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0 pointsCountSessine9y ago0 comments

I always hear these vague allusions to oil and gas subsidies, but never concrete examples. In fact, we actually tax the hell out of oil and gas at retail, so it seems a bit strange that we would actually be subsidizing it at the same time.

What kind of/magnitude of subsidies does oil and gas enjoy?

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27 comments · 8 top-level

smallnamespace9y ago· 8 in thread

https://en.wikipedia.org/wiki/Energy_subsidies#United_States

$3.2bn / year for fossil fuels, about half of what went to renewables

CountSessineOP9y ago

Those figures seem to come from here:

https://www.cbo.gov/publication/43993#section0

In particular, the $3.2bn/year is a tax write-off sort of 'subsidy', not a grant sort of subsidy, which I believe solar has received recently (section 1603).

Without doing more digging, I can't tell whether what those oil and gas write-offs are for. Exploration? Research?

smallnamespace9y ago

Why is that an important distinction here? Both direct subsidies and tax credits/rebates/write-offs have the same net effect on the government's coffers.

The Wikipedia article cites another article that has the breakdown (over a period of years):

1. Foreign tax credit ($15.3 billion)

2. Credit for production of non-conventional fuels ($14.1 billion)

3. Oil and Gas exploration and development expensing ($7.1 billion)

https://www.eli.org/sites/default/files/eli-pubs/d19_07.pdf

2 more replies

coldtea9y ago

Add the military spending to ensure control of oil producing countries and cheap oil, and it's more like $1 trillion.

ajss9y ago

Looking at the gross subsidy is misleading. Federal gas tax revenues alone are about $35bn/yr.

mcv9y ago

Wait, are we talking gasoline for cars here, or natural gas for energy production? Because those are very different things. It's entirely possible for gas and oil power plants to receive subsidies while gasoline for cars is heavily taxed.

smallnamespace9y ago

The excise tax is intended to pay for transportation infrastructure though, not to disincentivize gasoline consumption.

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jartelt9y ago

The gas tax is paid for by customers at the pump. It is not a tax being paid by the oil companies.

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crdoconnor9y ago

That's only federal subsidies.

coriny9y ago· 4 in thread

The wikipedia link: https://en.wikipedia.org/wiki/Energy_subsidies. e.g. in the UK north sea oil exploration is heavily subsidised: http://www.independent.co.uk/news/uk/politics/uk-government-.... Of course there's lots of politics and commercial interests here, so I don't overly trust the upfront numbers given by articles in newspapers.

As a reference point the UK has about the lowest consumer energy taxes in the EU, and the highest consumer prices.

dangravell9y ago

> As a reference point the UK has [...] the highest consumer prices.

No it doesn't, not even close...

http://ec.europa.eu/eurostat/statistics-explained/index.php/...

Unless I misunderstand what you mean by consumer prices?

coriny9y ago

Ah sorry, I missed a key phrase out - _pre-tax_ UK prices are the highest, and they are by a long way. Post-tax they're nearer the middle as the UK has by far the lowest energy taxes.

Unfortunately it's too late to edit my comment for clarification.

CountSessineOP9y ago

in the UK north sea oil exploration is heavily subsidised

It seems very misleading to say "taxpayer support" for a tax preference, especially when tax revenue for north sea oil is going to be well over that 6bn.

ZeroGravitas9y ago

It's all accounting at the end of the day. The oil belongs to the nation, they're "hiring" industries to extract it. Whether it's called a tax or a payment is all semantics at some level.

This is part of why Norway can make around £400 Billion more money than the UK from a similar amount of oil, extracted from basically the same place:

http://www.resourcegovernance.org/blog/did-uk-miss-out-%C2%A...

See also "Hollywood Accounting".

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staticelf9y ago· 3 in thread

"Tax the hell out of" - As a swede this makes me laugh since 1 liter of petrol costs just over $2 here.

But we also are pretty much number one when it comes to being environmental friendly nation and no swede would deny climate change.

hjalle9y ago

Just over $2? 95 octane costs around $1.5 (13.5 SEK) per liter. Still a lot more than US though.

lorenzhs9y ago

$1.50 per litre is $5.70 per US gallon. According to the AAA, today's US average is $2.25, making gas in Sweden 2.5x as expensive. I think GP's point stands, even if the numbers were a little off.

For the record, gas prices in Germany are similar to Sweden, maybe a couple of cents lower (currently around 1.35€ per litre—around 2.35 times the US average)

staticelf9y ago

Sorry, I wasn't aware that the dollar has increased so much in value..

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twinge9y ago· 2 in thread

I'm just a simple investor and have no ties to the oil industry. I was surprised to learn about the tax incentives for investing in oil: http://www.investopedia.com/articles/07/oil-tax-break.asp

efaref9y ago

I think most of these are just a transfer of wealth from the high-tax-paying consumer to the low-tax-paying rich industry owners. Just business as usual.

tim3339y ago

I don't think they are even that. If you look a the list they are are just tax deductions so if you hit oil you may pay the govt $1m instead of some larger sum. Most of the "subsidies" seem to be of that nature. I'd like to personally subsidise the oil industry by them sending me $1m as a discount from the $2m I would have really liked.

xorxornop9y ago· 2 in thread

Well, how about the fact there's an absolutely enormous, untaxed negative externality? It's implicit - normally you tax something to reduce use of something harmful. Renewable energy would be far more competitive if this was factored in.

Fossil fuels are causing incredible economic damage - but in a way that isn't captured by traditional economic models. It's going to have huge costs to future generations - if we taxed it, not only would we get off fossil fuels faster, we might then have extra cash around to soften the blow when it inevitably comes.

legolas24129y ago

Yes, there should be carbon tax.

But the OP wants to know of the coal subsidies even Elon musk calls so huge that solar subsidies are "cents on the dollar".

How about providing actual subsidies for coal, also the difference between taxes for coal and solar. Of course they should be compared per Kwhr (which in my opinion Elon musk didn't do).

ZeroGravitas9y ago

80% of US coal mined by the big three companies is sold by the federal government to them at 1 dollar a ton. That coal will cause between 22 and 237 dollars worth of costs to the nation.

http://www.greenpeace.org/usa/news/new-report-details-how-fe...

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ci5er9y ago

From what I can tell, whenever you hear about "subsidies", as it relates to combustible hydrocarbons, it isn't the kind of free-taxpayer-money boondoggle you see with (for example) a loan guarantee to Solyndra. It usually takes one (or both) of two forms: 1) The tax treatment of any capital-intensive industry, with a tip-of-the-hat to the "how do we account for depleted resources" question (you see the same pondering happening now with bitcoin, for example), and 2) not properly accounting for externalities in taxing the extractor, the oxidizer or the consumer of the point-of-service joule.

In brief, #1 means: "I don't like it, and things I don't like should be taxed more, and until they taxed more, I will call this gift of non-taxation 'a subsidy'"

As for #2, the negative-externality objectionators make a very fair point!

pure_ambition9y ago

To add to others, awesome (from a returns perspective) tax structures like MLPs mean that energy infrastructure is heavily subsidized because income generated through MLPs is either not taxed at all or taxed at a very advantageous rate compared to traditional corporations. The government in the US has set these up primarily to incentivize investment in energy infrastructure and real estate. Energy Transfer Partners - the company most recently known for trying to build the Dakota Access Pipeline - is one such MLP.

freehunter9y ago

>we actually tax the hell out of oil and gas at retail

A sales tax is a tax on the consumer of the product, not the producer of the product. The producer is the one getting the subsidies.

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0 comments

27 comments · 8 top-level

smallnamespace9y ago· 8 in thread

https://en.wikipedia.org/wiki/Energy_subsidies#United_States

$3.2bn / year for fossil fuels, about half of what went to renewables

CountSessineOP9y ago

Those figures seem to come from here:

https://www.cbo.gov/publication/43993#section0

In particular, the $3.2bn/year is a tax write-off sort of 'subsidy', not a grant sort of subsidy, which I believe solar has received recently (section 1603).

Without doing more digging, I can't tell whether what those oil and gas write-offs are for. Exploration? Research?

smallnamespace9y ago

Why is that an important distinction here? Both direct subsidies and tax credits/rebates/write-offs have the same net effect on the government's coffers.

The Wikipedia article cites another article that has the breakdown (over a period of years):

1. Foreign tax credit ($15.3 billion)

2. Credit for production of non-conventional fuels ($14.1 billion)

3. Oil and Gas exploration and development expensing ($7.1 billion)

https://www.eli.org/sites/default/files/eli-pubs/d19_07.pdf

2 more replies

coldtea9y ago

Add the military spending to ensure control of oil producing countries and cheap oil, and it's more like $1 trillion.

ajss9y ago

Looking at the gross subsidy is misleading. Federal gas tax revenues alone are about $35bn/yr.

mcv9y ago

smallnamespace9y ago

The excise tax is intended to pay for transportation infrastructure though, not to disincentivize gasoline consumption.

1 more reply

jartelt9y ago

The gas tax is paid for by customers at the pump. It is not a tax being paid by the oil companies.

1 more reply

crdoconnor9y ago

That's only federal subsidies.

coriny9y ago· 4 in thread

As a reference point the UK has about the lowest consumer energy taxes in the EU, and the highest consumer prices.

dangravell9y ago

> As a reference point the UK has [...] the highest consumer prices.

No it doesn't, not even close...

http://ec.europa.eu/eurostat/statistics-explained/index.php/...

Unless I misunderstand what you mean by consumer prices?

coriny9y ago

Ah sorry, I missed a key phrase out - _pre-tax_ UK prices are the highest, and they are by a long way. Post-tax they're nearer the middle as the UK has by far the lowest energy taxes.

Unfortunately it's too late to edit my comment for clarification.

CountSessineOP9y ago

in the UK north sea oil exploration is heavily subsidised

It seems very misleading to say "taxpayer support" for a tax preference, especially when tax revenue for north sea oil is going to be well over that 6bn.

ZeroGravitas9y ago

It's all accounting at the end of the day. The oil belongs to the nation, they're "hiring" industries to extract it. Whether it's called a tax or a payment is all semantics at some level.

This is part of why Norway can make around £400 Billion more money than the UK from a similar amount of oil, extracted from basically the same place:

http://www.resourcegovernance.org/blog/did-uk-miss-out-%C2%A...