WASHINGTON – U.S. Senator Bill Cassidy, M.D. (R-LA) pressed President Biden’s Treasury Secretary Janet Yellen on inflation, the administration’s proposal to limit tax incentives for the production of American oil and gas, and a strategy to combat Putin’s profits off of Russian oil production during a Senate Finance Committee hearing. A recent oilprice.com reported Russia received more than $6 billion in extra oil revenue in June.
“The administration has proposed decreasing tax incentives for the production of oil and gas. If you decrease tax incentives, you’re going to have less oil and gas produced, that’s going to intuitively decrease supply and contribute to that upward pressure,” said Dr. Cassidy.
Cassidy: “As regards to inflation, one variable we could potentially impact is the price of oil and gas. Now, you’ve mentioned how it is an international market, and there [are] some limits of what we do locally. But that said, the administration has proposed decreasing tax incentives for the production of oil and gas. If you decrease tax incentives, you’re going to have less oil and gas produced, that’s going to intuitively decrease supply and contribute to that upward pressure. Does that make sense?”
Yellen: “Well over the medium term we absolutely need to move to renewables and…”
Cassidy: “But I am speaking right now. If we decrease tax incentives to produce, that will decrease supply. And yet the administration is proposing to do that.”
Cassidy: “We’re in a situation right now as it regards to Russia and the price of oil in which because of the restrictions on purchasing Russian oil, their oil profits have increased. They’re selling less but at a higher price to say one more time: Russia now makes more money from oil and gas sales than it did before it began to apply sanctions. Now the Europeans have considered coming together in a buying block to limit the price that we will pay, monopsony power if you will. We will pay the price of production but no more and so therefore we don’t pay the higher price at the pump but they don’t get the increased revenue. Is the administration participating in this? Are we taking the lead in this? Is this something that we would entertain?”
Yellen: “Absolutely, our objective is…”
Cassidy: “So absolutely we are involved in discussions to come up with a buyer’s block that will not pay more than X amount?”
Yellen: “Yes, yes we are.”
Cassidy: “Can you give a kind of assessment of where those negotiations are?”
Yellen: “Extremely active. I think what we want to do is keep Russian oil flowing into the global market to hold down global prices and try to avoid a spike that causes a worldwide recession and drives up oil prices, but absolutely the objective is to limit the revenue going to Russia and the kind of strategy you suggest, there are different ways technically of accomplishing that but it is certainly a desirable strategy to consider.”