What oil subsidies?

[DaveinOlyWA]

the oil embargo of the 70's was a bit of an over reaction because OPEC cut its production which to the US amounted to something like a 5-7% decline in imports. this caused our reserves to go from something like 100+ days to under 50.

that is where the panic started. at the time, US production was being curtailed because OPEC oil was much cheaper. OPEC did this only to test our willingness to pay higher prices. we wussed out, OPEC saw what it needed to see and the rest is history

 

[Herm]

Lets put it a different way.. what would happen if the US military did not secure the oil markets?.. probably not much, oil would still be produced and sold.

We choose to keep a powerful military and when all you have is a hammer every problem looks like nails. Let me repeat, the problem is the nation building we did after the Iraq invasion.. that was nothing we should have been involved with.

Afghanistan had nothing to do with oil.

 

[DaveinOlyWA]

Lets put it a different way.. what would happen if the US military did not secure the oil markets?.. probably not much, oil would still be produced and sold.

We choose to keep a powerful military and when all you have is a hammer every problem looks like nails. Let me repeat, the problem is the nation building we did after the Iraq invasion.. that was nothing we should have been involved with.

Afghanistan had nothing to do with oil.

not a lot of people have that opinion. and what would happen if the US military did not protect the oil? are we to assume that terrorists do not know how much we are addicted to foreign oil?

 

[Herm]

and what would happen if the US military did not protect the oil? are we to assume that terrorists do not know how much we are addicted to foreign oil?

The terrorist want to sell oil too..

Oil companies would have to make deals with Iran for "protection".. they would hire security guards etc. It may even motivate the US to produce more oil within our territories and off the West coast.

The proper job for the US Military is to put the fear of God on the evildoers.. not nation rebuilding.

 

[PaulScott]

I think you are ignoring the really big subsidies. According to the 2009 RAND study http://www.rand.org/pubs/monographs/2009/RAND_MG838.pdf" onclick="window.open(this.href);return false;, some $80 billion in military costs are spent each year protecting our access to oil.

Its not a subsidy, its part of the transportation expenses of oil,

If the cost of protecting access to oil is spent out of the general treasury, as this cost is, but it is not passed on to the purchasers of the oil, then that is a subsidy. If you disagree, please explain why.

 

[thankyouOB]

I think you are ignoring the really big subsidies. According to the 2009 RAND study http://www.rand.org/pubs/monographs/2009/RAND_MG838.pdf" onclick="window.open(this.href);return false;, some $80 billion in military costs are spent each year protecting our access to oil.

Its not a subsidy, its part of the transportation expenses of oil,

If the cost of protecting access to oil is spent out of the general treasury, as this cost is, but it is not passed on to the purchasers of the oil, then that is a subsidy. If you disagree, please explain why.

Thanks for all you do, Paul. But don't waste time doing combat on the oil subsidy issue, particularly the idea that all the billions we spend keeping the oil pipeline open are not externalized costs of gasoline.
You cant really engage with these folks. You just have to view his posts as a side trip to the right-wing, talk-show zoo. Sort of like listening to the clown car debates that the goopers hold almost weekly. there is no reality there. It is just meanness, ideology or saying things designed to annoy the liberals. They oppose things today that they advocated for 10 years ago, such as health-care mandates, which was a Heritage Foundation idea to combat universal, single payer.
Even Ron Paul calls them out on some of their more absurd ideas -- and they look at him like he is the crazy uncle in the attic.

 

[PaulScott]

Herm said: "Its not a subsidy, its part of the transportation expenses of oil... "

If the cost of protecting access to oil is spent out of the general treasury, as this cost is, but it is not passed on to the purchasers of the oil, then that is a subsidy. If you disagree, please explain why.[/quote]

Thanks for all you do, Paul. But don't waste time doing combat on the oil subsidy issue, particularly the idea that all the billions we spend keeping the oil pipeline open are not externalized costs of gasoline.
[/quote]
I understand and appreciate your position, but I can't allow statements such as his to go unchallenged. Right wing, or just ignorant, these people spread their fecal infused memes throughout the blogosphere and too many of their ilk pick them up and smear them elsewhere. The stink is getting hard to take.

Oil is heavily subsidized with external costs. Anyone who disagrees must explain their position and stand by it. Otherwise, they are merely cowards and liars. Herm is clearly one or the other.

 

[DaveinOlyWA]

Paul; i agree these statements cannot be left unchallenged. they will circulate the internet for years creating massive FUD.

and all this comes down to definition but call it what you want, its still money coming out of our pockets and most of it does not return.

i find it weird that anyone can defend oil. it reminds me of people who saying smoking calms them down when the opposite have already proven to be true. despite repeated studies that show smoking to be nothing more than slow suicide, people still have justifications. but people are resistant to change. they become comfortable with something because it had worked in the past so they assume it will always work.

but oil has had its day and it no longer works. its eating us alive from the inside out and oil companies know but they will milk their trillion dollar industry down to the very last drop. and with that income, they are invested into the future ready to move right into solar, wind, wave or what have you.

the only thing they really need is a few bucks, a handful of fast talkers and they are golden

 

[Smidge204]

According to my eyes, no shortage of crude... Did I mention that the onshore terminal tanks were full, the tankers at the terminals were full, and there were tankers 'hovering' offshore? For miles?

This is the functional equivalent to concluding that global warming is a fraud because it's cold outside. So congratulations, I guess.

Your original assertion that it was tax structure shenanigans ruining refinery capacity is not only uncited but debunked. The fact remains that OPEC decided to cut their production by 25% as well as imposed embargoes on various countries including the US, resulting in a shortage - resulting in about a 7% decline for the US as DaveinOlyWA pointed out.

If you're importing 7% less than you need to, that is a shortage.

The United States, worried that they would use up their reserves and uncertain if the situation would get worse, began rationing efforts. Rationing artificially reduced demand, and the entire production line backed up. Tankers full of oil that were already filled and on their way across the ocean ended up anchored offshore with no place to unload. That does not mean there was no shortage, because there was no guarantee they could get those tankers refilled. Those tankers merely count towards what was already on hand.
=Smidge=

 

[Danal]

Wow, smidge, I thanked you for the refinery data, said I'd study it carefully, did so, and therefore dropped any statements about refineries... did all that about three posts ago. And began asking what caused the choke point... And you explained: Rationing. Slowed down the entire supply chain, created a surplus at the terminal.

So, we agree there was a threat of a shortage caused by OPEC reduction, a real shortage caused by rationing, and we agree there was a surplus at the terminal.

I'm happy.

 

[LTLFTcomposite]

I recall hearing a major contributing factor to the gas lines in the 1974 oil embargo goes something like this: On any given day the average gas tank in the US is about 1/3. During a panic, the immediate reaction of the motoring public is to "top off". If you take, say 100M cars X 20 gallons (tanks were bigger back then) X the 2/3 they just topped off and you have an almost instantaneous demand for something on the order of a billion gallons of gasoline at the retail level. The system isn't set up to handle that, everything from refinery output, storage, distribution, etc relies on a relatively smooth flow.

No idea if that is really the case but it makes sense.

 

[DrRocket]

RE: Military aid to OPEC. Let's remember that after Lyndon Johnson's Great Society and Vietnam war, the U.S. was printing money way too fast, and as the reserve currency (Bretton Woods 1944), foreign nations could redeem paper dollars for gold (but not American citizens thanks to FDR). The French showed up at the gold window when they realized the over-printing scam, yet Nixon blamed the "international speculators" for closing the gold window. From 1971, gold's price was allowed to float from the $35 per ounce. Nixon still had the problem of too many printed dollars chasing too few goods, so he cut a deal with the Saudis to only sell oil in dollars (petro dollars), in return for military aid and protection. If the only way to purchase oil was to use dollars, everyone in the world had to get a hold of dollars, and that sucked much of the printed dollars away from the U.S. Nixon switched to a new reserve currency based on oil and not on gold. There was no limit to printing.

So here we are spending a fortune on military aid (overt and covert) to protect middle east oil and keeping paper dollars away from these shores.

I'll agree that the military aid is a "hidden cost" of oil that taxpayers pay, not at the pump, but in tax dollars. You could call it a subsidy, but that is semantics.

 

[edatoakrun]

Good summary of changing US petro market in today's WSJ.

By DANIEL YERGIN

Every president since Richard Nixon has called for energy independence. Nevertheless, U.S. reliance on imported oil long seemed to be headed in only one direction—up—and that pointed to inevitably increasing dependence on the huge resources of the Middle East.

No longer. U.S. petroleum imports, on a net basis, reached their peak—60%—of domestic consumption in 2005. Since then, they have been going in the other direction. They are now down to 46%.

What's happening? Part of the answer is demand. U.S. oil consumption reached what might be called "peak demand" in 2005 and has since declined. The country has become more efficient in its use of petroleum, and that will continue as vehicle fuel economy goes up. The economic slump has also muffled demand.

But developments on the supply side are particularly striking. U.S. crude oil output has risen by 18% since 2008...

http://online.wsj.com/article/SB10001424052970204449804577068932026951376.html?mod=WSJ_hpp_RIGHTTopCarousel_3

 

[Nekota]

Some more information from Motley Fool on subsidies with some interesting comments from readers. I look forward to seeing others comment on this particular analysis including the reader comments. There is even a comment about EV but not sure the negative point made any sense.

http://www.fool.com/investing/general/2012/01/04/the-real-costs-of-alternative-energy.aspx#commentsBoxAnchor" onclick="window.open(this.href);return false;

I just had to edit this to include our well known Peterson who loves to bash EV's. How one 'analysis' gets used to support another 'point of view' and it's underpinned by the low levels of oil subsidy and treating electricity as only having a BTU heating value. Facts can be so easily distorted and 'stretched'.

http://seekingalpha.com/article/318079-why-the-electric-vehicle-house-of-cards-must-fall?ifp=0&source=email_authors_alerts" onclick="window.open(this.href);return false;

 

[dhanson865]

I recall hearing a major contributing factor to the gas lines in the 1974 oil embargo goes something like this: On any given day the average gas tank in the US is about 1/3. During a panic, the immediate reaction of the motoring public is to "top off". If you take, say 100M cars X 20 gallons (tanks were bigger back then) X the 2/3 they just topped off and you have an almost instantaneous demand for something on the order of a billion gallons of gasoline at the retail level. The system isn't set up to handle that, everything from refinery output, storage, distribution, etc relies on a relatively smooth flow.

Oil subsidies are we really talking oil? It seems this thread has a lot of talk of gasoline. If you keep the discussion purely US oriented and are discussing gasoline you also have to consider the subsidies for corn and anything else in the ethanol manufacturing / distribution system. I say this because there is a mandatory ethanol percentage for gasoline sales in 10 US states and the subsidies make attractive to the blenders to push it out to most if not all 50 states.

Now just to compare that "everyone wants to fill up at the same time" effect for EVs as compared to Gas. If you use Fast charging then EVs create the same issue but on the electrical grid instead of the gasoline distribution system. The good news is if there were severe limits you could charge your EV with a L1 EVSE and spread that load out a bit. You might even have solar panels that would allow you to charge the car during the day on L1 or L2 EVSEs depending on your array size(s) when you can make it nearer to a neutral load on the grid.

But the average car owner doesn't have solar panels and the average car owner wouldn't do whats best for the network so electric companies are worried about the "everyone wants to fill up at the same time" effect.

Still as the consumer fleet diversifies (Gas, Electric, Diesel, CNG) it can reduce the stress on each individual fuel infrastructure assuming they aren't all overloaded at the same time.

 

[dhanson865]

I keep reading on blogs, including MNL, about the subsidies that oil companies or oil products get from the U.S. government.

What exactly are the subsidies?

I need to make intelligent arguments about EV's and the tax credits we have received and compare them to the oil subsidies I keep reading about.

Thanks.

Don't forget that even EV's benefit from oil subsidies. Tire's, plastics, transporting new vehicles from plant to dealership, there are tons of ways we use oil besides making gasoline and putting it in the tank.

And make no mistake I am pro EV and pro hybrid. I mention how oil subsidies affect EVs to allow you to make a fair comparison.

I consider military expenditures and tax credits subsidies.

I don't know off the top of my head the ratio of benefits. Some portion of oil subsidies apply to gas vehicles only due to the fuel, some apply to all cars no matter the fuel. As a totally made up example if a barrel of oil becomes 10% gas and 90% other stuff then gas vehicles get 10 shares of oil subsidies and EVs get 9 shares of oil subsidies. But that's just oil, there are additional subsidies that go into making, distributing, selling gasoline between the time where it is part of oil subsidies and the time it enters the cars gas tank. Still the EVs are transported, sold, and used in an economy driven at least partially by gasoline. So maybe you have something like gas vehicles get 10 shares of oil subsidies and 10 shares of gas subsidies EVs get 9 shares of oil subsidies and 1 share of gas subsidies. I really don't know the proper ratios but the point is there are numerous subsidies and only some of them apply to only gas vehicles and some of them apply to all vehicles.

You might see someone say if the subsidy applies to both gas and electric vehicles it cancels out and can be ignored but that is a simplistic view. Good enough for napkin math but if you want an accurate number you have some complex interactions to account for.

 

[DaveinOlyWA]

What's happening? Part of the answer is demand. U.S. oil consumption reached what might be called "peak demand" in 2005 and has since declined. The country has become more efficient in its use of petroleum, and that will continue as vehicle fuel economy goes up. The economic slump has also muffled demand.

interesting timing of the reduction of consumption and the emergence of the Prius.

i find it VERY satisfying when i think about all the people who bashed Toyota and Prius owners for being un American and destroying our economy by not buying gas guzzling American crap.

would love to see their face right now when they slowly realize that i am supporting a friendly non aggressive trading partner while they are supporting people who are much more likely to be supporting terrorism

 

[TomT]

From SlashDot:

"With a stoichiometric ratio far lower than that of gasoline (much lower than the price difference), buying the E85 ethanol fuel blend instead of gasoline was already hard to justify. Unless you raced your car on a track where E85 provided a great alternative to race fuel, it really didn't make financial sense. And there are other reasons not to buy E85, too. Like the impact corn-based ethanol is having on food prices or the questionable emissions results (PDF). So, now that the ethanol subsidies provided by the U.S. federal government are scheduled to end this summer, it's going to be even harder to justify E85 (at least in the U.S.). This change will basically make a gallon of E85 cost the same or slightly more than gasoline. With so many things working against it, the days may be numbered for readily available E85 at your local gas station."

 

[ttweed]

One aspect of the "externalized cost" of the oil industry that has not been mentioned here yet is the impact on the nation's public health: "the significant costs to health and the environment that come from conventional pollution, greenhouse gas emissions, and the risks of catastrophic events like the BP oil spill" that the oil companies do not have to pay for. http://energy.nationaljournal.com/2012/03/should-government-subsidize-en.php#2181727

There is no way to put an accurate figure on these avoided costs, but they are certainly in the billions-per-year category, similar to the tax subsidies they enjoy.

TT

 

[DaveinOlyWA]

Obama recently went to Congress to get $28 B in oil subsidies removed. he was turned down. its time to ask your congressman how he voted. mine said yes. she was in a very small minority since the volt failed by over 70%