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The Impact of Removing Tax Preferences for US Oil and Natural Gas Production: Measuring Tax Subsidies by an Equivalent Price Impact Approach

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  • Gilbert E. Metcalf

Abstract

This paper presents a novel methodology for estimating impacts on domestic supply of oil and natural gas from changes in the tax treatment of oil and gas production. Using this approach along with simple market models for oil and natural gas, it finds that removing the major tax preferences for the oil and gas industry would have modest impacts on global oil production, consumption, or prices. Domestic oil and gas production is estimated to decline by 4%–5% over the long run. Global oil prices would rise by less than 1%. Domestic natural gas prices are estimated to rise by 7%–10%.

Suggested Citation

  • Gilbert E. Metcalf, 2018. "The Impact of Removing Tax Preferences for US Oil and Natural Gas Production: Measuring Tax Subsidies by an Equivalent Price Impact Approach," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(1), pages 1-37.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/693367
    DOI: 10.1086/693367
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    Cited by:

    1. Michael Lazarus & Harro van Asselt, 2018. "Fossil fuel supply and climate policy: exploring the road less taken," Climatic Change, Springer, vol. 150(1), pages 1-13, September.
    2. Richard G. Newell and Brian C. Prest, 2019. "The Unconventional Oil Supply Boom: Aggregate Price Response from Microdata," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    3. Edward B. Barbier, 2020. "Greening the Post-pandemic Recovery in the G20," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(4), pages 685-703, August.
    4. Brown, Jason P. & Maniloff, Peter & Manning, Dale T., 2020. "Spatially variable taxation and resource extraction: The impact of state oil taxes on drilling in the US," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    5. Jonathan Doh & Pawan Budhwar & Geoffrey Wood, 2021. "Long-term energy transitions and international business: Concepts, theory, methods, and a research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(5), pages 951-970, July.
    6. John Grimaldo-Guerrero & Juan Rivera-Alvarado & Jainer Acosta-Bustamante & Tulio Cabeza-Abello & Jose Osorio-Tovar, 2024. "Colombian Oil Energy Security through a Framework of Risks and Vulnerabilities," International Journal of Energy Economics and Policy, Econjournals, vol. 14(5), pages 479-486, September.
    7. Shawhan, Daniel & Peplinski, McKenna & Robson, Sally & Russell, Ethan & Ziegler, Ethan & Palmer, Karen, 2025. "Power Delayed: Economic Effects of Electricity Transmission and Generation Development Delays," RFF Working Paper Series 25-14, Resources for the Future.
    8. Thomas, Pinky & Collins, Alan & Etienne, Xiaoli & Mugabe, Douglas, 2024. "Impacts of state tax and resource ownership policies on extraction: Evidence from U.S. natural gas production," Energy Economics, Elsevier, vol. 138(C).
    9. Prest, Brian C., 2020. "Supply-Side Reforms to Oil and Gas Production on Federal Lands: Modeling the Implications for Climate Emissions, Revenues, and Production Shifts," RFF Working Paper Series 20-16, Resources for the Future.
    10. Shawhan, Daniel & Robson, Sally & Russell, Ethan, 2024. "Offshore Wind Power Examined: Effects, Benefits, and Costs of Offshore Wind Farms Along the US Atlantic and Gulf Coasts," RFF Working Paper Series 24-17, Resources for the Future.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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