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US Oil & Subsidies

hcsharp

Active Member
Jun 7, 2011
3,377
1,340
Vermont
I disagree.
Why does gasoline cost $4 a gallon in the U.S. and $10 a gallon in the U.K.?
Because in the UK and the EU gasoline is taxed to pay for the infrastructure it requires.

The US does the following - all effectively subsidize gasoline at the expense of the income tax payer:
#1 direct tax break gifts to big oil
#2 using income tax revenue instead of just insufficient gas tax revenue to build and maintain roads and highways
#3 fighting expensive wars to protect oil supplies
#4 not paying for its share of environmental and health damage

Not that I disagree as I have no knowledge, but I'm curious how that can be? If a subsidy has zero impact, what's the point? If Chevron got a subsidy and no one else did, wouldn't they be cheaper? If not, does that subsidy just vanish into the corporate coffers?

The oil companies basically sell gas for the most the market will bear. If they can get a higher price in Canada or Europe or China (after shipping) then they will sell it there, not in the US. Only the market will change the price, not whether or not they get any subsidies. ckessel if Chevron got a subsidy and BP didn't, they would both still sell their gas for the highest price the market will pay.

Rich I think you are basically saying the same thing I am. If the oil companies had to pay for all those things you listed in #1 - 4, they would still sell their gas for the most they could get for it. If that was less than their cost, they would cut production until the price came back up. They sell it in EU and UK for about the same price as in the States. The reason the consumer pays more there is because the government adds a larger tax.

The reason we have massive subsidies for the oil industry is not to keep prices low. It's because they have a very powerful political lobby and several very effective super-pacs.
 
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brianman

Burrito Founder
Nov 10, 2011
17,521
2,989
The oil companies basically sell gas for the most the market will bear. If they can get a higher price in Canada or Europe or China (after shipping) then they will sell it there, not in the US. Only the market will change the price, not whether or not they get any subsidies. ckessel if Chevron got a subsidy and BP didn't, they would both still sell their gas for the highest price the market will pay.

Rich I think you are basically saying the same thing I am. If the oil companies had to pay for all those things you listed in #1 - 4, they would still sell their gas for the most they could get for it. If that was less than their cost, they would cut production until the price came back up. They sell it in EU and UK for about the same price as in the States. The reason the consumer pays more there is because the government adds a larger tax.

The reason we have massive subsidies for the oil industry is not to keep prices low. It's because they have a very powerful political lobby and several very effective super-pacs.
There's a reason why "highest price the market will bear" in a search engine returns "Economics 101" links in the results.
 

Robert.Boston

Model S VIN P01536
Oct 7, 2011
7,844
36
Portland, Maine, USA
While the above analyses of the effect of subsidies are correct in a static analysis, I don't think that they fully capture the dynamic effects. There is a spectrum of exploration & production costs across different oil fields. If federal subsidies lower the cost of E&P to the oil producer, then more oil fields become (apparently) economic to develop. This increases the total supply of crude, which shifts the world price of finished products.
 

78Lion

Member
Mar 17, 2012
126
13
Maryland
While the above analyses of the effect of subsidies are correct in a static analysis, I don't think that they fully capture the dynamic effects. There is a spectrum of exploration & production costs across different oil fields. If federal subsidies lower the cost of E&P to the oil producer, then more oil fields become (apparently) economic to develop. This increases the total supply of crude, which shifts the world price of finished products.

Price sold has a much more direct correlation. Shale oil production would dry up if the price of gas fell to 2.50 a gallon as it would not be profitable to produce. It has been an known source for 100 years, yet production was non-existant until the price at the pump justified its production.

The amount of federal subsidy necessary to reduce cost to a point of viability hasn't been reached yet, though the lobbies continue to try to get more.

We might want to move this thread, or the tangent to an off-topic thread.
 

Norbert

TSLA will win
Oct 12, 2009
5,410
1,626
San Francisco, CA
While the above analyses of the effect of subsidies are correct in a static analysis, I don't think that they fully capture the dynamic effects. There is a spectrum of exploration & production costs across different oil fields. If federal subsidies lower the cost of E&P to the oil producer, then more oil fields become (apparently) economic to develop. This increases the total supply of crude, which shifts the world price of finished products.

Which means that the benefits of these subsidies are distributed over the whole world, and deplete US supplies of oil. It is like giving away oil.
 

vfx

Well-Known Member
Aug 18, 2006
14,790
40
CA CA
Taxpayers on the Hook for BPs Gulf Spill | Fox Business

BP is moving to cut its tax bill by about $11.8 billion by writing off the costs of its devastating oil spill in the Gulf of Mexico as an ordinary business expense, a spill which wreaked havoc on the Gulf, killed wild life and damaged the local economy.


Then there are the real costs:

Gulf Oil Spill: Cleanup Has Cost Federal Taxpayers $87 Million So Far

Federal officials say cleaning up the massive oil spill in the Gulf of Mexico has already cost the government $87 million, making it the third-most expensive cleanup effort in the nation's history.

A senior financial analyst at the National Pollution Funds Center says an additional $38 million in emergency money has been assigned to the Deepwater Horizon spill, but it has yet to be spent.
The most expensive cleanup was the Exxon Valdez spill, which cost $121 million. The second was $89 million for cleaning up a 1994 oil spill off the coast of San Juan, Puerto Rico.
 
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Kipernicus

Model S Res#P1440
Dec 2, 2009
1,255
135
Belmont, CA
Any more links that prove out and quantify the subsidies to the US oil and gas industry?

I'd prefer sources that are not easily dismissed by skeptics (no studies by the Sierra Club, please)

Thanks
 
there is so much misinformation in this thread, I will address 2 points.
one huge reason gas at the pump cost so much more in europe could be laid to the reasons offered but one of the biggest reasons for the price differential is TAXES applied by european governments that fund their specific brands of socialist programs. that is not done in the US. and the other misconception is about the costs of crude oil. crude oil comes in different grades and from different sources. the biggest reasons for differentials in the cost of crude are the quality of the crude oil and the costs of getting it from the ground to the refinery.
if the US did not take steps to protect the sources of crude oil or the routes uses to transport the oil the whole world's economic system would be in tatters and you wouldn't be able to heat your homes, light your lights, have food in your stores or clothes on your backs, let alone be able to buy high priced high tech electrically powered vehicles.
 

ItsNotAboutTheMoney

Well-Known Member
Jul 12, 2012
10,321
7,401
Maine
there is so much misinformation in this thread, I will address 2 points.
one huge reason gas at the pump cost so much more in europe could be laid to the reasons offered but one of the biggest reasons for the price differential is TAXES applied by european governments that fund their specific brands of socialist programs. that is not done in the US. and the other misconception is about the costs of crude oil. crude oil comes in different grades and from different sources. the biggest reasons for differentials in the cost of crude are the quality of the crude oil and the costs of getting it from the ground to the refinery.
if the US did not take steps to protect the sources of crude oil or the routes uses to transport the oil the whole world's economic system would be in tatters and you wouldn't be able to heat your homes, light your lights, have food in your stores or clothes on your backs, let alone be able to buy high priced high tech electrically powered vehicles.

Nobody disputes the amount of trouble that governments go to gain access to and to protect petroleum. In fact, people emphasize just how much of a problem that is. What really is annoying is that instead of consumers paying for that protection through a consumption tax, it's paid for with general taxation. The consequence is that the USA is incredibly inefficient in petroleum use and alternative technologies do not advance as fact as they should.
 

VolkerP

EU Model S P-37
Jul 6, 2011
2,464
27
Germany
BBC looking at fossil fuel subsidies all around the world, developed and developing countries:
BBC News - Fossil fuel subsidies growing despite concerns

_74519696_74519695.jpg
 

Jeff Miller

Member
Jan 2, 2013
293
3
Chicago
BBC looking at fossil fuel subsidies all around the world, developed and developing countries:
BBC News - Fossil fuel subsidies growing despite concerns

_74519696_74519695.jpg

There are some things that France doesn't get quite right (in my opinion) but when it come to energy policy, they are second to none; much lower costs for electricity and much lower carbon emissions than almost all of its neighbors. (As a former employee of the Commissariat a l'Energie Atomique, I may be slightly biased.)
 
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RiverBrick

Active Member
Mar 23, 2014
2,508
1,719
Mount Washington Valley
t

if the US did not take steps to protect the sources of crude oil or the routes uses to transport the oil the whole world's economic system would be in tatters and you wouldn't be able to heat your homes, light your lights, have food in your stores or clothes on your backs, let alone be able to buy high priced high tech electrically powered vehicles.

The heat and light in my home come from electricity, which in turn is produced 98% by Hydro and 1% from Wind.
 
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