If you were to survey people and ask the question “Should we subsidize oil companies?” — the overwhelming majority would undoubtedly respond “No!” The notion that we are subsidizing oil companies generates outrage in many people, but in this article I will show why these subsidies aren’t going to go away any time soon. The reason may surprise you.
I decided to write this article following a a recent discussion in a CleanTech discussion group on the social networking site LinkedIn. The person who started the discussion asked the question “Why is it so Hard to Kill Fossil-Fuel Subsidies?” The discussion was prompted by a recent article by environmental activist and author Bill McKibben called Payola for the Most Profitable Corporations in History. In the article McKibben proposes “five rules of the road that should be applied to the fossil-fuel industry.” But McKibben himself demonstrated in his article that he doesn’t really understand the nature of these subsidies — and this sort of misunderstanding largely explains why so many people are outraged that they persist.
So let’s take the original question on subsidies and ask it in a different way: “Should we allow oil companies to take a tax deduction also available to any U.S. manufacturer such as Apple or Microsoft?” A lot of people will still answer “No” to that question, but certainly fewer than answered “No” to the original question.
Now ask the question “Should farmers be allowed a fuel tax exemption for the fuel they use on the farm?” In this case, some people are going to say “No”, but farmers are going to be near unanimous in saying “Yes!”
Let’s ask one final question: “Should low-income families who struggle to pay their heating bills be helped with programs like the Low Income Home Energy Assistance Program (HEAP)?” The irony in this question is that some of the people who are the most vehemently opposed to fossil fuel subsidies will argue that this is an important program that helps keep poor people from freezing to death in winter, and thus it would be inhumane to eliminate it.
Yet unless you answered “No” to all four questions you support programs that have been identified as fossil fuel subsidies. Bill McKibben himself indicates sympathy for subsidies when he wrote: “Many of those subsidies, however, take the form of cheap, subsidized gas in petro-states, often with impoverished populations — as in Nigeria, where popular protests forced the government to back down on a decision to cut such subsidies earlier this year.” However, he then incorrectly asserts “In the U.S., though, they’re simply straightforward presents to rich companies, gifts from the 99% to the 1%.”
That’s just not true, and a failure to understand this is why there is so much outrage over fossil fuel subsidies in the U.S. (As an aside, characterizing the oil companies as “the 1%” is also misleading, because oil companies are overwhelmingly owned by the 99%).