The Drilling Ban
According to the Energy Information Administration (EIA), the US imported 3,661,404,000 barrels of crude oil in 2007. Thatís royalties the US Treasury didnít collect, directly added to the annual budget deficit and ultimately the national debt. So how much money did the Democrats with their drilling ban cost the US Treasury last year? The bigger question is how much would the price of oil drop to if the US Congress had gotten itís act together and stopped playing politics as our friends at CORE are so upset about?
According to Representative John Peterson (R) of Pennsylvaniaís 5th District, the current going royalty rate is 15.17% on the cost of barrel of oil. (See PDF file)Before we start, the essential premise of Representative Petersonís claim of $ 2.5 trillion over five years is based on the recent peak cost of oil and natural gas projected into the past. He was using the past five years of consumption by keeping the drilling ban thus denying the rest of the world that oil for their use.
The premise we will use is to assume a price for oil from back in 2006 of around $ 60/barrel when gasoline was around $ 2.70/gallon at the pump. That premise is based on the capitalistic concept of charging what the market will bear with an abundance of supply, i.e. the US producing all of its own energy thus freeing those imports for other countries to use such as China, India, etc. The period chosen was during the election cycle when Nancy Pelosi and the Democrats promised to lower the price of oil NOT raise it by their foolishness of maintaining the drilling ban instead. The US Treasury would have taken in $ 33,326,099,208 (3,661,404,000 barrels x $ 60/barrel x 15.17%) or roughly $33.3 billion on crude oil alone last year.
However, the drilling ban didnít only affect crude oil, it also affected natural gas as well. According to the EIA, the US imported 4,607,582 million cubic feet (MCF) of natural gas and itís equivalent in LNG or Liquefied Natural Gas. The average cost of this imported natural gas was around $ 6.87 per thousand cubic feet (TCF). Using the same royalty rate the US Treasury would have taken in $ 4,801,925,201 (4,607,582,000 TCF x $ 6.87 TCF x 15.17%) or roughly $4.8 billion on natural gas last year. Between the two energy imports, the US Treasury was denied $38.1 billion in revenue last year.
Now on the surface, in the scheme of things, thatís not a huge number when we compare that to the total revenue stream into the US Treasury. However, such a narrow view does not take into account a few not so insignificant items such as: the retail cost of gasoline on the consumer at the pump, the cost of transportation on economy as a whole, the cost of living on the poor, the loss of GDP, the loss of state and local sales taxes, the cost of government outlays for public assistance and unemployment and so on.