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So Many Subsidies for Big Oil, So Little Political Will to End Them

1:11 PM PDT on May 13, 2011

Lisa Margonelli, director of the New America Foundation’s Energy Productivity Initiative, hit the nail on the head on the problem with Congressional action on oil subsidies. Yesterday, she wrote in Politico that ending Exxon’s unjustifiable tax breaks would be nice, but there are far more egregious examples of U.S. government handouts to big oil:

Really, a bigger problem is that the U.S. taxpayer simply doesn’t charge the oil companies enough for the oil that we own. A 2008 GAO report found that the US government “take” from oil sales in the Gulf of Mexico ranked 93rd out of 104 countries that sell their oil. THAT subsidy to the oil industry is huge, much larger than the $2.1 billion that is the subject of today’s Congressional theater.

The really problematic U.S. oil subsidies are not even on the table. Here we’re discussing a relatively small $2.1 billion in subsidies, when today American drivers will spend $1.5 billion on gasoline alone. Why? Because even more than we’ve subsidized oil production, we’ve subsidized oil demand. We encourage oil consumption, and even throw money at it through everything from paying for highways without charging for their use, to giving tax write offs for parking spaces and fuel consumption, to selling auto insurance in a “one-size-fits-all” price regardless of whether you drive 3000 miles or 25,000 miles per year, to prohibiting private mass transit systems like jitneys from competing in many cities.

And then there’s the massive amount of money we spend on maintaining military hegemony in the oil producing and shipping hot points around the world without adding that fee to the price of gasoline. These are the subsidies we really need to address and Congress should drop the charade and get to work.

When you add that all up, gas is a whole lot more expensive than even today’s prices would suggest. The late Milton Copulos, president of the National Defense Council Foundation, estimated that if you add in “things like the cost of defending the flow of oil in the Persian Gulf, the loss of domestic jobs and investment, the uncertainties that enter the economy and the costs related with oil supply disruptions,” gas would cost $11.06 a gallon. And that was in 2006.

We pay for those things out of our income taxes (and our grandkids are paying for them through our massive debt load). And to think drivers say that they pay the full cost of the infrastructure that supports their driving habit. We’re all paying for it.

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