Owl For President

Sunday, March 6, 2011

Big Oil subsidies don't make sense

Arthur Woodson
■Tax subsidies for oil companies don’t decrease our reliance on foreign oil. Oil companies often argue that without subsidies, domestic production will decline and our reliance on foreign oil will increase. Yet U.S. production has steadily ......declined since its 1970s peak. We produce about the same amount of oil now that we produced in the 1950s despite billions in subsidies over the past 30 years.Subsidies do little to change the fact that limited domestic supplies contribute to the United States importing about 60 percent of its oil. In fact, the Treasury Department estimates that ending subsidies will affect domestic production by less than one half of 1 percent. If we’re serious about ending oil imports we need to transition away from oil as a fuel supply.President George W. Bush himself noted in 2005 that the profit potential in the oil industry drives company behaviors and not the subsidies. “With $55 oil we don’t need incentives to the oil and gas companies to explore. There are plenty of incentives.”■Oil subsidies don’t save jobs. Oil companies and lobbyists also argue that ending subsidies will kill jobs. But this doesn’t make sense since eliminating oil subsidies minimally impacts domestic production (as explained above).It’s also important to note that the oil and gas industry is about 10 times more capital intensive than the U.S. economy as a whole. Consequently, subsidizing oil industry production to create jobs isn’t a good use of taxpayer dollars. Any decrease in production will likely affect capital investment in machinery, not the number of jobs created.■Oil subsidies don’t help consumers at the pump. Finally, oil companies are fond of saying that ending tax subsidies will cause disastrous price hikes. But the tax subsidies Sanders, the president’s budget, and other lawmakers propose for elimination pay companies to find and produce oil. Eliminating them will have little, if any, effect on consumer prices. A Joint Economic Committee report states, “the removal or modification of [one of these subsidies] is unlikely to have any effect on consumer prices for oil and gas.” The committee found that subsidies do not affect production decisions in the near term. And in the long term the Energy Information Administration explains that the major factors affecting oil prices include the production limits set by the Organization of the Petroleum Exporting Countries and global disruptions in supply. Moreover, the minimal impact of tax subsidies on domestic production (as discussed above) underscores that eliminating tax subsidies will have little, if any, effect

No comments: