It's amazing how ignorant people can be to the world around them. Let's assume you live in the US, since the article is dealing with those subsidies.
The food you're eating - c. 20% of US farm income is subsidies [0]
The employees of the restaurant - probably, at least one of them is on a government support program to augment their wages [1]
The car you drove to the restaurant in - the US Federal government subsidized your gas (ever wonder why US gas is cheaper than Canada/EU?) [2]
So maybe instead of spending your time looking down your nose and 'not understanding why people don't understand economics,' why don't you do research on the world around you?
[0] https://perc.tamu.edu/PERC-Blog/PERC-Blog/U-S-Farm-Subsidies...
[1] https://www.gao.gov/products/gao-21-45
[2] https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subs...
US gas is cheaper than elsewhere in the developed world because a) the US is self-sufficient in terms of supply and, more importantly, b) US fuel taxes are less.
If you actually read the EESI paper you cited, you see that the "subsidies", whether direct or indirect, are actually varying accounting treatments; basically, the same amount of taxes are collected but over a longer period of time. In any case, even if you were to remove all the direct "subsidies", the paper does not claim that tax revenue would rise more than about $40 billion over about a decade. $4 billion a year is a pittance for a federal government that collected $4.9 trillion in 2022.
Let's go through your argument (would you believe I did both read and understand the document I linked!?), but before we do that, let's look at some more traditional subsidies that O&G gets in America: [0]
The GAO has reported extensively that taxpayers have not received a fair rate of return due to outdated fiscal terms. For example, Federal onshore oil and gas royalty rates are consistently lower than on State-issued leases and Federal offshore leases (see Tables 1 and 2); in fact, onshore royalty rates have never been raised. Likewise, bonding levels have not been raised for 60 years, and minimum bids and rents have been the same for over 30 years. If a lease is not sold competitively at auction, for two years it can be sold non-competitively for a modest administrative fee, with no bonus bid required. These noncompetitive leases are frequently less diligently developed as competitively issued leases. From 2013 to 2019, average revenues from competitive leases were nearly three times greater than revenues from noncompetitive leases.
Underpriced use of public land sure sounds like a subsidy to me!
Ok back to your comment, let's cherry-pick some arguments you made then get into accounting.
>US gas is cheaper than elsewhere in the developed world because a) the US is self-sufficient in terms of supply
Oh, I was unaware that the cheap gas phenomenon started in 2008 when we started approaching energy independence. Thanks Obama, I guess.
>b) US fuel taxes are less.
You're getting dangerously close to agreeing with me on the subsidy point, but I know we won't agree on the politics of pricing externalities, so I'll just move on.
> the paper does not claim that tax revenue would rise more than about $40 billion over about a decade. $4 billion a year is a pittance for a federal government that collected $4.9 trillion in 2022.
It's an amazing logical fallacy to say "one number is smaller than another unrelated number, so the smaller number is unimportant," but even ignoring that, its still a subsidy and that's my entire point. Subsidies big and small are everywhere and this is one of them. I nowhere made an argument that O&G subsidies are going to bankrupt the US, just wanted to make OP aware of the fact that their gas is subsidized.
OK, now on to my favorite topic: why GAAP and cashflow accounting are different and why that actually matters, especially in CAPEX-driven balance sheet businesses.
1) The Intangible Drilling Costs Deduction - You are 100% wrong here. Depreciation and Amortization schedules exist for a reason, it's not just made up to keep EY busy footing 3-statement models. Let's run with this hypothetical: a business looks to build a well when prices are $100/barrel. In that first year of pumping, they successfully discover that the well is wet and they pay way less tax than they otherwise would because they got to amortize everything all at once. Now in year 2, that wet well is still producing but oil prices fall and it no longer makes sense to keep pumping. So now they have a known wet well (a balance sheet asset that they can restart at any time) and all the retained earnings from year 1 that the government never gets to claw back.
Compare this to a world without this subsidy where those expenses are amortized on expected useful life of the well. In this case, not only does the driller have incentive to keep producing even if prices fall, they absorb some of the pricing risk that the US government currently takes on.
If the US government intentionally absorbing pricing risk (arguably free insurance for O&G companies) is not a subsidy to you then again, we just disagree.
2) Percentage Depletion - In contrast, percentage depletion allows firms to deduct a set percentage from their taxable income. Because percentage depletion is not based on capital costs, total deductions can exceed capital costs. << Enough said
3) Foreign tax - Instead of claiming royalty payments as deductions, oil and gas companies are able to treat them as fully deductible foreign income tax. << Again, maybe you're not following the language here, but this is not "basically, the same amount of taxes are collected but over a longer period of time" it's "less taxes vs. other industries" (if you actually don't follow, tax paid to foreign governments isn't treated as a normal expense, it's usually covered in treaty agreements and is treated as tax already paid)
So yeah, not only are these real honest to goodness subsidies, they amount to billions of dollars a year!
[0]https://www.doi.gov/sites/doi.gov/files/report-on-the-federa...
I have no problem with raising lease rates for Federal land to market rates.
>>US gas is cheaper than elsewhere in the developed world because a) the US is self-sufficient in terms of supply
>Oh, I was unaware that the cheap gas phenomenon started in 2008 when we started approaching energy independence. Thanks Obama, I guess.
Oh, come now. It is a fact that, both historically and today, part (not all, but part) of the reason why US gas prices are lower than in the rest of the developed world is because the US is relatively self-sufficient. (And before you bring up Canada, Canada significantly lacks domestic refining capability, as well as ability to deliver its own gas to the eastern half of the country.)
2008 to now isn't the first time the US reached energy independence; the US had this status into the 1960s, and if it really needed to it could have always reached this, especially when including Canadian supply. The Gulf War was fought to maintain oil supply to Europe, not to the US.
>>b) US fuel taxes are less.
>You're getting dangerously close to agreeing with me on the subsidy point, but I know we won't agree on the politics of pricing externalities, so I'll just move on.
You and I both know that when people here and on Reddit claim that "the US subsidizes gas and that's why it's so cheap", 99% of the time it's meant to convey the claim "US gas companies get zillions in handouts from the government" (in the sort of bags with dollar signs that Mayor Quimby receives his bribes in), as opposed to "gas is taxed less in the US than elsewhere" (much less "US gas isn't appropriately pricing in externalities"), and 99% of the time that's the message that's taken away by the reader.
We indeed would not agree on the politics of pricing externalities (more precisely, whether such counts as "subsidies"). Your statement, however, implies that other countries' gax taxes are higher because they are more appropriately pricing said externalities. We both know that Canada or Belgium or Portugal's gax taxes are not higher than in the US because their governments have duly, nobly, and wisely calculated the impact of climate change and have set the tax rates accordingly. (Maybe Norway.) Said taxes are higher because their governments believe they are acceptable to the public, and are spent accordingly as part of general funds as opposed to being all (or even part) sent to a "global warming lockbox", or somesuch.
>> the paper does not claim that tax revenue would rise more than about $40 billion over about a decade. $4 billion a year is a pittance for a federal government that collected $4.9 trillion in 2022.
>It's an amazing logical fallacy to say "one number is smaller than another unrelated number, so the smaller number is unimportant," but even ignoring that, its still a subsidy and that's my entire point.
First, both the degree and kind matter. Unless you rush to correct everyone who says that public schools/toll-less highways/police services are "free" with "Ackshually, they aren't free", you also agree.
Second, EIA says (<https://www.eia.gov/tools/faqs/faq.php?id=23&t=10>) that in 2021 135 billion gallons of gas were consumed in the US. We'll simplisticly say that every cent of of the $4 billion a year in "subsidies", which the EESI is presumably citing as a worst-case figure, can be assigned to gas. So each gallon is being "subsidized" by about $0.34. Not nothing (and, again, this is a worst-case figure), but relatively small versus the massive swing we saw in 2022 in the price per gallon (<https://www.cnn.com/2022/12/29/energy/oil-gas-prices-2022/in...>). More importantly, said amount is absolutely not the explanation for the difference in price per gallon/liter between the US and other developed countries, either.
