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World oil subsidies hit $312 billion

November 20, 2010

Oil Subsidies Reached $312 Billion in 2009, IEA
By Renewable Fuels Association

Toronto – – The International Energy Agency World Energy Outlook today revealed that global fossil-fuel subsidies amounted to US $312 billion in 2009. The US $312 billion included subsidies to fossil fuels used in final consumption and to fossil fuel inputs to power generation but, did not include direct producer subsidies which topped US $100 billion last year according to the Global Renewable Fuels Alliance.

According to the IEA these consumption subsidies were down from US $558 billion in 2008 largely because oil prices declined in 2009. Conversely, these oil subsidies are set to climb in 2010 with increasing oil prices.

“As we strive to develop alternatives to oil we must recognize that we are not competing on a level playing field,” said Bliss Baker, spokesperson for the Global Renewable Fuels Alliance. “Massive multi-billion dollar oil subsides are a serious obstacle to the development of cleaner greener alternatives. Oil has a huge competitive advantage financed by global taxpayers,” added Mr. Baker

Next week the G20 will meet in Korea and the issue of oil subsidies is on the agenda following a commitment made at the G20 meeting in Pittsburg in September 2009.

“Despite the IEA’s optimism that there is momentum for reducing subsidies, not one country has eliminated an oil subsidy program since signing on to the pledge in 2009,“ said Mr. Baker

In addition to the consumption subsidies, several countries continue to provide domestic producer subsidies to oil companies at alarming rates. According to a November 2010 study done by Earth Track, many countries continue to provide direct producer subsidies to oil companies including;

• Canada provides over US $2 billion per year to oil companies
• U.S. producer subsidies reached US $52 billion in 2009
• European Union provided US $8 billion in subsidies to oil companies in 2009

“It is time for the G20 to show leadership and reverse this practice of never ending subsidies to big oil. It is time to move beyond oil to a world with sustainable alternatives to crude oil such as biofuels and other renewable forms of energy,” concluded Mr. Baker.

  
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Discuss this article

Bob Clark November 20, 2010

This article is bogus, concerning U.S and Canadian oil subsidies. U.S oil and natural companies pay huge corporate income taxes, and they also pay production royalty taxes. Exxon Mobile alone paid over $15 billion in corporate income taxes in 2009, and nearly $36 billion in the year 2008. These income taxes represented over 40% of their operating income. If not for the production write offs such as accelerated depreciation (which many other non energy companies receive), the rates of taxation would’ve been higher. These oil income taxes come after deductions (so called production subsidies). These so called “subsidies” still leave U.S oil companies paying a higher corporate rate than most other foreign companies. As for royalty tax breaks on production, these should not also be included in the calculation of subsidies. Without these small breaks, the federal lands would sit idle gathering moss with no alternative economic use.

Moreover, this article conveniently forgets the large amounts of gasoline taxes(some 45 cents per gallon, state and federal combined), fully offsetting these so called production subsidies. You might say these taxes are to build roads, but much of the road taxes are now used to subsidize urban passenger train projects having little to do with oil consumption. Europe’s transportation fuel oil taxes alone are enough to wipeout the worldwide oil subsidies referred to in this article. And they aren’t spending but a fraction of these taxes on roads.

By comparison, the U.S corned based ethanol market receives some $6 billion in direct fuel blending credits, and most ethanol production is at best breakeven showing very little if any profit to tax in the past several years (several bankruptcies, in fact).

You want more energy independence for the U.S and additional net federal revenues? Open up ANWR for oil drilling and approve the Keystone XL pipeline (Canadian and Dakotas oil production would replace Middle East and Venezuelan oil imports). These two actions alone swamp anything done over the last ten years in renewable energy supplies. The latter can’t provide the massive supply the former can. For all the thousands of miles of new transmission wires and bird killing wind turbines, I don’t see why we should think the environmental damages are any less with renewables.

I guess when your desperate as renewables are for continued government hand outs to survive, you grab for any snake oil you can get your hands on to sell (this article included).

P.S I don’t work for an oil company and never have. It’s only the economic prosperity brought by oil and the automobile are undeniable. It’s brought so much individual freedom the Democratic party and its progressive elite can’t successfully control the people as it would like.

Fred Stovel November 20, 2010

Bob Clark’s comments are on the mark. I would only add that if we calculate the “subsidy” per BTU or some other unit of energy we would see why the “renewables” are an unjustifiable loss to our economy. However, some still cling to the notion that if you keep throwing money at “renewables” we will develop an exception to the 2nd law of thermodynamics.

Fred Stovel November 21, 2010

To continue my thoughts with some data, Todd Wynn, in a Oct 27, 2010 article of the Cascade Policy Institute, responds to comments as follows:
“Second, often when I discuss subsidies, someone chimes in with a response that fossil fuels receive subsidies. This is true. I believe that fossil fuels should not receive subsidies either. Two wrongs never make a right. Let’s pull back layers of government without trying to use government to “solve” a government-created problem. Subsidies need to be understood better. They need to be standardized to understand the true level of subsidies for different energy forms. For an energy source that barely exceeds one percent of electricity output in the U.S., wind subsidies are $23 per megawatt hour (solar is on the same level). This is around 60 times that of the $0.44 per megawatt hour that go to the foundation of US electrical power output, coal. It is 100 times the $0.25 per megawatt hour that go to natural gas. Coal and natural gas account for over 70 percent of US electrical power supply.”

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