What oil subsidies?

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DrRocket

Well-known member
Joined
Sep 21, 2010
Messages
96
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.
 
I recently listened to this story via the NPR News app: http://www.npr.org/2011/11/16/142364037/solyndra-highlights-long-history-of-energy-subsidies" onclick="window.open(this.href);return false;.

http://www.eia.gov/analysis/requests/subsidy/" onclick="window.open(this.href);return false; and http://www.eia.gov/analysis/requests/subsidy/sies.cfm" onclick="window.open(this.href);return false; might help.
 
Thank you for the link to the reports.

Oil companies getting a tax deduction for a business expense is not a subsidy. All businesses get those deductions. The bulk of the money that went to R&D went to renewables and some went to coal (most likely to make it cleaner). The internal revenue codes requires businesses to pay an income tax on income after expenses. So that seems like a level playing field.

So I still don't see where the oil companies are getting a similar payment like I did through the $7500 tax credit. I understand the opposite is happening, the federal government charges 18 cents per gallon in taxes for auto gas at the pump, and then tax the oil companies an income tax.

Still not seeing the subsidies.
 
Here's another I stumbled across while trying to look up military costs related to ensuring supply and flow of oil:
http://priceofoil.org/fossil-fuel-subsidies/" onclick="window.open(this.href);return false;

Arguably, some of those military costs could count as subsidies.

These others are informational relating to oil reserves and oil choke points:
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2178rank.html" onclick="window.open(this.href);return false;
http://www.eia.gov/cabs/world_oil_transit_chokepoints/Full.html" onclick="window.open(this.href);return false;
 
DrRocket said:
Oil companies getting a tax deduction for a business expense is not a subsidy. All businesses get those deductions.
And all businesses get subsidies. Reducing your tax burden is functionally equivalent to giving you a check for the same amount. Tax deductions are absolutely a subsidy.

The point is those subsidies exist to help businesses to grow and encourage them to invest in themselves. The petroleum industry literally makes money hand over fist like no other the world has ever seen - they can afford to fund their own R&D and whatnot a hundred times over, so why should the taxpayer pick up the bill for them?

Cap subsidies for any industry or business that can afford to pay their own way. Subsidize expenses in excess of, say, 25% of net profit or whatever so they're paying at least that much. That would wipe out petroleum subsidies while leaving the businesses that actually need the help unaffected.

FYI the per-gallon gasoline tax is levied on the consumer, not the petroleum industry.
=Smidge=
 
increasing taxes on refineries, with rebates for exports, is a more politically palatable way of increasing taxes on gasoline.. after all many refineries are owned by oil companies... use the revenue to fund rebates on electrics, up to the cost of the car itself (with a minimum battery capacity). Everyone wins and you could get your Leaf for free.
 
Herm said:
increasing taxes on refineries, with rebates for exports, is a more politically palatable way of increasing taxes on gasoline.. after all many refineries are owned by oil companies... use the revenue to fund rebates on electrics, up to the cost of the car itself (with a minimum battery capacity). Everyone wins and you could get your Leaf for free.


During the mid 1970s, when people were standing (parking) in line at gas stations due to shortages, the media would have you believe that crude oil was in short supply. In fact, the tanks onshore at the Houston port (and others) were full of crude, the tankers at 'dock' (actually a floating unload terminal) were full because the couldn't unload, and other tankers were 'hovering' offshore, all full of crude.

So why the lines?

Because a few years earlier the tax structures around refinery construction and operation where changed, and the industry as a whole simply stopped adding refinery capacity. Result: A glut of crude and a shortage of refined products, such as gasoline. Not an oil shortage, a refinery capacity shortage.

It's happened on a smaller scale several times since.



Moral of this story: Be extremely aware of ripple effects when making even the smallest changes to the cash flow of a multi-billion/trillion dollar industry.
 
Danal said:
Moral of this story: Be extremely aware of ripple effects when making even the smallest changes to the cash flow of a multi-billion/trillion dollar industry.

Thanks Dana, sometimes I throw out inane posts such as the previous one to make my naive friends think a bit more.. its really a form of gentle trolling. Next topic will be how we can force the oil companies to reform by only buying gas on certain days.
 
Danal said:
Because a few years earlier the tax structures around refinery construction and operation where changed, and the industry as a whole simply stopped adding refinery capacity. Result: A glut of crude and a shortage of refined products, such as gasoline. Not an oil shortage, a refinery capacity shortage.
So the global OPEC embargo had nothing to do with it, then? The more than doubling of the pre-refinery price of crude was completely ancillary to the problem?

It was all refinery bottleneck?

I guess that explains why refinery capacity had been increasing for a decade before the crisis (with a sharp increase right at 1970-71), as well continued increasing during and after...

Oil%20Refinery%20Capacity%20North%20America%20Region.gif


It also explains Europe was actually hurt MORE by the crisis too - damn US government meddling with the tax structures, preventing Europe from expanding refinery capacity! Oh wait...

Oil%20Refinery%20Capacity%20Europe%20and%20EuroAsia%20Region%20incl%20Russia.gif


Nope, the rate of refinery capacity continued to increase at the same rate pretty much all through Europe too, until after the crisis was over. Huh. If you want to blame the US government for something, blame Nixon and his brain-dead scheme to expand exploration by encouraging use of, and thus dependency on and higher prices of, oil.
=Smidge=
 
So the conclusion I reach is there is no petrol subsidy :| -- I'm surprised by that result --

How about : http://thehill.com/blogs/e2-wire/e2-wire/194915-overnight-energy" onclick="window.open(this.href);return false;

or : http://www.tnr.com/blog/jonathan-chait/88133/why-oil-tax-breaks-are-so-special" onclick="window.open(this.href);return false;

and : http://www.oilandgasjointventures.com/tax-benefits.html" onclick="window.open(this.href);return false; :shock:
 
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. Here's a telling quote:

"U.S. defense expenditures to safeguard the supply and transit of oil from the Persian Gulf for the global market may run 12 to 15 percent of the FY 2009 U.S. defense budget."

These expenditures are exclusive of the wars for oil. Iraq and Afghanistan have cost us north of $1.5 trillion, and counting. I count Afghanistan in this since Osama Bin Laden explicitly stated that he attacked us on 9/11 because we are in Saudi. We're in Saudi because of oil.

The cost to our treasury is bad enough, but there is also the cost of thousands of dead soldiers and the ongoing cost of tens of thousands of wounded soldiers. Estimates are that before the wounded soldiers all die, some 60-80 years from now, we'll have paid another $1-$2 trillion.

When you buy gas, you pay nothing for this. That's a subsidy.

Then there is the environmental and health costs to society. The studies I've seen estimate 20,000-30,000 premature American deaths due to pollution from internal combustion engines. Further, the economic costs of the Gulf oil spill and the recent Montana spill are enormous. In the case of the Gulf spill, which is still going on, there were thousands of jobs lost and significant poisoning of people who were in contact with the oil or the dispersant they used to break it up.

When you buy gas, you pay for none of this. That's a subsidy.

Lastly, the economic hit is huge. Over 60% of the money spent for gas leaves our country. It's running about $400 billion/year and will rise as oil prices rise. That's a full 45% of our trade deficit. It's even worse when you consider the hit to your local economy. When you buy gas, over 90% of your money leaves your community. Here in CA, we spent about $55 billion last year for gas. About $50 billion of that left our state for good. That's a massive transfer of wealth to a small cadre of evil men. This goes on in every community in the U.S. and throughout the world. The oil companies earn billions in profits and use millions of that to buy Congress. It's as clear as day.

If we were to internalize some of these external costs in the price of dirty energy, then we would be playing on a level playing field. Until we do that, the miniscule subsidies given to plug-in cars are not only necessary, but fair.
 
Smidge204 said:
Nope, the rate of refinery capacity continued to increase at the same rate pretty much all through Europe too, until after the crisis was over.
=Smidge=

Interesting data, I will look at it carefully.

Nonetheless, why were all those tanks/tankers full and unable to offload? Saw them myself... during the exact same weeks and months people were in line at stations. Or ask anyone who was around Houston or Texas City during those times.

I wonder what the real "choke point" was between the consumer lines and the crude?
 
PaulScott said:
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, but a lot of the blame must be placed at the feet of the military-industrial complex, they want to keep themselves relevant, elected and employed. I have no problem with that, its actually laudable, what bothers me is the nation rebuilding afterwards. We already pay for the military, I'm ok for the occasional few more billions to replace spent munitions but please curb the nation re-building, its not our responsibility.

The solution is always to force the corporations to pay their "fair" share of taxes, or even an unfair portion and pay more.. yes I know they will pass it along to their customers (they have to) or just move out of the country but it still feels righteous. So sorry about the lost jobs.
 
Danal said:
I wonder what the real "choke point" was between the consumer lines and the crude?
The choke point was rationing, because there was a shortage. When you are short on a resource you do what you can to reduce the rate at which you use it in hopes you can find more before you run out. It has nothing to do with total refining capacity and everything to do with how demand was being artificially restricted so we didn't carelessly use it all up.

If those tankers were emptied there was probably no guarantee they could be filled back up again, so they sat in the harbor as storage.


Herm said:
Its not a subsidy, its part of the transportation expenses of oil
An expense which is being paid by someone (government/taxpayers) other than the ones who profit from it (petroleum industry). That's the very definition of a subsidy!


Herm said:
.. yes I know they will pass it along to their customers (they have to) or just move out of the country but it still feels righteous. So sorry about the lost jobs.
If a business is able to raise the price of its goods or services without losing competitiveness, it should already have done so. If you raise costs for the business through taxes or whatever, they CAN'T pass it on to their customers without giving an advantage to a competitor who is willing to pay that extra cost out of their profit margin. Only when those profit margins are already at their limit does the customer see an increase in price, providing there isn't any market manipulation going on.

And that's for costs - if you raise taxes, taxes are levied on profits, which is after costs are subtracted. If a company raised their prices trying to compensate for higher taxes, their taxes would just go up and they'd again hurt their competitiveness.

The only way to argue against this is to argue that the free market doesn't work as it's purported to, which is a huge can of worms few people are willing to open.
=Smidge=
 
Herm said:
PaulScott said:
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, but a lot of the blame must be placed at the feet of the military-industrial complex, they want to keep themselves relevant, elected and employed. I have no problem with that, its actually laudable, what bothers me is the nation rebuilding afterwards. We already pay for the military, I'm ok for the occasional few more billions to replace spent munitions but please curb the nation re-building, its not our responsibility.

The solution is always to force the corporations to pay their "fair" share of taxes, or even an unfair portion and pay more.. yes I know they will pass it along to their customers (they have to) or just move out of the country but it still feels righteous. So sorry about the lost jobs.

If we all paid the true cost at the pump instead of every April hidden in our taxes, I think a lot more of us would turn to alternatives. The fact that all American are paying for it independent of how much we use makes it a subsidy.
 
ok. another pissing match based on individual definitions.

lets start another...

person A; hey that runaway freight train is headed right at us at 70 mph. we will all be killed!!

person B; no its not. its only doing 55 mph...what was that 2nd part??
 
Smidge204 said:
Danal said:
I wonder what the real "choke point" was between the consumer lines and the crude?
The choke point was rationing, because there was a shortage. When you are short on a resource you do what you can to reduce the rate at which you use it in hopes you can find more before you run out. It has nothing to do with total refining capacity and everything to do with how demand was being artificially restricted so we didn't carelessly use it all up.

If those tankers were emptied there was probably no guarantee they could be filled back up again, so they sat in the harbor as storage.

A shortage of what? According to your data, no shortage of refinery capacity. 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? It is that last part that makes me ask where was the shortage? I heard (but did not see with my own eyes) there were also tankers sitting at the "other end" of that particular supply chain, who chose not to leave port, knowing they couldn't dock and unload.

If there were a crude shortage, you couldn't see it by looking at all the crude sitting waiting to be unloaded and refined.

I've always wondered what really happened at that time, because what was said just didn't match the physical reality.


Anyway, Smidge, thanks for the refinery data, that was enlightening. We are now in the land of speculation, and I don't really mean to have one of those internet argument threads... all I can say is that even during the worst of the visible consumer gas lines, there was a LOT of crude around Houston and the Texas coast that, and that the press at the time, and the historic records, says there wasn't.
 
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