Think Washington subsidizes Big Oil the most? Think again

Not that this will stop the Obama administration from decrying giveaways to Big Oil — facts have never much bothered this bunch before — but a new government report shows there’s big money to be had in energy subsidies, mostly for fuels other than oil and coal.

The Congressional Budget Office compiled federal tax-credit and spending data since the Carter era and found that, lately, the vast majority of the corporate welfare is going not to fossil fuels but to renewable energy:

CBO energy subsidies chart

In case this picture isn’t worth a thousand words to you, CBO summarizes the trend neatly:

Measured in 2011 dollars, the cost of energy-related tax preferences more than doubled between 1977 and 1982 and then fell dramatically between 1982 and 1988, in part because of declines in tax rates and fuel prices… . The cost of energy-related tax preferences grew gradually between 1988 and 2005 and averaged about $4 billion a year from 2000 to 2005. That cost (including outlays for grants in lieu of tax preferences) has risen sharply since then, to an average of $20 billion a year from 2009 through 2011.

In 2011, renewable energy accounted for 68 percent of the tax preferences — almost seven times as much as energy efficiency got and more than four times as much as fossil fuels — and all of the direct subsidies. That’s about $7 of every $8 devoted to federal energy subsidies. Worse, the analysis toward the end of the report suggests these subsidies are being given in a highly economically inefficient way.

Even during most of George W. Bush’s tenure, fossil fuels did well to get half of the handouts. Note that the vast majority of the dough renewables got during his years went to the ethanol boondoggle — through tax subsidies which, finally and mercifully, ended after last year. Yet, in the past few years, ethanol has been matched by giveaways to other types of renewable energy. In fact, this chart more or less reflects the general problem with federal spending over the past decade-plus: Things got bad enough toward the end of the Bush era, but they have exploded out of all semblance of control under Obama. As the CBO authors also noted:

In 2009, DOE received $39 billion for support of energy technologies (after accounting for rescissions [sic] and transfers) — roughly 17 times the average annual appropriation for the preceding decade. That funding included $27.6 billion in budget authority provided under ARRA and $11.4 billion in regular 2009 appropriations.

Note the two bits I put in bold. There was a huge upswing in energy spending in 2009, and not only because of the “stimulus” package. That $11.4 billion in regular spending was the highest of any year since 1980, and it dwarfed the spending in the preceding 10 years.

I favor eliminating any and all corporate welfare, including to fossil fuels. But this report ought to put paid to the notion that we are subsidizing Big Oil to the hilt while ignoring “cleaner” energies.

Ought to — but it probably won’t.

– By Kyle Wingfield

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129 comments Add your comment

ByteMe

March 8th, 2012
11:04 am

In case some like Kyle don’t get the difference: big oil is wildly profitable. Why give tax credits and preferences at all to a wildly profitable industry?? You give tax preferences to encourage the kind of behavior you want. Giving it to home-grown investments in future energy options makes good sense because we are either going to lead or follow and wouldn’t you rather lead? Giving it to wildly profitable old-style options is foolish.

Of course, there are some who don’t want to give tax investments to any private enterprise and that’s reasonable too, provided you are ok with no longer complaining about “What’s Obama doing about high gas prices?”

Kyle Wingfield

March 8th, 2012
11:10 am

ByteMe: Like I said at the end of the post, I’m fine with ending Big Oil’s subsidies. Let’s just not pretend they’re the chief recipients of federal energy handouts. (Btw: 6.2% margins = “wildly profitable”?)

And there are plenty of opportunities to address gas prices on the regulatory side, and the president is decidedly not taking advantage of them.

Inside Out

March 8th, 2012
11:14 am

If we are going to offer subsidies, we should at least do it on the back end so that we the tax payers would receive the advantage of lower prices….If that is not going to be the case, then cut it out all the way…. The oil campanies make huge Gross Profits… Let them invest a larger percent of that gross into R&D….Their bottom line will not be as fat, but hey….thats the way the free market works right????

Inside Out

March 8th, 2012
11:18 am

Kyle……Link me over to any artilce you wrote in the Spring or Summer of 2008 when Gas prices spiked that said then president Bush was not doing enough to lower the prices of gas……. Just want to see if you were singing the same tune then…..

MPercy

March 8th, 2012
11:18 am

Also, keep in mind that in the case of the oil industry the vast majority of the “handouts” come in the form of deductions against income for the depreciation of equipment–depreciation that *every* *other* manufacturer can and does also take.

Compare that to the renewables, which are largely handed actual cash money taken from taxpayers.

ghp_fan

March 8th, 2012
11:19 am

I think subsidies to Big Oil has most often been mentioned with the frame of reference being that they didn’t need the subsidies, not that they were the largest recipient of government subsidies.

Stephenson Billings

March 8th, 2012
11:20 am

And let’s not forget things like this:

Green Firms Get Fed Cash, Give Execs Bonuses, Fail

“President Obama’s Department of Energy helped finance several green energy companies that later fell into bankruptcy — but not before the firms doled out six-figure bonuses and payouts to top executives, a Center for Public Integrity and ABC News investigation found.

Take, for instance, Beacon Power Corp., the second recipient of an Energy Department loan guarantee in 2009. In March 2010, the Massachusetts energy storage company paid cash bonuses of $259,285 to three executives in part due to progress made on the $43 million energy loan, Securities and Exchange Commission records show. Last October, Beacon Power filed for Chapter 11 bankruptcy.”

http://abcnews.go.com/Blotter/green-firms-fed-cash-give-execs-bonuses-fail/story?id=15851653#.T1jbzoem-Ch

Stephenson Billings

March 8th, 2012
11:22 am

Or this:

Another Obama-Backed Green Energy Company Goes Bankrupt
Ener1 is third company that received assistance from stimulus package to go bankrupt

“Clean energy appears to be a harder sell to Wall Street than Main Street. Ener1, the parent company of a electric car battery maker that received a $118 million grant from the Obama administration, filed for Chapter 11 bankruptcy yesterday.”

http://www.investorplace.com/investorpolitics/another-obama-backed-green-energy-company-goes-bankrupt/

Ernest T. Bass

March 8th, 2012
11:22 am

Think Washington subsidizes Big Oil the most? Think again

Why are we subsidizing them at all ?

Especially when they are recording record profits ?

Stephenson Billings

March 8th, 2012
11:23 am

Or this:

GM laying off 1300 due to low Volt sales

“”Even with sales up in February over January, we are still seeking to align our production with demand,” GM spokesman Chris Lee said. The car company had hoped to sell 45,000 Chevy Volts in America this year, according to the Detroit News, but has only sold about 1,626 over the first two months of 2012.”

Ernest T. Bass

March 8th, 2012
11:23 am

I think subsidies to Big Oil has most often been mentioned with the frame of reference being that they didn’t need the subsidies, not that they were the largest recipient of government subsidies.

Exactly correct. But facts have never much bothered this bunch before

MPercy

March 8th, 2012
11:24 am

By far the biggest “subsidy” people claim has been given to the oil industry is the government claiming revenues that they are not entitled to by contract.

Some years ago, when leasing oil fields in the Gulf of Mexico and on federal lands, the government wrote the leases to include royalty payments. The royalty payments were reasonable based on oil prices at the time. But now that oil has quadrupled, the government is mad because the royalties were not written to scale with the price of oil. They have tried several times to void those leases and force companies to pay more.

When you hear someone talking about $40B in subsidies to oil companies…that’s what they’re talking about.

When you hear someone talking about $4B in subsidies to oil companies, most of that is really standard deductions for depreciation of equipment just like all manufactures can & do take.

Inside Out

March 8th, 2012
11:28 am

“and last the companies are permitted to deduct royalties they pay to foreign government, on the ground that royalties paid to a government are really a tax.”

From: http://www.becker-posner-blog.com/2011/05/the-us-tax-subsidies-for-oil-companiesposner.html

So we are subsidizing the expenses they pay to foriegn governments???? Really?!?!?!?!?!?

Kyle Wingfield

March 8th, 2012
11:28 am

Inside Out @ 11:18: I was working in Europe at the time, so I didn’t write anything about gas prices in the U.S.

I can, however, find any number of instances where Democrats blamed Bush for the gas prices back then. That’s mostly politics, of course. There is one important way, however, in which there’s some actual substance: The new domestic oil production Obama has been touting owes to decisions made by Bush then, as well as by private land owners. If not for those decisions, supply would be lower and prices would be even higher. And they will be worse in the future because of the decisions Obama is making now about domestic production.

Inside Out

March 8th, 2012
11:29 am

Enter your comments here

Stephenson Billings

March 8th, 2012
11:29 am

“Why are we subsidizing them at all ?”

Why are we letting the gov’t pick winners and losers? Like Kyle said, get rid of all corporate welfare.

Kyle Wingfield

March 8th, 2012
11:31 am

I might add to my 11:28: I was working in Europe at the time — and paying the higher gas prices there (roughly $8/gallon) that Obama’s energy secretary is on the record as favoring here. Which is one reason the Obama administration hasn’t been doing anything to boost domestic production.

Finn McCool (Class Warfare = Stopping Rich People from TAKING MORE of OUR MONEY)

March 8th, 2012
11:34 am

Off topic but WOW:
Mitt Romney has lost every southern state thus far by at least 9 percent. Put together, Tennessee, Georgia, and South Carolina have 300 counties. Romney has won nine of them, all urban or wealthy suburban areas. As CNN’s Peter Hamby first noticed, Romney actually came in third place in most Appalachian counties. Romney won Florida, but he won only three counties in the panhandle, the part most like the rest of the South.

http://www.slate.com/articles/news_and_politics/politics/2012/03/the_deep_south_is_irrelevant_in_the_2012_republican_party_primary_.html

Finn McCool (Class Warfare = Stopping Rich People from TAKING MORE of OUR MONEY)

March 8th, 2012
11:37 am

This is a good read – especially for all you haters of the Frank-Dodd bill:

http://www.salon.com/2012/03/07/the_real_way_to_hold_down_gas_prices/singleton/

A little-noted provision of that 2010 law, which was passed in reaction to the 2008 financial crisis, requires an even littler-noticed federal agency, the Commodity Futures Trading Commission, to establish “position limits” for commodity and swaps traders. I’m something of an obscure-securities-law buff, but even I wasn’t aware of that Dodd-Frank provision until this week, when the dependably progressive Vermont senator, Bernie Sanders, got 67 congressional signatures on a letter calling on the CFTC to do its job.

carlosgvv

March 8th, 2012
11:44 am

Either by deliberation or by accident you have it backwards. It is Big Oil who pours money into the Republican Party in order to gain political favors. It’s no accident we have the best Congress money can buy.

Stephenson Billings

March 8th, 2012
11:46 am

Ah, yes. Price controls. Because they worked so well in the 70’s.

Stephenson Billings

March 8th, 2012
11:48 am

But the main reason oil (and other commodities) are still trading so high is because of the horrible monetary policy of the Fed that’s devaluing our dollar, which is what commodities throughout the world are traded.

Finn McCool (Class Warfare = Stopping Rich People from TAKING MORE of OUR MONEY)

March 8th, 2012
11:49 am

You all see this?
The U.S. has become a net exporter of gasoline for the first time in fifty years
http://www.npr.org/2012/03/05/147992053/u-s-a-gas-exporter-for-first-time-in-more-than-50-years

Don't Tread

March 8th, 2012
11:50 am

“the ethanol boondoggle” Yeah, no kidding.

Ethanol needs to be removed from gasoline. I’d pay an extra 10% for gas without ethanol in it.

Stephenson Billings

March 8th, 2012
11:50 am

“Either by deliberation or by accident you have it backwards. It is Big Oil who pours money into the Republican Party in order to gain political favors. It’s no accident we have the best Congress money can buy.”

^^Not intended to be a factual statement.

Obama biggest recipient of BP cash

http://www.politico.com/news/stories/0510/36783.html

Inside Out

March 8th, 2012
11:59 am

The US offers subsidies to Big Oil that amounts to about 5Billion a year…The oil companies have an annual tax Bill of roughly 5.2 Billion…..

So in essence, they are allowed to do business in this country, profit in this country and those on the right are willing to allow them to continue to do this with no contribution to this country…Sounds like they are great examples of the welfare queens that Your boy Newton Leroy is always whinning about…

Stephenson Billings

March 8th, 2012
12:05 pm

“Sounds like they are great examples of the welfare queens that Your boy Newton Leroy is always whinning [sic] about…”

Kinda like all those “green energy” companies Obama is giddy about (whether or not they actually can stay in business)

Inside Out

March 8th, 2012
12:09 pm

Whether they stay open or close down Is neither here nor there for me..I do not want my tax dollars going to pay some clown to do nothing and get rich…….

Scott Droper

March 8th, 2012
12:09 pm

Sorry Kyle, but the chart can’t possibly be correct. Georgia Power’s Plant Vogtle has 8.3 BILLION in FEDERAL Loan Guarantees. That’s a subsidy and the nuke part of the graph doesn’t reflect that. There are three types of lies: lies, damn lies and statistics! Come back with a pretty graph showing total dollars going to various types of sources.

@@

March 8th, 2012
12:13 pm

Obama’s clean energy is cleaning our clock.

Admittedly, I’m no economist, which is why I try desperately to protect what’s mine. Stephenson Billings hit on something I’ve been noticing.

But the main reason oil (and other commodities) are still trading so high is because of the horrible monetary policy of the Fed that’s devaluing our dollar, which is what commodities throughout the world are traded.

Whenever Bernanke speaks or is planning to speak, the speculators take notice.

“Crude was boosted by a story in the Wall Street Journal that the Fed was considering a fresh variation on its bond-buying program, once again raising speculation of further central bank stimulus,” said GFT markets analyst David Morrison.

“Investors are so desperate for signs of further Fed intervention that they are jumping on anything,” he added.

http://www.heraldsun.com.au/business/markets/oil-rebounds-on-us-federal-reserve-stimulus-speculation/story-fn7j1dyq-1226293020283

In response to Kyle’s topic. I’m for ending ALL subsidies be they corporate or individual. It’s the only way we can call it fair. I’m willing to make an exception on small businesses. My hope for them is that they can expand and grow employing more people who will then spend more money.

Stephenson Billings

March 8th, 2012
12:19 pm

also doesn’t help that OPEC is hell-bent on keeping oil at about $100/barrel

Just saying..

March 8th, 2012
12:23 pm

Heavens! How on earth did these tax giveaways get through Congress?

saywhat?

March 8th, 2012
12:25 pm

Ernest T. Bass @11:23- Post of the day!

carlosgvv

March 8th, 2012
12:26 pm

Stephenson Billings – 11:50

Obama reportedly got about $77,000 from BP. Not exactly a game winning fortune. Also, believe it or not, there are other oil giants besides BP.

Jefferson

March 8th, 2012
12:34 pm

Ethanol subsidies should be ended. Stir the gas pot, Kyle the GOP appears to need something to scare folks with.

Do what??????

March 8th, 2012
12:37 pm

Big oil gave Obozo more money than any other candidate.

Do what??????

March 8th, 2012
12:37 pm

“Exactly correct. But facts have never much bothered this bunch before”

Stellar comment, cupcake. Try again.

Do what??????

March 8th, 2012
12:38 pm

” It is Big Oil who pours money into the Republican Party”

If you tell a lie enough times, carlos will eventually believe it.

@@

March 8th, 2012
12:41 pm

Tiberius - Your lightning rod of hate!

March 8th, 2012
12:42 pm

“Why give tax credits and preferences at all to a wildly profitable industry??”

You don’t.

“You give tax preferences to encourage the kind of behavior you want.”

Losing money is the kind of behavior you want? :roll: ‘Cause that’s where the tax money has gone to, ByteMe.

“Giving it to home-grown investments in future energy options makes good sense because we are either going to lead or follow and wouldn’t you rather lead?”

I’d LOVE to see private industry lead – PRIVATELY.

“Of course, there are some who don’t want to give tax investments to any private enterprise and that’s reasonable too, provided you are ok with no longer complaining about “What’s Obama doing about high gas prices?”

Of course, there are some who don’t realize that one doesn’t have anything to do with the other, and is, in fact, a deflection from the article at hand.

Tiberius - Your lightning rod of hate!

March 8th, 2012
12:45 pm

Do What?? carlos will believe anything the daily DNC talking points memo tells him.

@@

March 8th, 2012
12:50 pm

And just so we all know, after bailing F&F out to the tune of $183 million, we’re paying to defend their sexual escapades.

WASHINGTON (CNNMoney) — A watchdog agency said Wednesday that the legal tab for former leaders of mortgage finance giants Fannie Mae and Freddie Mac is at least $110 million.

And taxpayers have paid at least $47 million of it, according to an Office of Inspector General of the Federal Housing Finance Agency report.

And the total bill could be even higher since the inspector general report focused on only one particular legal case against Fannie Mae, and isn’t an exhaustive account of the housing giants’ legal bills, reportedly more than $160 million, according to a 2011 congressional hearing.

Was it as good for you as it was for me?

(ISH)

Kyle Wingfield

March 8th, 2012
12:53 pm

Scott Droper @ 12:09: The CBO report only included tax subsidies and direct spending. But you’re correct that loan guarantees are another form of subsidy. The Energy Department says its guarantee program totals $34.9 billion, with $18.2B (52%) for renewable/alternative energy; $10.3B (30%) for nuclear; and $6.4B (18%) for everything else (mostly energy efficiency in the form of a loan to Ford). None of this is related to fossil fuels.

Add that money to the funds CBO reported, and the breakdown comes to:
58% renewables
20% nuclear
6% fossil fuels
4% energy efficiency
12% other

So, the ratios of renewables to efficiency and renewables to fossil fuels become even more skewed. I don’t think this changes my basic point: Subsidies to fossil fuel producers, while unjustified, hardly represent the bulk of federal energy subsidies.

Lil' Barry Bailout (Revised Downward)

March 8th, 2012
12:55 pm

Nothing gets the libtards going like popping their Bubble Of Willful Ignorance.

commoncents

March 8th, 2012
1:01 pm

Droper 12:09 “Sorry Kyle, but the chart can’t possibly be correct. Georgia Power’s Plant Vogtle has 8.3 BILLION in FEDERAL Loan Guarantees. That’s a subsidy and the nuke part of the graph doesn’t reflect that. There are three types of lies: lies, damn lies and statistics! Come back with a pretty graph showing total dollars going to various types of sources.”

8 billion in guarantees doesn’t equate to 8 billion given out in one year. That means up to 8 billion can be given out over some specified time frame, which is likely several years.

Jefferson

March 8th, 2012
1:02 pm

The President of the US gets most of you tikes going.

Now with Ten Percent More Flavor

March 8th, 2012
1:11 pm

Dear Kyle,

thanks for demonstrating per your chart that big oil and coal were indeed the biggest recipients of those energy-related government handouts until recently. At least you were honest enough to acknowledge that much. As for going forward, do you honestly think we have any choice but to try and curb our dependency on fossil fuels, for multiple reasons.

Cosby

March 8th, 2012
1:11 pm

Tax credits…seems as if we need to delete the 16th amendment, pass the fair tax and then see what happens.. subsidies by the Feds mean they gret t pick winners and loosers which i cannot fine in the constitution. Time to charge the elite DC criminals with crimes comitted and hang them!!

Tiberius - Your lightning rod of hate!

March 8th, 2012
1:14 pm

“As for going forward, do you honestly think we have any choice but to try and curb our dependency on fossil fuels, for multiple reasons.”

Reasonable position.

Now where is it that government should be providing capital for such ventures?

Kyle Wingfield

March 8th, 2012
1:15 pm

10%: Let me answer your question with a question: Do you honestly think we can curb our dependency on fossil fuels anytime in the next 2-3 decades?

Btw, maximizing the use of our own resources would eliminate (I assume) a few of the multiple reasons to which you referred.