As President Barack Obama prepares to release his proposal for the next year’s budget this month, he is expected to call for eliminating $4 billion per year in subsidies to the oil industry. This is money that could be re-channeled into spurring clean energy development, reducing the deficit, and paying for basic government services during hard economic times. This common sense proposal should logically attract support from both sides of the political aisle, as it seems in line with Republicans’ calls for reduced spending.
However in practice efforts to end oil subsidies will likely to run into opposition from conservative lawmakers, who may talk big about reducing the budget but are reluctant to make spending cuts that affect industries they themselves support. The ability of oil companies to make hefty political contributions guarantees oil subsidies are not going to vanish without a fight. It is time for those who believe in doing business better to come together and get behind the president’s proposal to end wasteful subsidies to a polluting industry more than capable of standing on its own feet.
Right now the oil industry receives tax credits, loan guarantees, and other preferential treatment from the federal government. From the standpoint of economics this makes little sense: while these types of subsidies are useful for helping new types of energy get off the ground, oil companies have been well established for over a hundred years and clearly do not need the help. Unsurprisingly the oil industry and its allies in Congress are reluctant to give up their special treatment, and have successfully defeated earlier attempts to eliminate subsidies. However that was before the federal budget deficit became a matter of such bi-partisan concern. With deficit-inspired cuts being made to basic programs that keep families afloat during hard times, giving away billions of dollars each year to oil giants is inexcusable.
At the same time let’s not forget subsidies to the oil industry go far beyond the tax credits and other programs Obama is pushing to eliminate. Even more important is the fact that everyday Americans are subsidizing Big Oil by shouldering health costs associated with pollution. When BP’s Deepwater Horizon drilling infrastructure exploded last April, it was coastal economies and not BP that suffered the most. Meanwhile the effects of pollution from automobile exhaust and oil refineries are similarly being born by people who pay the price in higher medical bills and reduced health. As long as this continues oil and other fossil fuel industries will remain a heavily subsidized business.
In light of this, losing $4 billion dollars in preferential treatment should seem like not such a big deal for Big Oil. Such an action would have a miniscule effect on industry profits, and be felt barely if at all by consumers at the pump. At the same time it would free up $4 billion to pay back the deficit, protect essential programs, and fund projects that spur economic development. It’s a win-win deal innovators across the political spectrum should be able to support.
Article by Nick Engelfried, appearing courtesy Justmeans.