Largest energy industry group warns of Dem inflation bill's impact: 'Going to harm the American consumer'

The American Petroleum Institute (API), the largest fossil fuel industry group in the U.S., explained its opposition to Democrats' inflation bill, arguing it will do more harm than good.

The API said it opposed several tax increases impacting the U.S. oil and gas industry included in the Inflation Reduction Act, adding that the taxes would mean increased costs. The group also argued the bill was poorly-timed, coming amid a recession and a time when there is a "significant imbalance" between supply and demand driven in part by a push to transition to green energy and away from oil and gas.

"That's sort of the context in which this bill was considered," Frank Macchiarola, API's senior vice president of policy, economics and regulatory affairs, told FOX Business in an interview. "If you examine it within that context, you realize that this bill falls far short of addressing both the economic and global energy security challenges we're facing."

"Specifically, from our industry's perspective, the bill imposes significant taxes on the oil and gas industry here in the United States at a time when we should be incentivizing supply and lowering costs," Macchiarola continued.

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President Biden signed the Inflation Reduction Act on Tuesday, less than a month after Sen. Joe Manchin, D-W.Va., unveiled it and about a week after both the House and Senate passed it along party lines. 

The legislation reinstates an $11.6 billion Superfund tax on oil and petroleum companies and introduces a new $6.3 billion tax on natural gas producers, two provisions that could impact gasoline and electricity prices respectively. The bill would also impose a corporate minimum tax of 15% generating more than $300 billion over the next decade, but which is expected to increase consumer costs.

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"It imposes a specific tax on imported oil and petroleum products in the form of the Superfund tax," Macchiarola said. "Specific to the industry, this is an $11.6 billion tax increase. That is, again, at the worst possible time. When we should be adding supply and limiting costs, we are imposing this tax that's going to harm the American consumer, families, businesses that are looking for low-cost energy right now."

"Another provision in this bill, specifically related to cost increases, is an over $6 billion new tax on natural gas, methane. This provision, we think, is unnecessary because the EPA is regulating in this space," he added. "So, it makes no sense at all to impose, on top of that, a new tax on natural gas."

Macchiarola said the API supported some provisions in the bill that ensured the federal government would hold future oil and gas lease sales, but said the tax increases outweighed the benefits. He also noted that the bill increases royalty fees producers must pay for leases.

"On the one hand, there are some provisions that would seem to advance the development of oil and natural gas," he told FOX Business. "But on the other, there are provisions that raise costs on American producers that are competing globally."

"So, it makes you wonder whether this product of compromise between one segment of the Democratic Party and one senator, frankly, is a balanced enough energy policy," he said. "From our standpoint, it's not."

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While gasoline prices have fallen more than $1 a gallon since hitting an all-time high in June, they remain more than $1.60 per gallon higher than their January 2021 level. Domestic crude oil production also remains nearly a million barrels per day short of its pre-pandemic level, according to the Energy Information Administration.

Meanwhile, nationwide prices for natural gas — by far the largest source of electricity generation in the U.S. — have skyrocketed in recent weeks, with September futures hitting $9.27 per million British thermal units (MMBtu), marketplace data showed. By comparison, between 2010-2021, the average price of natural gas was $3.30 per MMBtu.

"The totality of all of this is that this bill simply misses the mark and increases costs and taxes at a time when we should be focused on getting more supply into the mix and on lowering costs for American producers who are competing globally during this current energy crisis," Macchiarola continued.

In addition to the taxes on fossil fuel production, the Inflation Reduction Act invests $369 billion for climate programs like rebates for more efficient appliances and tax credits for solar panels, electric vehicles and electric stoves. It also extends subsidies for wind and solar infrastructure development.

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"The Inflation Reduction Act invests $369 billion to take the most aggressive action ever — ever, ever, ever — in confronting the climate crisis and strengthening our economic — our energy security," Biden remarked on Tuesday.