why ending gas and oil subsidies will never happen

by problembear

and why is this important to us ? because oil and gas industry subsidies prevent the private market from setting real oil prices.

congress is pretending to debate this issue but the subsidies will remain in place

listening to the main stream media you would think that this is a partisan issue but,  despite the rhetoric of senator harry reid, democrats are simply trying to make some political hay over this issue knowing full well that they lack the votes to actually do anything about big oil subsidies. and i doubt if they would even suggest it if they did have the votes. why? well, besides the obvious fear over campaign contributions that all politicians have when they take on big oil, there is an even simpler explanation: prices at the pump would skyrocket if we stopped the subsidies and the voters would revolt…….

if tax subsidies were eliminated, oil companies say that prices at the pump would eventually become equivalent to the average market price of gasoline in europe (around 5.50 to 6.12 / gal) or even the average equivalent price in japan (7.00/ gal)

now the reason the oil companies prefer subsidies to allowing the free enterprise market to work it’s magic is quite simple:

if prices were to go above 5.00/gal, then alternative fuel (solar, wind, electric cars etc) would become economically viable; people would park their vehicles in favor of bicycles, bus, and walk more. we would buy less gas for our vehicles and oil for our homes. industry would convert to solar. …….

so big oil in collusion with our elected politicians are using government to force taxpayers to subsidize the industry in order to keep us from developing alternatives.

how is that for pure unadulterated socialized contempt for the american way?


  1. JC

    Of course, the incentives are all wrong on this legislation. Instead of using the savings from stopping the welfare for oil companies to reduce the deficit, the money should go towards investments in alternative energy sources.

    And who’s leading the way?

    “…it will help pay down our national debt.”

    And why is he leading the way?

    “Democrats unveiled their legislation to repeal Big Oil tax subsidies today, giving the high-profile legislation to three Senators with elections next year in tough states (Claire McCaskill, Sherrod Brown and Jon Tester) …

    It’s another issue where Republicans are talking nonsense, but Democrats are mainly talking politics.”

    Yep.

    • JC

      Oh, and speaking of politics, here’s what Senator Mark Begich (D-AK) had to say about the ploy:

      Begich chided the party for putting message over substance. “It is a gimmick, a gimmick to get the next week of activity, and get some press out there,” he said. “Picking on one industry because it sounds good, rates good in the polls, gets you a couple of headlines is not what the American people want us to do here. If anything, they’re getting fed up with that. … Let’s stop the headline-grabbing and get serious about the energy security.”

      Dems can’t even get their political strategy aligned. Why am I not surprised?

  2. Hmmm. Top contributors to Senator Begich:

    DE Shaw and company (investors in many markets and exploiters of commodity) :#5 at $18,400

    Pioneer Natural Resources: #7 at $14,300

    Exxon/Mobil: #13 at $11,250.

    Jon Tester’s top contributors.

    I’m not saying that who contributes to a legislator controls that legislator. I’ll leave that up to others. I will note that it is often the others who critically examine why a legislator is to be trusted in rhetoric while another is not. I suspect that such critical thought has to do with personal agenda, but who can really say …

  3. Peter McCay

    Subsidies for the BIG 5 only amount to about $4.5 bil. Profits for the Big 5 this fiscal year are projected to be $125Bil. Withdrawing subsidies will have no effect on the price @ the pump. There are much stronger forces at work ie USD strength/weakness, supply & demand and the futures market. The derivative speculation amounts for about 20% of the PPB. (Price per barrel) Your argument seems flawed.

    • good points mr mccay. derivative speculation is affecting oil as well as food prices. since no money can be made in real estate anymore, it seems as though the fund managers are speculating on all things consumable these days; fuel, rice, wheat are all going up.

      however, i did couch my thesis on gas/oil subsidies a bit by saying; ” if tax subsidies were eliminated, oil companies say that prices at the pump would eventually become equivalent to the average market price of gasoline in europe (around 5.50 to 6.12 / gal) or even the average equivalent price in japan (7.00/ gal)

      oil companies could be bluffing of course. but the main point of this diatribe is that congress is in no position to call their bluff. politicians are terrible at poker. especially the more spineless variety which harry reid personifies.

      • Peter McCay

        I believe they are using the subsidies as an outer line of defense. The REAL issue is the tax, or lack there of that they are paying. Exon shelters its taxable cash flow in about 20 whollly owned subsidiaries domiciled in Bermuda, Cayman Islands etc. Perfectly legal of course but this accounts for the reason Uncle Sam isn’t seeing any money. Now if the tax code were to change????? The subsidies they are getting are small potatoes to them, merely a smokescreen.

  4. Chuck

    Somebody please tell Messina and the President it’s time to sell from the SPR. I told them to fill it at 41 and weird enough they did. It’s time to make some money, apply the profits to alternative energy and drop the job killing spot market. Ask Bill Clinton or Bush for help selling as they know how to do it right.

  5. Chuck

    PB .. Ive been in negotiations with oil companies on deals valued in the tens of millions . After one three day meeting I found a floppy disk laying in the stairwell of the hotel in Houston. It was from a major oil company executive outlining their purchase agreements for av gas for some major end users. I have to be vague because they are ruthless and they are liars. They are always bluffing. Your position needs to include a walk away. I kept the floppy.
    The President fucked up his bluff to use the Strategic Petroleum Reserve, they knew he wouldn’t do it and he was talking to the wrong folks. I imagine the oil boys out at the club laughing at him. I think Tester could handle them if he had some background.

    • tester could handle big oil? you mean like he handled the bankers?

      and even if one senator had the nads to stand up to big oil, pray how does that one senator manage to do anything with 534 members of congress who are caught in the throes of full abject terror and quivering in craven retreat?

      chuck is right. the oil guys have already started the victory party and broken out the 20 year old scotch.

  6. i can’t wait until the finance committee hearings on this- max baucus will talk a lot of smack at the oil executives who will look duly chastised for the tv cameras and then have some staff member ask the oil guys to write their own ticket behind our backs like he did with the health insurance lobby for his so called health care reform.

  7. rawr

    I know you guys don’t put much credit into facts around here, but you should read this:

    http://seekingalpha.com/article/269295-consequences-of-a-tax-hike-for-oil-and-gas-companies?source=yahoo

  8. pretty skewed “facts” you got there, rawr.

    and the bio of the author certainly tells me all i have to know about certitude on said “facts”…… Bill Francis author: “I work for a small natural gas company and enjoy following E&P companies and energy pricing.”

    now there’s lots of words in that article but all i see when reading it is lots of industry sponsored lies and half truths along with a heavy dose of obfuscation. wordy answers are usually complicated because the author is busy building an agenda rather than having any real desire to get at the truth.

    all i hear is ‘wee wee wee, grunt grunt grunt, give me more.”

    • rawr

      Sorry, but as someone educated in corporate account, I can tell you that you’re wrong. It seems like anytime I prove a liberal wrong with facts, you throw aroudn words like “lies” and “half truths.” Look at the following indisputable chart of profit margins. Go to the line titled “net profit margin.”

      http://biz.yahoo.com/p/sum_qpmd.html

      Maybe this witch hunt should start with equity funds, move to mining, and then end up at breweries. I’m sure Big Sky and Bayern’s profits have been bankrupting Missoula, right?

      • Your argument is bogus. This thread is about taxpayers subsidizing oil and gas.

        • rawr

          Taxpayer subsidies for oil and gas companies are a fallacy. The so called “tax breaks” and “subsidies” are very standard accounting practices in EVERY other industy. Don’t get me wrong, the tax and accounting laws are far too messy in the US, but oil and gas companies are not getting any kind of special treatment. So should we just end these accounting practices so that oil and gas companies move out of the country where there are NO environmental standards? Are we better off getting oil from the Middle East, where they have absolutely not a care in the world for the environment and their employees? Or should we safely develop energy resources at home so we can cut off the middle east, stay out of war, make money, and become more independent and self-sustaining? Sure, we need energy alternatives, but until a GOOD alternative that can be mass produced is available, we’ll have to sustain ourselves on oil. I’m not happy about it, but I am realistic about it.

          Look at all of the other industries they could be trying to exploit. Why oil and gas? Funny that they pick one of the few industries you can score a $100k+ a year job in without even a highschool degree.

  9. Ingemar Johansson

    Don’t fret rawr, most Montanans know if you raise costs prices follow.

    Besides, just getting them to discuss gas prices is a win.

  10. Ingemar Johansson

    It’s Friday, how ’bout a twin spin.

  11. this tweet caught my eye today….




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