As we’ll hear today, the United States subsidizes the fossil fuel industry with taxpayer dollars. It’s not just the US: according to the International Energy Agency, fossil fuel handouts hit a global high of $1 trillion in 2022 – the same year Big Oil pulled in a record $4 trillion of income.
In the United States, by some estimates taxpayers pay about $20 billion dollars every year to the fossil fuel industry. What do we get for that? Economists generally agree: not much. To quote conservative economist Gib Metcalf: these subsidies offer “little if any benefit in the form of oil patch jobs, lower prices at the pump, or increased energy security for the country.” The cash subsidy is both big and wrong.
It should be noted that your link only explores federal subsidies, while Whitehouse notes the bulk of subsidization that happen at the state and local level. Texas, for instance, invests enormously in public works that benefit fossil fuel producers while offering the administrative offices generous grants and tax forbearances to operate within the state.
Because energy consumption underpins the bulk of our commercial activities, there is a real net-benefit to keeping raw fuel and electricity prices artificially low. Market rate energy would constrict capital construction and real estate development, reduce employment rates, and increase inflation - generally speaking, it would cut into long term economic growth. The OPEC embargo of the 70s demonstrated as much.
At the same time, fossil fuel consumption yields a host of side-effects - degradation of air and water quality, rising global temperatures leading to more sever weather and sea levels which increase the rate of coastal erosion, wholesale destruction of agricultural land and waterways where spills occur, etc.
So subsidies aren’t bad on their face, but fossil fuel subsidies - particularly at the scale of current energy consumption - carry far too many negative externalities to be considered good long term policy.
Unfortunately, the political benefits of fossil fuel subsidy continue to outweigh the social consequences, leading to a political class that is financially invested in continuing subsidies that have long since transformed into a net negative for domestic growth.
According to Senator Sheldon Whitehouse, the bulk of our state and federal subsidies are tilted towards fossil fuels.
It should be noted that your link only explores federal subsidies, while Whitehouse notes the bulk of subsidization that happen at the state and local level. Texas, for instance, invests enormously in public works that benefit fossil fuel producers while offering the administrative offices generous grants and tax forbearances to operate within the state.
Because energy consumption underpins the bulk of our commercial activities, there is a real net-benefit to keeping raw fuel and electricity prices artificially low. Market rate energy would constrict capital construction and real estate development, reduce employment rates, and increase inflation - generally speaking, it would cut into long term economic growth. The OPEC embargo of the 70s demonstrated as much.
At the same time, fossil fuel consumption yields a host of side-effects - degradation of air and water quality, rising global temperatures leading to more sever weather and sea levels which increase the rate of coastal erosion, wholesale destruction of agricultural land and waterways where spills occur, etc.
So subsidies aren’t bad on their face, but fossil fuel subsidies - particularly at the scale of current energy consumption - carry far too many negative externalities to be considered good long term policy.
Unfortunately, the political benefits of fossil fuel subsidy continue to outweigh the social consequences, leading to a political class that is financially invested in continuing subsidies that have long since transformed into a net negative for domestic growth.
Excellent distinction. Ty for the info