Subsidies for Oil, Energy Policy, and Climate Change
I would like to reply to the three very thoughtful comments of 2GreenEnergy reader James Gover, who writes:
1) We can talk about the oil subsidies and toss numbers around, but I have yet to see defensible, detailed comparisons of the magnitude of subsidies to various energy sources. If someone in this group has defensible data, please send me a reference. I do not consider special interest groups that start with the answer to be credible.
Without a doubt, this is a problem – and for several reasons. First, as you suggest, anyone trying to ascertain that number has a reason for doing so which normally carries with it a financial or political interest in the matter and taints the legitimacy of the findings. And we need also to understand that there are over a dozen different kinds of subsidies, some extremely nebulous and debatable by their very nature. As you look down this list, you’ll see what I mean:
- Construction bonds at low interest rates or tax-free
- Research-and-development programs at low or no cost
- Assuming the legal risks of exploration and development in a company’s stead
- Below-cost loans with lenient repayment conditions
- Income tax breaks, especially featuring obscure provisions in tax laws designed to receive little congressional oversight when they expire
- Sales tax breaks – taxes on petroleum products are lower than average sales tax rates for other goods
- Giving money to international financial institutions (the U.S. has given tens of billions of dollars to the World Bank and U.S. Export-Import Bank to encourage oil production internationally, according to Friends of the Earth)
- The U.S. Strategic Petroleum Reserve
- Construction and protection of the nation’s highway system
- Relaxing the amount of royalties to be paid – apparently, we get about 40% of revenues from oil on public land vs. 60% – 65% in most other countries
- Not forcing the industry to deal with the “externalities” – healthcare costs, long-term environmental damage, etc. — costs that are becoming increasingly clear and subject to quantification
2) We can talk about what the US government should do regarding energy, but what the government will do is decided by their constituents, the American public, not the government. Until the general public is educated on the costs, sustainability and risks of various energy alternatives, the inclination is to maintain the status quo. The simple fact is that all sources of energy have a downside. What matters is how this compares to the upside.
This is exactly right — and it happens to be the basic reason I writes this stuff every day. Until people understand the issues, and put pressure on their elected leaders to move us in the right direction, our energy policy will continue to languish as the rest of the world leaves us in the dust while we choke ourselves slowly to death. We get the government we deserve, which is why I join you in refraining from placing too much blame on Congress itself.
Having said that, the recent US Supreme Court decision Citizen’s United vs. the Federal Election Commission has removed much of the power formerly held by “We The People” to effect the changes we desire. See MoveToAmend.org.
3) A majority of the public, many seemingly well educated, at least formally, do not believe that mankind’s contribution to global warming is significant. People are no longer willing to accept that because climate experts believe this or that, they should follow suit and accept the experts claims to be factual. Scientific bodies have little credibility in the eyes of the general public and are seen as just another special interest seeking to get their hands in the pockets of taxpayers.
It is true that the Climate Change Deniers have done a fantastic job in turning huge masses of people against the vast majority of climate scientists; this is a PR coup the likes of which we’ve rarely seen in human history. The idea that research scientists have a greater motive to bend their figures to raise more grant money than the oil companies have in selling billions of gallons of gasoline and diesel is laughable, to me at least, but clearly many people don’t see it that way.
Yet I don’t know why I’m surprised. We should never underestimate the power of effective public relations; it was only 75 years ago that the German people, swayed by demagoguery and PR, supported the Nazis in their attempts at genocide. We must never forget that people will believe anything.
Thanks again for writing in with this terrific perspective, James.
Subsidies support infrastructure and lubricate the wheels of commerce. Unfortunately this is at the expense of the tax payer who foots the bill with I.O.U.s from China and the rest of the world.
I am not going to enter the fray about whether subsidies of petroleum products should be more or less but I would like to comment on the rise of new technology without direct subsidy after the initial research stage.
The case in point is digital cameras. The old technology of silver halide based fim was replaced with CCD imaging in about a decade. People did not receive a subsidy to buy digital cameras. They were a cost effective investment.
When solar and wind become fully cost effective on their own merits we will see their adoption occur at a rapid pace. We are close to that tipping point now.
The same subsidies that petroleum has raked in will be available to the new technologies as they prove their benefits to society. We will literally build roads to the development sites at government expense, knowing that their will be a payback. Tax incremental financing districts can smooth the way for the large private investments that will need to be made.
What we don’t need to do is pump tax money down rat holes that are dreamed up by “green” financial wizards who can pull money out of Washington easier than out of Wall street pockets. The cream will rise to the top and we will reap the benefits all in good time.
I love my digital camera(s) and will love my solar array on my roof top when the price point meets my pocket book.
L
“Here, Here, Mon Heir; It has been proven many times in History ; the Sheep will follow the P.R. Demagoguery irrespective of logical arguments to the contrary. There is power in MONEY, and it is far greater than the power of the Truth.
It sometimes more important to uncover the facts and here is my recommendations go to CSpan type US Senate Investigation Hearing on the Oil Consolidation Hearing 07-08
Hear for yourself what triggered the investigations & the demand to take back the oil subsidizes when it was to late due to policy loop-holes after receiving over an half trillion dollars in windfall profits due to prices gauging and market manipulations now calculate and compound this over 10 years we can see where and why the economy is in the state that it is in approximate 10 Trillions and we wonder why the country is in debt .
And for the Oil conglomerates not counting the ecological damage of 1.3 trillion in 2010 carry over from the BP Oil Spill and now the nuclear power plants whats next when we have a nuclear power plant in IL been on line since 1957 do we count any loss of life to this number if an tragedy from an earth quake strikes ?
My question is where were everyone on this subject a sleep and not voices heard over the fact that there even existed for years for the Oil industries tax subsidies and even for the pharmaceutical to telecommunications industries .
Thought I’d share this link to answer John Glover’s very first question. http://tonto.eia.doe.gov/energy_in_brief/energy_subsidies.cfm
You’ll see that per unit we spend more to subsidize wind and solar, except for refined coal, than anything else. However, in total dollar wind is fourth behind refined coal, coal, and nuclear.
Maybe is we stopped subsidizing coal, cleaner technologies would be more cost competitive.
Maybe if we eliminated coal from the energy supply we would be having rolling black-outs and shivering in our dark homes when the sun doesn’t shine. L
@Larry – My fully sealed industrial scale, continuously harvested, temperature controlled, pump-less, outdoor installed, everything that everybody has asked for and more photobioreactor system, is NOT a digital camera.
There are no similarities in their respective development processes either (I have 15+ years in R&D so I would know). If you’re tired of rat holes, end the subsidies to petroleum they do not need because they have proven they turn a handsome profit, without them, period.
The technology already exists that is capable of growing algae in such quantities using equipment designs & procedures that don’t care what Energy Analysts or whoever else thinks themselves infallible, or Bean Counters (regardless of their color) have to say about it. Speculation and assumptions that’s all you guys have, that’s it!!
These are people do not create technology as a matter of their stock & trade as it is for me. The two types of people have glibly decided all by themselves that the technology they don’t understand which I designed & built. Which many others have laid eyes on (hence exists) either does’t work, or won’t be economically viable (@>50K+ gal/acre/yr) is certainly is viable. The problem as I see it (since I have actually made it happen I get to say this) Is that the wrong people have been working on the wrong problem. Genetic Manipulation has repeatedly proven it doesn’t work the way it needs to (Monsanto – India) but everybody thinks they can play God and can take something that took millions of years to evolve into what it is, and make it “better”, I believe the word is “Nope”.
But I do definitely see the analogy you are attempting to draw. Nice try.
@Wisdom2See – I can tell you definitely are reading. You need a different search engine so you read less filtered material. Your question is leading (and misleading) as Hell. Are you a Propagandist hired by the government to muddy the waters like in the Climate Change debate?
Read our website. 3rd Party Proof costs $300K, warm up your checkbook or please stop embarrassing yourself.
Digital cameras are not bioreactors but they use relevant technology that was developed because of a driving force for a better camera. Photographers jumped on the bandwagon along with medical technologists who saw imaging quality that equalled or exceeded film. Folks will beat a path to your door if you have invented a better mouse trap or bioreactor or solar panel. IMO we should not need government to be the driving force for innovation. There is a roll for government to play in developing standards and insuring safety. And yes, backing off from petroleum subsidies makes sense for the same reason. L
The oil and gas subsidies came about to ensure domestic drilling, continued pumping of low volume wells and reasons driven by the large importation of oil by the USA. It was the government trying to incent industry to do the right thing. But, some subsidies are sweat heart deals like 40% royalties on government land wells versus 60% in most of the world. A manufacturing tax credit for oil and gas companies. Cutting these according to the US Government is $36.5B over 10 years.
It is difficult to find all the subsidies for renewable as they are scattered in federal, state, county and city government tax incentives. According to the Environmental Law Institute, U.S. government “Energy Subsidies Favor Fossil Fuels Over Renewables” by a factor of more than 7:1. According to Bloomberg Energy, worldwide fossil fuel subsidies are 12:1 over renewables. This is a bad trend to favor fossil fuels over solar and wind, because solar energy is more plentiful than any other energy source by far, and so it has the potential to be cheaper than any other energy source, and it’s totally clean and sustainable. But let’s also remember most of the renewable industry are very fairly new and still very expensive for the consumer. So either we are willing to pay more, invest more or we are not.
I think we have a choice and that choice will only see the light of day when we include all the costs an energy source has in determining the best case for us economically. We need to look at the environmental impact, air quality, clean up, disaster recovery a la nuclear and oil spills and yes even global warming as a cost of cheap fossil fuels. We need to recognize what an investment in new technology will do for us if anything. We then need to add on top the lack of energy independence we have in the USA and say for security reasons we need to pay for a better solution.,
In today’s political environment, I would also add that expecting the US Congress to make the right long term choices given our system of lobbyists and political parities is an almost impossible task. The countries who will beat us economically in the future are those that will choose a different path investing for future lower prices on technology or approaches that do not exist today.
As soon as the average price per gallon of gasoline gets over whatever tipping point it takes (maybe $5 a gallon?) in the US, we will see motivation by the masses to seek alternatives to fossil fuels. We saw it at $4 something a gallon before, but it would probably need to be a bit higher this time. Really long gas lines again would help too. It’s hard to see real change happening until gasoline is more expensive and more of a hassle to come by than other fuels. People always seek out the cheapest and easiest thing. I hope we can do a better job of educating people about alternatives (and a better job of making them convenient and affordable) by the time gas prices go back up to stay or it will be messy indeed.
Where was it that someone said they needed unarguable info. that Oil Co.s are subsidized, to an unequal balance? http://www.nytimes.com/2010/07/04/business/04bptax.html is this a link that serves that task?
In regard to the oil industry, I recommend a book I just read by Edwin Black called “British Petroleum and the Redline Agreement.” The book is not a tirade or even your classic “scandalous” expose’ against the oil company(ies), but nonetheless provides much interesting information on the history of the oil giants (especially BP) that one gets a clear picture of said history. (By the way, Black was given full access and cooperation by BP in the writing of this book!) And what is the significance to that picture? It is this: that the oil giants have not only always been very closely connected with the foreign policies of their respective governments, but in addition some (like BP) were actually owned and operated by the British government for a great deal of their history before being privitized. To suggest that this in itself wasn’t a “subsidy” of massive proportions is pure silliness. But it should also be noted (as a way of pointing to the inherent amorality of these monolithic giants) that some of the major firms (Royal Dutch Shell, Standard Oil among others) profited by doing business with the Third Reich, and that despite the defeat of the Nazis, they were able to glean those ill-gotten profits after the war was over from the accounts that the Nazis had preserved during the conflict. There is even a scanned image in the book of a Standard Oil magazine advertisment in the book where a drawn image of one of the German gas-station attendants is giving a Nazi salute. . . . . I hope this post gives many a pointer as to what we are dealing with, not only when dealing with oil companies, but with all trans-nationals . . . (assuming, of course, that they’re not already familiar with this fascinating subject). . . .
Fascinating stuff; thanks very much for writing.
Does James Gover know how WindJammer Energy, Inc. can receive a government subsidy to help develop and bring to the market place a newly patented wind generator? Some of the details are at the three page web site, http://www.windjammerenergy.com. The page tabs are down the left side. Any amount of funding will be very helpful.A business man from Chain called and he is coming to see me in June.
Greg Wilson
Wildsailman@gmail.com
WindJammer Energy, Inc.
Let’s equalize subsidies.
@Anonymous – No, let’s eliminate all subsidies. Our budget is skewed because of them, not just on energy. FOr anyone to say that decisions are to be based on a free market supply/demand basis, where is the free market if there are subsidies? Level the playing field and look at life-cycle costing and energy efficiency is the best bang for the buck by far, followed by most sustainable energy sources.
I agree with you all the way, for what it’s worth.
@Matt – The information from EIA is conveniently skewed to make the subsidies to renewables look high compared to fossil fuels. Just add up the subsidies for Coal, NG, nuclear and they are $6,718 to $4,875 for renewables (38% more). Also note this information is from the FY 2007 Bush Administration EIA (Obama Adminstration EIA is certainly not an improvement), plus their table indicates this is in Millions of dollars making the subsidies $6.7 Trillion and $4.9 Trillion – which is not possible. And what the heck is electricity (not fuel specific) subsidy of $1.2 Billion? Battery technology or other R&D?
In this information overload age, we are still required to trust but verify – and the verification process takes more time than I have life energy to spend on the task. I really like the link to the NYT article, though – thanks much to Greg.
Bottom line is that there exist vast subsidies – both direct and indirect – that we the taxpayers provide – to all kinds of industries that don’t need it, are not justified, and create an artificial marketplace for technologies that can’t stand on their own merits.
And now that we have given corporations (and their money) even more political power, it is not likely the marketplace will ever be “fair and balanced” in my lifetime, let alone a truly competitive free market that rewards innovation.
So I will just keeping stating the obvious that makes economic sense for me – 1st reduce the loads (energy efficiency with better designs, better operations, better material choices,etc.) then pick the best energy supply available for that site depending on the client’s metrics (cost, reliability, power quality, environmental attributes, etc.)
To draw any analogy beteen the rise to power of the Nazis and increasing awareness by more and more people of the fraud that is man-made climate change is perverse. Hundreds of very well qualified scientists in the world have systematically documented the fraud being perpetuated by Gore et al. Wind energy as the prime eample of green energy is being exposedas a scam. It can make no contribution to a modern pbeyond ower system as it is cannot electricity that is reliable,consistent,readily available etc. It must be backed up MGW for MGW by fossili fuel generation. Its capacity value is negligible and beyond a very low penetration can cause extreme instability in an electrical system. There is a lot of information available as to the real cost of green energy vs fossil fuels,for exmple the EIA in the US. Green energy is a scam and is supported by to types od people: the uninformed and the rent seekers.