A new discussion paper has claimed removing tax preferences in the US could increase the global price of oil by 1% by 2030.
The findings of Gilbert Metcalf, Professor of Economics at Tuft University, were in relation to the tax treatment of oil and gas investment.
Reform advocates have argued that eliminating tax preferences for producers of oil and gas could increase government revenues by billions of dollars each year while defenders of the existing
tax regime have contended that changing it would lead to “large declines in domestic oil and gas production” as well as “significant job destruction”.
Gilbert said in the timeframe with which tax preferences were removed, domestic oil production could drop 5% and global consumption could fall by less than 1% in that timeframe.
It also found domestic natural gas prices could rise between 7 and 10% and both domestic gas production and consumption could fall between 3 and 4%.
The Professor concluded the estimated effects of removing the preference on energy prices, domestic production and global consumption suggest that none of the three preferences directly and
materially improve US energy security or mitigate climate change.
Gilbert added that if eliminated, they could potentially enhance US influence to advocate for international climate action and general fiscal savings.
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