Abundant opportunity to invest in oil & gas – for decades. What is fair? 

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Exclusive: No choice but to invest in oil, Shell CEO says
Ron Bousso, Dmitry Zhdannikov, Reuters, October 14, 2019

Royal Dutch Shell (RDSa.L) still sees abundant opportunity to make money from oil and gas in coming decades even as investors and governments increase pressure on energy companies over climate change, its chief executive said.  But in an interview with Reuters, Ben van Beurden expressed concern that some shareholders could abandon the world’s second-largest listed energy company due partly to what he called the “demonization” of oil and gas and “unjustified” worries that its business model was unsustainable.   The 61-year-old Dutch executive in recent years became one of the sector’s most prominent voices advocating action over global warming in the wake of the 2015 Paris climate agreement.

Our Take: Of course Shell is investing in oil; the world markets demand it. As noted in the article below, the oil and natural gas industry produces the energy we count on every day, while meeting climate objectives. Markets, not mandates. 

The Continuing Quest for Energy – and Lower Emissions
Mark Green, API Energy Blog, October 14, 2019

Looking over EPA’s new Greenhouse Gas Reporting Program (GHGRP) data on methane emissions, let’s consider two overarching points:   First, energy from natural gas and oil power and empower America’s modern way of life – better health, greater comforts and conveniences and opportunities for Americans and their families to prosper. No other energy comes close in terms of accessibility, reliability, affordability and useful adaptability across an economy and nation as large and diverse as ours.  Second, as America’s natural gas and oil industry produces the energy we count on every day, it also must continue to capture as much methane as possible from that production, to help the U.S. meet its climate objectives.  On both of those leading priorities, our industry is on it.

The oil tax initiative: Fair for whom?
Roger Marks, Anchorage Daily News, October 15, 2019

Alaska’s constitution provides for “utilization, development, and conservation of … resources … for the maximum benefit of the people.” What is maximum benefit? Cash to the state? Short-term cash? Long-term? Jobs? Income? Environmental quality? Who knows?  Then there is the idea of the state getting its “fair share.” What is fair? For eons, philosophers, theologians, lawyers, economist and countless others have pondered this. There is currently a ballot initiative to raise oil taxes called “The Fair Share Act.”  Most economists would say fairness entails taxes being competitive; taxpayers should pay a similar amount to what they pay in other similar places. Otherwise investment will go elsewhere, and production suffers. As measured by percentage of net pre-tax profits going to the state and federal government, the current system is competitive. (Including the “credits,” which do not really function as credits, but rather provide progressivity to the system.)

Our Take: Today is the day. Alaska’s lieutenant governor will either certify or deny the “Fair Share” ballot initiative. As noted in the article, “The initiative sponsors have not stated what is fair, how they justify it, how they measure it or how the initiative attains fairness.” Adding an additional $1 billion in taxes would triple the tax rate – the sponsors of this initiative assume that such a drastic increase will have no impact on investment levels.  #voodooeconomics