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Fossil-fuel subsidies: Helping the richest get richer

This news story was published on April 6, 2012.
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MCT FORUM, By Bill McKibben, Los Angeles Times –

Last week, the Senate voted on a proposal by New Jersey Sen. Robert Menendez to end some of the billions of dollars in handouts enjoyed by the fossil-fuel industry. The Repeal Big Oil Tax Subsidies Act was a curiously skimpy bill that targeted only oil companies, and just the five richest of them at that. Left out were coal and natural gas. Even so, the proposal didn’t pass.

But that hasn’t stopped President Obama from calling for an end to oil subsidies at every stop on his early presidential-campaign-plus-fundraising blitz. And this month Vermont Sen. Bernie Sanders will introduce a much tougher bill that tackles all fossil fuels and their purveyors.

Even if Congress can’t pass a bill to end them, those subsidies are worth focusing on. After all, we’re talking about somewhere between $10 billion and $40 billion annually (depending on what you count) in freebie cash for an energy industry already making historic profits.

We should be outraged, but there’s a problem: The very word “subsidies” makes American eyes glaze over. It sounds so boring, like something that has everything to do with finance and taxes and accounting, and nothing to do with us. But bring yourself to focus on fossil-fuel subsidies for just a minute, and you will realize just how loony our policy is.

Start this way: You subsidize something you want to encourage, something that might not happen if you didn’t support it financially. Take education. We build schools, pay teachers and give government loans and grants to college kids. Families too have embraced education subsidies, with tuition often being the last big subsidy we give the children we’ve raised. The theory is: Young people don’t know enough yet. We need to give them a hand and a chance when it comes to further learning, so they’ll be a help to society in the future. From that analogy, here are five rules that should be applied to the fossil-fuel industry.

Don’t subsidize those who already have plenty of cash on hand.

No one would propose a government program of low-interest loans to send the richest kids in the country to college. We assume that the wealthy will pay full freight. Similarly, we should assume that the fossil-fuel business, the most profitable industry on Earth, should pay its way. What possible reason is there for giving, say, Exxon a tax break? Year after year the company sets records for money-making. Last year it managed to rake in a mere $41 billion in profit, just failing to break its own 2008 all-time mark of $45 billion.

Don’t subsidize people forever.

If students need government loans to help them get bachelor’s degrees, that’s sound policy. But if they want loans to get their 11th bachelor of arts, they should pay themselves. We learned how to burn coal 300 years ago. A subsidized fossil-fuel industry is the equivalent of a 19-year-old repeating third grade yet again.

Don’t abandon important subsidies just because in one instance they didn’t work out.

The government gave money to a solar power company called Solyndra. The company went belly-up. That stung. But since we’re in the process of figuring out how to perfect solar power and drive down its cost, it still makes sense to subsidize it. Think of it as the equivalent of giving a high-school senior a scholarship to go to college. Most of the time that works out. But a few kids are going to spend four years drinking; consider them human Solyndras. The subsidy wasn’t well spent on those kids, but we don’t shut down the entire college loan program as a result.

Don’t subsidize something you want less of.

At this point, the greatest human challenge is to get off fossil fuels. If we don’t do it soon, the climatologists tell us, our prospects as a civilization are grim. So why are we lending a significant helping hand to companies intent on driving us toward disaster? It’s like giving a fellowship to a graduate student who wants to pursue a thesis on “Strategies for Stimulating Doughnut Consumption Among Diabetics.”

Don’t give subsidies to people who have given you cash.

Most of the men and women in Congress who vote each year to continue subsidies have taken campaign donations from big energy companies. In essence, they’ve been given small gifts by outfits to whom they then return large presents, using public money, not their own. Oil Change International estimates that fossil-fuel companies get $59 back for every dollar they spend on donations and lobbying. It’s no different from sending a college financial aid officer a $100 bill in the expectation that he’ll give your daughter a scholarship. That’s bribery. And there’s no chance it will yield the best energy policy or the best student body.

These five rules don’t get at the biggest subsidy we give the fossil-fuel business: the right to pour their waste into the atmosphere for free. But they would be a start, a statement that we no longer will be played for suckers and saps. There’s just no reason to hand the richest industry on Earth a bonus to help them wreck the planet.

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20 Responses to Fossil-fuel subsidies: Helping the richest get richer

  1. Howie Reply Report comment

    April 7, 2012 at 9:18 pm

    I hate seeing rich people get subsidies whether it’s farmers, big oil, or big medical. Unfortunately, we have a problem as a society. Our way of life is centered on cheap energy. Some think drill baby drill is the answer…others think it’s green energy. Fact is, we need cheap oil and green energy needs more research. What a mess.

    • Observer Reply Report comment

      April 8, 2012 at 11:59 pm

      I read the other day, that one of the major pipeline operators were filing applications to reverse the flow of a line from Cushing, OK to Houston in order to send inland crude coming by train to the Houston market. That will ship 400,000 bbls a day. That is in addition to oil running via train to places like Louisiana from N. Dakota. (a train delivers 85,714 bbls)

      Oil from both sources will replace imports.

  2. concerned Reply Report comment

    April 7, 2012 at 9:11 am

    As long as we are talking about subsidizing the rich, why do we need farm subsidies with record grain prices?

    Do not mention “family farms” they have been dead for a generation.

  3. Larry Reply Report comment

    April 7, 2012 at 8:58 am

    Peter- as a person who has worked out ofthe country setting up and locating manufacturing businesses in other country’s (Mexico, Canada, Korea, China and a little in Argentina I can truthfully say that the reason company’s do this is to take advantage of the low labor rates and the lack of laws controlling work to the enviroment. Most of these coutry’s governments subsidise the labor Charging only labor and fringe which normally is around $10.00 p/hour. It has always been my opinion that they lose more than they gain in freight and handling but the costs is hidden in the expense side so they go for it. They definetly lose control of quality and spend millions trying to control it. I have always thought if they spent that money improving the operation in the U.S. they would make more money. However, it is all about the bonus for CEO’s and more profits for the shareholder’s. When is enough enough???

    • Observer Reply Report comment

      April 7, 2012 at 9:25 am

      Larry, you are correct about some foreign countries subsidizing labour these days. In the 80’s and 90’s, some governments were targeting certain products in markets to gain a larger share.

      In some cases, such as Xerox, the competitors were selling machines in the U.S. at prices that only covered the cost of raw materials. That creates a very unequal playing field for American companies.

      The result at first was having a subsidiary in Japan produce some parts. But pretty soon, the percentage of content kept going up and up. Xerox had no choice if it wanted to be competitive.

      I will admit however, that the quality of some of the parts coming from Japan were pretty good. Some! In other cases, materials were used that just did not match up to the application, causing a higher failure rate. Customers do not like that.

      I still maintain, the only way out of this mess is to charge a differential tax on imported products. It should be structured to bring the cost of that item up to the average wage/cost of living/labour rates in the U.S.

      • Peter L Reply Report comment

        April 7, 2012 at 10:28 am

        Observer, I and others have been saying the same type of thing…only calling it “import” tax rather than your fancy “differential” tax. Only if I say it, you’re going to try and dismantle it.

        Have you realized yet that you’re a bully hypocrite?

      • Observer Reply Report comment

        April 7, 2012 at 6:17 pm

        No, your proposal and the one I posted, are not the same. I take into account labor cost differentials only. Most folks are able to discern that.

        Since before you were born, I have been watching this subject, searching for an answer. I have watched as whole communities dried up as jobs left the country. I have watched as neighbors snubbed their noses at other community members and purchased Japanese products, eventually killing their jobs based where they lived. I watched the results, and the impacts it had on the community and our region. In the case of Xerox, I was directly involved with the loss, and efforts to regain a competitive advantage. I saw first hand how a foreign country tried to decimate an entire industry segment. A

        nd how WE fought back. I was not out smoking pot, or suggesting silly weird notions of remaking society. I was neck deep in making something work against a lot of odds. WE did it!

        What did you do except getting high? Hmmmm?

      • Observer Reply Report comment

        April 7, 2012 at 6:21 pm

        If that sounded resentful, it is because I am. I do not like being talked down from someone who is all gobbly gook theory, and no accomplishments.

  4. Observer Reply Report comment

    April 6, 2012 at 8:35 pm


    Profit per gallon of gasoline sold:

    Based upon a $3.00 gallon of gasoline, the average break-down is as follows.

    ·Gasoline Retailer $.01 cents per gallon
    ·Oil Company $.08 cents per gallon
    ·Refining $.29 cents per gallon
    ·Marketing/Distribution $.32 cents per gallon
    ·Taxes $.59 cents per gallon
    ·Cost of crude $1.71 per gallon (delivered)

    So these big bad oil companies are killing us a penny per gallon at a time. Mean time, the Feds get 59¢ per gallon. Who is gouging whom?

    • Observer Reply Report comment

      April 6, 2012 at 8:38 pm

      I meant 8¢ per gallon.

    • Observer Reply Report comment

      April 7, 2012 at 6:03 pm

      This is what is reported on SEC filings, annual reports, and such, like it or not. Take the time to go through them and prove me wrong. I used case in point, Valero. Once you get through the hundreds of pages, and done the math, let me know.

    • common sense Reply Report comment

      April 8, 2012 at 8:54 pm

      If you think Walmart and Kum&Go only make a penny a gallon you’re the one smoking dope!

      • Observer Reply Report comment

        April 8, 2012 at 11:43 pm

        They are not my figures, they belong to Valero. And no one is to say that other retailers such as Kum & Go does not take more of a margin. That was just an example.

        I am going to stand by my example because it is what was reported to the Government, not some made up figure.

  5. common sense Reply Report comment

    April 6, 2012 at 8:02 pm

    Just like farm subsidies makes no sense when they are making record profits! When prices are low and they struggle making a profit then we should help and only then.

    • Jamey Reply Report comment

      April 6, 2012 at 10:27 pm

      There should be no subidies to farmers. They live a much better life then the average person (New trucks and cars, nice houses, 4 wheelers,and look at the machine shop most have with tools most professional shops would love to have) and only work a few months a year, then south for the winter. Things need to change now. This greed at all levels is going to destroy this nation. I would rather help people on welfare then farm subidies. (Matt you should have a link to the Members of the congress at national and state levels so we can send them are complaints.)

      • Jason Reply Report comment

        August 11, 2012 at 10:11 pm

        I’m sorry,but you have a slanted view of farmers. My Bother-in-Law never had a new car (their newest was a 86 Mazda that my sister bought before they were married in 90. He didn’t drive a new tractor, his didn’t even have a cab. The house he lived in hadn’t been remodeled since built by his Grand-Father. Didn’t have a 4 wheeler and worked 10-12 hrs a day, every day. Finally he paid off the money borrowed to buy the land and got a job working for someone else. He now drives s new car they have remodeled the house and he takes vacations. If farming was so easy, more would do it.

  6. Observer Reply Report comment

    April 6, 2012 at 7:47 pm

    Peter, you cannot get baseload from wind or solar.

    And I know no one who wants a stupid electic car that has a max limit on travel. Nor do they want to cram into those small pint sized vehicles. I sure the heck don’t.

    Lastly, we should kick out of our country, people who support drugheads, embrace spaceship homes, support socialism, wants everyone to support him by giving him free land, and carry on conversations with their car.

    • Peter L Reply Report comment

      April 7, 2012 at 10:22 am

      Observer, you and I will never get along, so you may as well not even address me. Yes people do want all of those things and more. Once they wake up to the domination and social control they’ve been under, they’ll see life in the quiet lane isn’t so bad. Would you rather have your children 2 ton trucks in their neighborhood or electric bicycles and golf carts?

      One day, nature willing, the era of peace will be upon us.

      • Peter L Reply Report comment

        April 7, 2012 at 10:24 am

        Oops…ommission. I meant would you rather have your children “dodging” two ton trucks or electric bicycles and golf carts. The point being, once transportation switches over to something lighter and less impactive…everyone will feel safer and better….and QUIETER.

      • Observer Reply Report comment

        April 8, 2012 at 11:50 pm

        As far as that goes Peter, it will depend on the infrastructure, and costs. It will not depend on quiet, or any other silly notions or theories.

        For the record, both kids have large vehicles, and use them for travel other than local or the loop, in which case they take the ‘L’. I think both would laugh at your suggestions.