalf said the tax incentives do little to improve U.S. energy security or reduce greenhouse gas emissions, but eliminating them could strengthen the nation’s position as a global climate change leader.
The Obama Administration has for years proposed eliminating the tax breaks, but a significant change was never likely under a Republican-controlled Congress.
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