The People of America's Oil and Natural Gas Indusry

Fact-Check on Fuel Subsidies

Kyle Isakower

Kyle Isakower
Posted April 2, 2012

Update: The author has changed the article, without noting so. Original article here. The new article suffers from many the same problems in that it fails to note that the majority of the money involved is through government efforts to lower prices in developing countries.  As the IEA notes ending this support will shift "the burden of high prices from government budgets to individual consumers…" and that “…low-income households are likely to be disproportionately affected by the removal…”

We see a lot of false arguments about “subsidies” for the oil and natural gas industry, but this tweet caught us by surprise:

First, as we have to explain every time, the oil and gas industries don’t get tax credits (which reduce taxes dollar for dollar) or grants from the government. They get tax deductions for business investments that will generate tax revenues in the future. Unlike the case of credits or grants, the government will still be paid the full amount of tax owed on their operations.  Which means the taxpayer is getting every dollar that’s owed.

So their false subsidies argument is just old nonsense, but that $1,360 figure, that’s some new nonsense. How do they figure? Well, clicking through gives us this chart:

And these words:

Every year fossil fuels get six times as much money in subsidies from the U.S. government — i.e. you, the taxpayer — than renewable energy.

$409 billion in “subsidies” from the U.S. government?  Really?  Maybe we can use that new (apparently to them) product called “Google” to check it out.

Search one gets us the presentation this chart was pulled from and then search two the IEA study from which the numbers were drawn: “The IEA’s latest estimates indicate that fossil-fuel consumption subsidies worldwide amounted to $409 billion in 2010…” So now we see that the $409 billion is the worldwide number, not just for the U.S.

For the U.S. we do another search leading to an OECD report that the IEA contributed to. At both the U.S. State and Federal levels, fossil fuel subsidies, as defined by the OECD, clock in at $15.4 billion. Since our Grist reporter uses government singular we can presume that he means the Federal government so we can take the State stuff off removing $2.8 billion, leaving us with $12.5 billion – or about 3% of our reporters’ estimate – or to use Grist’s methodology, $41.67 for every American. But wait, there’s more!

The article continues:

Here’s an idea: Instead of giving all that money to fossil fuel companies who are currently posting record profits, why not simply send each and every U.S. citizen a check for that amount?

But even that $12.5 billion is not all going to fossil fuel companies. A little over $4 billion of it is going for Federal government research and development, $3.45 billion goes to support low-income individuals, and $923 million goes to farmers with another $1 billion going to fill the Strategic Petroleum Reserve.  So now we are down to about $3.3 billion – or about $11 for every American. And even then, it is in the form of tax deductions that all US companies get – it does not represent money given to fossil fuel companies, example here.

Three searches, all the facts. The folks at Grist should try it some time.

ABOUT THE AUTHOR

Kyle Isakower is vice president of regulatory and economic policy at the American Petroleum Institute. With 26 years experience, he is the go-to guy for issues regarding energy and environmental policy and oversees the development of API standards and economic analyses. In his past lives, Kyle has worked on issues related to waste management and remediation, NAAQS and air toxics—and led efforts promote the industry's energy efficiency efforts. Transplanted to Washington from north Jersey over 20 years ago, he remains faithful to the New York Giants, and works diligently to ensure his wife and two children do so as well.