It's kind of like the concept of a child prodigy: not every single one grows into something significant but performing well early gets you into spotlights.
Ask a bunch of people to upvote? I know it's against the rules, but they're not really enforceable on a broad scale, and everyone I know who has gotten stuff to the front page did ask for upvotes, and covertly, by not sharing a direct link to HN, to avoid tripping HN's referral detection mechanisms.
It's a bit of a prisoner's dilemma, it would be a nice platform if everyone didn't do that, but like many other things it tends to result in a defect-defect scenario.
True, but making sure there is enough energy is more important to them (see Europe as an example of what happens when government fails at this).
Democrats also consider energy a priority, but don't like hydrocarbon fuel, so are conflicted with bills like this - I bet it won't get every Democrat on board either.
Also, the current situation isn't directly a subsidy, it's a tax reduction, which is sort of a subsidy if you squint, but it's different enough. Republicans do like tax reductions.
> I bet it won't get every Democrat on board either.
Oh, it's dead in the senate. There really is no way Joe Manchin would vote for this given the state he represents. West Virginia has WAY too much interest in burning coal.
There may also be others, but Manchin will happily take the blame to stop it from passing. His voting base will love him for it.
Texas will literally buy the land for your factory, build it, and lease it to you for free. AND then they'll recruit and train all your employees for free.
Of course, however, a tax cut is not a subsidy. Economic concepts can very easily be wrongly conflated with each other or misreported by the press or politicians. There's an obvious qualitative difference between a government subsidy (the act of taking property from some to give to others) and a tax break (the government merely stealing less).
As far as this bill specifically goes, I haven't read the entire thing, but the bullet points seem to be all about reducing tax burdens. As an overall opinion, I think more people and industries ought to have tax breaks.
Given the extreme shortsightedness of Europe's leaders in trying to tackle their energy needs, I have little doubt that this act will come back to bite all of us in some way.
Alaska just announced a record high PFD for this year, over $2B payout, highest in the programs 41 years. And the reasons for it being so high? “Energy costs and inflation” (totally unrelated side note: our Republican governor is up for re-election).
Democrats still hold a narrow majority in the house so it could pass there, but could be killed by pro gas democrats. The senate will be almost impossible. This is likely to shift after the midterms.
The problem isn't D vs R, it's the risk of high paying oil jobs being lost, even if it isn't a lot of jobs these are the people that donate to campaigns and fuel their local economy.
Not this year, and not if Dems don't control the house next year. This is also an incredibly stupid thing to be pushing right before a pivotal election.
You need no further proof that the left isn't controlled by some elite secretive singular entity. Lefty groups keep stepping on obvious rakes like this one and "defund the police" -- the underlying policies may make actual sense but there's no understanding of optics or timing whatsoever.
> This is also an incredibly stupid thing to be pushing right before a pivotal election
Maybe for the democratic party as a whole, but it might be beneficial to the bill sponsor(s) if this wins votes in their own district. The main sponsor's district is Portland, OR so I suspect it's locally savvy for them.
So my questions was motivated by trying to understand if the bill is an actual attempt to pass legislation or just a few people scoring some green votes before an election by floating a bill they know is doomed.
maybe you do not understand how unleaded gasoline works? We add ethanol to gasoline get unleaded to gasoline so we can avoid adding lead to it to prevent knocking of engines.
I’m not really in favor of making exceptions to the types of food that poor people are or aren’t allowed to buy. Removing corn subsidies would do a lot to change the pricing dynamics of food in the US. Sugary and heavily processed foods would increase in price due to the rising price of HFCS, meats would increase in price due to the rising price of feed for livestock. It may also make other, healthier crops more attractive to farmers to grow which would help decrease the cost of healthier options.
It’s not the only thing that is making America very fat, but it is certainly a large component to it and there’s basically no reason for the subsidy to exist.
the US is very interested in keeping food cheap and corn subsidies are a big part of it. We also want to make sure we maintain the capacity to produce a LOT of calories very efficiently. This is helpful for national security as well, if imports are disrupted, we will have a food variety issue, not a starvation issue.
You’re piling on a lot of ifs of which there are alternative contingencies other than artificially keeping the price of corn goods cheap. I’d argue that the negative effects of cheap corn has made our country less healthy which in turn is a national security issue. Anyone that’s been in the military and even modestly keeps up with current policy will see how the military is having to adapt to a significantly less healthy pool of recruits.
Government Cheese wasn’t to ensure that prices of dairy would stay low, it was to bail out dairy farmers after the price of it dropped to unsustainably low levels. It’s not even a very good product to stockpile. The market would correct itself.
I know a lot would have to go wrong for it to matter. But having the ability to crank out huge amounts of corn, dairy and cheese if other food sources become scarce is a good ace in the hole to have if push comes to shove. Look at how the supply chain crunch affected our ability to produce certain goods. It wasn't so bad overall but we don't want to deal with that for calories.
The government could curb any behavior it wants with taxes and removing subsidies. Raise the price on gas, and the market will respond with EVs. If the tax on cigarettes were $50 then smoking would likely end immediately; I suppose a black market could emerge though.
>I guarantee a black market would emerge immediately
FTFY
But seriously, this experiment is already playing out in NYC[0]. Every marginal % you tax a product, you push some number of consumers into the black market. At some point, the black market reaches a critical mass where the thing you're taxing might as well be banned.
At some point, the black market reaches a critical mass where the thing you're taxing might as well be banned. >>>
This doesn't make sense, because you're still getting taxes on the white market merch. Even if black market merch dominates, its different from prohibition where you get no taxes.
> Raise the price on gas, and the market will respond with EVs
EVs are supply constrained. Raising gas prices when the average EV is months from delivery and tens of thousands of dollars more expensive than ICE comparables is just mean.
> the government will have plenty of money to buy EV's for the proletariat
That increases demand. The problem isn’t demand. People are putting down deposits and paying over sticker price. The problem is supply. The government buying EVs for everyone does nothing to solve that problem.
You’d also have to adjust for industrial transport and agriculture. Otherwise, food prices will go up. (But yes, I broadly agree. I’ve advocated for something similar for water.)
Why adjust for a feature? If it makes less emissions heavy food more competitive and the total is distributed evenly by population, then you're only worse off if your food emits more than average from imported fuel sources (and even then you're not unless exceptions are made because of imports and exports -- which could result in an adjustment being needed for trade balance and exporting emissions reasons).
This is, in fact, what is happening; in NL they're slowly but sharply increasing taxes on tobacco products. The other day they found and dismantled an "illegal" cigarrete manufacturing plant. Only illegal because it was sold untaxed, smoking itself isn't illegal yet.
Mind you, taxing and the other measures are working; the amount of people smoking has been reduced by a lot in the past few decades. But there will always be a market for tobacco and tobacco products.
Tax benefits are definitely subsidizes, yes. The government is subsidizing marriages, children, and saving for retirement (as well as solar panels, owning farmland, donating to charity, and a million other things).
> The government is subsidizing marriages, children, and saving for retirement
Only if we don't pay any taxes in the first place and the tax benefit is a credit, or if all our income belongs to the government and they just let us keep some of it. Few companies pay no net tax and our income belongs to us and is taken away by taxes for various debatably beneficial/justifiable uses.
A way of thinking about this is that taxes and subsidies are basic tools government has to encourage/discourage behaviour. Since money is fungible, tax benefits are effectively subsidies offered to productive (in the tax sense) entities.
You can try and draw a line between the two but in practice it's kind of inherently fuzzy: if government takes money from company A and nominally gives it to an arts program, everyone agrees it's a subsidy. If it takes the same money and uses it to cover a shortfall due to reducing company B's tax burden (i.e. an incentive) it's pretty similar.
I suspect people who really contort themselves to draw a distinction have strong views about taxation as a whole which lead them to dislike the term subsidy, and want to have it not apply to government incentives they like to take advantage of.
Thinking of tax benefits as subsidies is the point of view that all money you earn belongs to the government and they decide how much you get to keep.
Taxes are mandatory payments for (allegedly) services the government provides.
Tax breaks let people/companies keep more of their own money. They are not subsidies. Subsidies would be additional money provided (which could be the case in a refundable tax credit where you end up getting a refund on taxes you never paid).
I find characterizing amortization schedules for high-capital-investment industries as “subsidies” very frustrating. This situation doesn’t arise because the govt is handing out freebies, but because capex on oil and gas projects is very front-loaded — it takes some time to spud in a rig, build a refinery, etc., and during that time the asset is unproductive. That’s why amortization works the way it does! It’s not the evil govt trying to prop up a supposedly failing industry …
Maybe I'm not understanding this due to the jargon but the amoritization schedule adjustment is just one part of this. It looks like there are a bunch of genuine subsidies affected here too.
Not only that, it's actually INCREASING the amortization schedule (for geological and geophysical expenditures) from 24 months to 7 years. So not only is the comment misleading, it's straight up wrong
A lot of them rely on oil/gas; Wind turbines, for example, are made with synthesized laminates and glues, use grease and oils to operate, and require large fleets of diesel trucks to assemble and maintain.
Do these subsidies go exclusively to unestablished energy firms trying to enter a market that has an unreasonably high capital requirement or are they going to massive energy corporations that can front the cost?
Thought experiment: If these "amortizations schedules" didn't already exist, would there be any chance we would introduce them today, given how profitable and successful oil and gas businesses are and most certainly would still be without these subsidies?
They would have huge losses in the years that they invested in things, and huge profits in the years the investments paid off. This might result in more or less tax revenue depending on exactly how the rest of the tax code is structured (or restructured).
Which would mean that only people/companies who can afford to weather huge losses (potentially for several consecutive years) are able to enter capital-intensive sectors, providing massive moats to incumbents in those sectors and even more advantages to people who are already wealthy.
Right, but isn't this good when we are talking about fossil fuel companies? Fair competition drives down the price of fossil energy, while our goal as a civilization should be to raise the price as much as we can stand (to infinity if possible!) so that we don't cook ourselves.
You can therefore make the argument (though I don't agree with it myself) that subsidies to big oil that reduce competition from upstarts is, in a twisted way, a climate-positive policy.
This of course fails because subsidizing big, publicly-traded oil companies reduces their cost of capital. This causes rational capital allocators to rationally invest in fossil fuel exploration, resulting in more carbon being dug out of the ground and added to the atmosphere.
Which is fair, but oil and gas companies are some of the wealthiest companies around, they don't need government support to make new investments. That would be socialist; why can't they stop going to Starbucks and just pull themselves up by the bootstraps?
depreciation is certainly a subsidy to capital, which is entirely unnecessary and distorts markets by upsetting the pricing mechanism. financial firms will happily provide upfront capital to any future profitable project.
"depreciation is certainly a subsidy to capital"
Only if you twist the meaning of "subsidy" to mean "any level of taxation less than 100%". Which may be what you mean, but (correctly IMO) isn't generally a popular POV.
More than that... does it really do anything? Making companies spread their expenses over 6 or 7 years instead of 1 to 2 doesn't seem like a big deal if they are constantly investing in new facilities.
I remember last time a looked into this is that there are really no tax subsidies that the oil and gas industry gets that are unreasonable. Absolutely every industry with high CapEx font-load their amortization.
It is the non-tax subsidies that add up. The US' military interest in the Middle East seems to be entirely based on the oil reserves in the region. How much less oil would be pumped with warring countries and unstable regimes? Also, oil companies largely don't pay for the environmental damage they do. If burning oil left a stinky purple gas instead of an invisible gas, they would be paying far, far more to stop it or get rid of it.
US military involvement in the Middle East is hardly a subsidy to the oil and gas companies that would be impacted by this Act. Most of the oil and gas companies in that region are state owned with Aramco being the largest by far. They aren't subject to US laws or taxes. And they don't even export much to the US. Hypothetically, if an armed conflict shut down Aramco production then US oil and gas companies would actually make more profit.
I do agree that allowing oil and gas companies to avoid paying the full costs of environmental damage is effectively a form of hidden subsidy.
> The conflict in Ukraine means my heating bill in NY goes up 40% this winter.
Why? The US is the largest producer of natural gas in the world, and by quite a large margin[1].
Europe tied themselves to Russian natural gas, heeding no warnings in the process, and now find themselves cut off due to conflict. Oh, if only this could have been predicted and avoided in advance...
It makes sense for Europeans to experience ludicrous natural gas bills, but not someone in NY. Further, the US should not make citizens suffer in order to prop up European nations that couldn't have cared any less about their own security until it was too late.
> It makes sense for Europeans to experience ludicrous natural gas bills, but not someone in NY.
It's a globally traded commodity. If someone in NY won't pay 40% more, someone in Europe will. Just like you work for who gives you the most compelling offer, so too does natural gas go to who presents the most compelling offer.
> the US should not make citizens suffer in order to prop up European nations
Given that the US is where most of the natural gas is produced, per your comment, the US will realize a huge windfall by shipping its product to Europe at a high markup. The citizens of the US will be emboldened by it. They may have to pay more for heat, but stand to gain even more than that. Europe loses either way.
> The citizens of the US will be emboldened by it. They may have to pay more for heat, but stand to gain even more than that.
I have to disagree here. The citizens of the US gain nothing from the US permitting natural gas companies to export to Europe instead of filling local demand first. These are private companies anyway... so not sure how this logic holds up.
> It's a globally traded commodity.
Sure it is... however a nation can and will prohibit exports when local demand exceeds available reserves. Natural gas is a strategic asset after all, and we're already dangerously dancing with inflation/recession - it wouldn't make sense to accelerate that path just because Europe needs gas after a series of terrible, completely avoidable choices.
> however a nation can and will prohibit exports when local demand exceeds available reserves.
Sure. There is no doubt a tipping point. Seeing 100% exports wouldn't work. But the nation of the US is made up of its citizens, so only when the citizens start to feel that tipping point has nearing or has occurred will they take measures to prohibit such exports.
Clearly we're not there. There is still more upside than downside.
I think in theory you would be right, but practically Joe Biden isn't going to ask regular citizens if he should allow export of Natural Gas to European nations.
Majority of citizens just accept the half-truth that Putin's War caused high gas (both natural and petroleum) for everyone, and that there's nothing that can be done except end the war.
Europe needs to suffer for their poor decisions. Enough of the US swooping in and solving European mistakes... then getting villainized for being the world's safety net.
> but practically Joe Biden isn't going to ask regular citizens if he should allow export of Natural Gas to European nations.
No, that isn't practical. Which is why government is set up in reverse: The citizens tell Biden what they want. The citizens are the boss, after all. It stands to reason that the message comes down from the boss. Except that isn't practical either, so middlemen are employed to combine and distill the information they receive from the boss into a more digestible form that can be presented in a practical manner to the worker.
Those middlemen are chosen by the citizens through a long and arduous process to ensure that they are trustworthy enough to accurately convey the desired message to the worker on the ground. Yes, theoretically an unscrupulous middleman could spread false information, but through hundreds of years of using this system the citizens have shown to have a strong degree of confidence in the effectiveness of the selection process.
Not only do they have confidence, but they also find utility. It would be downright silly to go to all of the trouble of selecting the most trustworthy middleman and hire him, at a decent rate of pay I might add, only to never use his services. The citizens recognize the value they get by hiring these people to pass their orders to the workers.
You personally may have no use for said middlemen as you management style sees you sit back and forever wait for Biden to knock on your door, but citizens (plural) is inherently about more than you.
> Which is why government is set up in reverse: The citizens tell Biden what they want. The citizens are the boss, after all
Again, that's some great theory, and it's how it's supposed to work, but it doesn't. If it did, the government wouldn't be busy misdirecting reasons why the prices are ludicrous - ie, they have to sell a fake narrative to the general population, and most of the population won't question authority.
This is, in principal, why things like the electoral college exist - the framers knew the general population was busy living their own lives and either wouldn't pay enough attention or would deliberately be misled for political gain.
So while yes the government eventually answers to the people, and in theory election outcomes will be based on what people want - the problem is when the people are deliberately misled and then vote based off half-truths and lies, which is what's going on here.
High natural and petroleum gas prices are the Administration's own doing - the result of explicit domestic and foreign policy decisions the executive and team have made... but they've done a great job convincing casual voters they had nothing to do with it. That's where the way government is supposed to work starts to fall apart.
> High natural and petroleum gas prices are the Administration's own doing
The citizens may have made a mistake in their direction for government, I can accept that. To squarely blame to workers on the ground following orders for those mistakes is strange, though. That's like blaming the developers at Google who work on chat code for the constant churn in chat applications.
Maybe those developers at Google really did tell management, rightly or wrongly, that the codebases were terrible and that Yet Another Rewrite™ was the only way out. But even if that's the case the bosses should have the wherewithal to see through what is reality and what is not, and if the claim is valid to ensure that it didn't happen in the first place.
Bosses are going to screw up, of course. No human is infallible. But they are to blame when they do. They're the boss exactly because they are in charge and responsible for seeing through the good and the bad. The worker merely serves the boss.
Governance is hard because most people don’t really have any idea about what’s going on, and listen to proxies who may or may not know anything at all.
A rational person might say “A global pandemic and lockdown turned the supply and demand curves upside down.” and “A tyrant is holding a continent hostage by turning off fuel supplies to a major market.”, and perhaps conclude that instability, uncertainty and risk affect prices.
Or… you can listen to a windbag rant about the closure of a pipeline that doesn’t exist, and meanwhile see gasoline prices fall 30% as production imbalances improve, and still conclude that a politician chose to commit political suicide for lolz.
Ensuring stability in the Middle East is a subsidy for fossil fuel consumers. It hurts the oil producers, which are the companies targeted by this bill. The war in Ukraine is a good example of this as it's contributing to their record profits.
Middle East stability is a long term policygoal. The United States made Saudi Arabia one of the highest priority allies to avoid a repeat of 1973.
On a long term scale, keeping the pumps going is good for the petroleum industry, as sustained high prices justify the capital expense for alternatives. Once you buy an electric car, you don’t really give a hoot about gasoline.
The other big "hidden" subsidy is publicly-funded maintenance of tons of auto infrastructure like 16 lane interstate highways, sewer and water service to far-flung exurbs, etc. The automotive sector (auto manufacturing, petroleum, trucking, etc.) would probably not turn a profit at current levels of production if they were forced to pay for the maintenance of roads to a standard necessary for auto traffic. They might still exist but presumably without this artificial juicing of demand, it wouldn't have made sense to dig up so much oil (and produce and run so many machines to burn it) so fast.
Indeed, basically the entire built environment is one giant fossil fuel subsidy. Almost all construction in the past ~200 years, certainly since WW2, has been malinvestment based on artificially cheap fossil energy.
Really, you can say that the industrial revolution is defined by energy getting exponentially and artificially cheaper as we got better at digging up burnable stuff, burning it, and using the resulting energy to do stuff, including digging up more burnable stuff even faster.
There wouldn't be no infrastructure, it would just have to be scaled back to a level where it could be paid for with real surpluses rather than the fake surplus created by pretending that only digging up oil and coal have a cost, while burning it is free.
We should have infrasteucture, but uts about who is paying for it.
As a non-user of cars, I still pay for highways. But a non-user of trains doesn't pay for railways.
Buyers of electric cars get more cash subsidy than my ebike costs to build! Why don't we give out same subsidy to people who want yo buy a bike or to spend on railway tickets?
I am a user of Cycles, and I don't get shit - I dont even get space to ride - there are almost no dedicated roads for bikes.
For the ampunt we spend on fixing roads, we could give everyone a new ebike every two years.
Airplabes are even worse. Ebikes, Cars and trains pay taxes on fuel and electricity, but airplanes don't.
So why are subsidies distributed so unfairly? At least make them equal
Everyone uses transport. Theoretically if you owned your own land and lived like a stone age person, making everything from scratch, using nothing in a modern economy then I guess yes the argument could be made you shouldn’t pay as much, but it’s such an unlikely situation it’s not worth legislating for. Actually even then, you need to be defended by your State from people who would take your land by force. So everyone uses transport whether they realize it or not.
This statement does nothing to address the unevenness of how transportation is funded. Train service in America is a joke and at the same time we've decided this[1] highway was somehow worth building. America has been investing immense amounts of capital into highway construction for decades and that investment has come at the expense of mass transit that could actually handle the transportation of millions of people up and down the eastern seaboard. Cars are an extremely space and energy inefficient method of transportation, we definitely need them for some purposes - but the fact that they're the default option for people's daily commute is bonkers.
Everyone may use transport, and everyone may benefit from transport - but that does very little to address the extreme imbalance in transport funding we've seen in America.
We don’t fund lots of potential transport modes, like canals, blimps, or horse carriage ways. Dollar per dollar, region specific studies in the US show that we get more out of roads, which is why the money goes there. It’s just about basic economics.
I don't accept the assumption that the US gets more potential value out of roads than trains and buses - I do accept that currently the train infrastructure is so insanely poor that nobody wants to ride it.
I think if we take a look at the world at large we'd see that the eastern seaboard and southern california could look a lot more like the Rhine valley and the lowlands while improving quality of life for residents.
Roads need to exist and I am not trying to say they don't - but they shouldn't be the primary transit option for most people on most of their routes.
Isn't this circular reasoning? Rails are terrible, so nobody uses them, hence nobody invests, hence poor ROI. Roads are heavily invested, so are usable to the point it is uneconomical to use any alternative, so roads get more investment, etc.
Plenty of people use rail in the US just for carrying goods instead of people. It turns out trains are most efficient at hauling large loads with high tolerances for latency, which humans are not and do not have.
Except busses and airplane flights tend to be much cheaper than train tickets there (excluding subways/local trains). If trains were so efficient that would likely be shown in the pricing.
While in Spain for several months it was only economical for me to take a train a single time. It was several times more expensive than the alternatives in every other case. This left me either flying or bussing.
In Stockholm it's actually cheaper to take a bus to the airport than the train, and that's just local travel.
Those are not hidden subsidies of o&g, they are services demanded by the tax payers. They may have started as a subsidy a very long time ago but haven't been for a very long time because the average person can recognize how useful they are and demand they be built. Demand is slowly changing as people realize infrastructure needs to be designed to be human centric with roads still being a vital but secondary part of the transportation infrastructure and as that changes politicians will start changing what they fund eventually or risk not being elected. It is not right to say it is a subsidy to car manufacturers that car manufacturers should be paying for.
Whoever is demanding them, they are still subsidies. You can be sure that if there were a bill introduced tomorrow that (with a chance of passing) significantly redirected highway spending, or even just tried to cover the whole bill (including the cost to use direct air capture to undo the climate damage and store the carbon indefinitely) with fuel taxes, the fossil fuel and auto manufacturing lobbies would be tripping over themselves to see it defeated at almost any cost.
If that is your position then the word subsidy lacks all meaning because pretty much everything the government does with tax revenue is a subsidy by this definition. Also, it would not just be those lobbies calling their representatives to get that idea overturned, it would be a majority of the populace once they ran the numbers on their cost of living increase from that policy.
> The US' military interest in the Middle East seems to be entirely based on the oil reserves in the region.
This is such a common trope that's clearly not true. Afghanistan doesn't have any real oil production, and Iraq had a tiny OPEC quota. To the extent that oil production had any real strategic purpose in the US conflicts, it was the income they provided local regimes.
My answer to that would be that the US was/is very concerned about spillover conflict. A few aggressive countries could easily draw the whole region in.
Why is the US so less concerned about South East Asia or Africa than the Middle East?
If you're looking at it narrowly in terms of US's actual invasions, perhaps. But the US foreign policy in the Middle East has generally been directed towards "keep the oil flowing" to such a degree that there's not really any other coherent vision or grand strategy at play in that region.
If you want to get pedantic about hyperbole, let's get even more pedantic! Afghanistan isn't in the Middle East, although some consider it to be in the "Greater Middle East" (a recently coined term).
We built all that infrastructure decades back after Kuwait. Our entire force structure pivoted and remained that way because it was obvious the only thing that stopped Saddam from rolling into the northern Saudi fields was himself. If he'd been smart, he would have kept going and would still be there.
Afghanistan and Iraq II and III are just knock-on effects of all that and we're not doing because like MBS for his personality.
From the OP, the list of “subsidies” is below. I’m not an expert but this sounds like lots more than amortization. Do these all sound like things that are reasonable after digging more to you? (Tone check - not accusatory, I’m curious if this matches up with your previous research or doesn’t overlap). Tax credits and deductions on the face sound unreasonable to me, but it’s unclear from the summary how substantial they actually are.
I’d agree that policing the Middle East is by far the biggest subsidy though, and that externalities are the thing we should be focusing on. But absent a coherent CO2 tax proposal I’m ok with chipping away at smaller subsidies where they exist (Though now seems to be a politically suicidal time to propose doing so. Wait until inflation is under control before increasing the cost of gas again.)
>>>
This bill limits or repeals certain fossil fuel oil and gas subsidies for oil companies. Specifically, it
increases to seven years the amortization period for geological and geophysical expenditures;
repeals the tax credits for producing oil and gas from marginal wells and for enhanced oil recovery;
repeals the tax deduction for the intangible drilling and development costs of oil and gas wells;
repeals percentage depletion;
repeals the tax deduction for tertiary injectant expenses;
repeals the passive loss exception for working interests in oil and gas property;
denies the tax deduction for income attributable to domestic production activities for oil and gas activities;
prohibits the use of the last-in, first-out (LIFO) accounting method by major integrated oil companies;
limits the foreign tax credit for dual capacity taxpayers (i.e., taxpayers who are subject to a levy of a foreign country or U.S. possession and receive specific economic benefits from such country or possession);
and
expands the definition of crude oil for purposes of the excise tax on petroleum and petroleum products to include any oil derived from a bitumen or bituminous mixture (tar sands), and any oil derived from kerogen-bearing sources (oil shale).
I am no expert, but the only one the sticks out to me is the depletion allowance. If you sell a million barrels of oil you then get to say you land is worth a million barrels of oil less. What exactly is that supposed to be incentivizing? You have already taken the oil out of the ground and sold it. It is a pure gift to be able to write-off some of your land value after that.
while writing it without having to sell it is a bit of a gift, it is still just an amortization thing because your land is materially worth less now that the oil isn't available to be extracted. If you sold the land you would have a loss equivalent to that change in value to write off against your other profits. It's once again just a timing thing not an actual net change as the loss will be recorded and deducted from taxes payable at some point with or without this legislation and it really should be.
> How much less oil would be pumped with warring countries and unstable regimes?
Less oil being pumped globally would be beneficial to American oil companies.
> Also, oil companies largely don't pay for the environmental damage they do. If burning oil left a stinky purple gas instead of an invisible gas, they would be paying far, far more to stop it or get rid of it.
Then tax the people burning the oil, not the ones the ones that are producing it. It's not like Middle Eastern oil burns any cleaner than domestic oil. The sad truth is that nobody in America actually gives a damn about the environment. They'll virtue signal about wanting change, but back off at any proposal that requires personal sacrifice.
> Less oil being pumped globally would be beneficial to American oil companies.
In the short term, yes. There is a point when you ruin the whole industry. Right now $4/gallon gas has no good alternatives, but at $15/gallon things like e-fuels and biofuels start competing quite nicely.
This is misunderstanding how the market works. If gas prices got that high, yes other fuels would come into the picture but they wouldn’t replace cheaper-to-produce American crude because of margins.
The thing about those prices that would be a concern would be pushing people towards not using fuel altogether, not the existence of more expensive biofuels.
A subsidy is just a benefit given by a government for public interest reasons (in the view of said government, which may or may not match yours), so I don't see why what you said would prevent these from being subsidies.
Correct me if I'm wrong, but you speak as if "subsidy" were a derogatory term, a word associated to wasteful ideas that cannot be applied to something that you consider necessary. That's a highly ideological view, not an objective view of the term.
> A subsidy is just a benefit given by a government for public interest reason
Amortization is a bookkeeping concept that most industries get to control. The government would be forcing companies here to change how they do their bookkeeping to (theoretically) extract more tax from them specifically.
In this case, the government is not currently giving them a benefit, it's taking away a right most other industries have.
Otherwise, I would have to believe that any tax rate under 100% is a subsidy.
This has it backwards. Amortization arises from the decline in value of capital goods through their usage. Say you buy a delivery truck for 100k and after a year of deliveries net a cash profit of 80k. You didn't actually make 80k because your 100k truck is worth less after 1 year of wear. So the question is how much? You'd like to say it's worth 80k less so your net profit is 0 and you don't pay taxes. The tax man wants it to be 0 or at least accurate so you pay the taxes you owe.
To forestall this sort of back and forth the government has set standardized amortization schedules. It says that first year trucks decline 35% in value, second year an additional 25% and so on until it's 0.
So that's why we have standard amortization schedules. The policy implications come into play when you set those schedules. If you want businesses to buy more trucks you allow them to amortize them faster so that they are cheaper when accounting for tax implications. If you don't want them to buy more trucks you slow it down so that businesses pay more taxes sooner which makes them more expensive.
If oil companies are getting a faster than warranted amortization schedule then it is a tax subsidy.
I'm finding this argument unconvincing. Don't we have banks and insurance companies for this? Is it not the purpose of the capital market to evaluate large risky investments?
Refineries are meant to last decades. Can't imagine anyone thinking, "yeah, that's a good investment right now". It would take a pretty good size financial nudge from the government to get that going.
EDIT: actually I think you misunderstood the part about amortization entirely. It would actually INCREASE the amortization schedule from 24 months to 7 years...
This seems like an unfair characterization of the bill. Most of the things listed are not amortization:
- repeals the tax credits for producing oil and gas from marginal wells and for enhanced oil recovery;
- repeals the tax deduction for the intangible drilling and development costs of oil and gas wells;
- repeals percentage depletion;
- repeals the tax deduction for tertiary injectant expenses;
- repeals the passive loss exception for working interests in oil and gas property;
- denies the tax deduction for income attributable to domestic production activities for oil and gas activities;
- prohibits the use of the last-in, first-out (LIFO) accounting method by major integrated oil companies;
- limits the foreign tax credit for dual capacity taxpayers (i.e., taxpayers who are subject to a levy of a foreign country or U.S. possession and receive specific economic benefits from such country or possession); and
- expands the definition of crude oil for purposes of the excise tax on petroleum and petroleum products to include any oil derived from a bitumen or bituminous mixture (tar sands), and any oil derived from kerogen-bearing sources (oil shale).
Yes, and an increase in the amortization period decreases the amount that can be written off for a project in any given year, which all else being equal means the company pays more tax.
Why does the government need to be involved at all? Surely some bank will happily lend money to 1,000 different gas drilling operations and take a cut of the successes and eat the losses. How is getting what amounts to a loan from Big Brother any different? (Because remember, another term for "covering frontloaded costs and recovering them on an amortized schedule" is "loan"!)
The problem is these should not be any more refineries, drill holes etc. The fossils should stay in the ground, the industry should not grow anymore int should shrink. But actually it looks like they only plan digging and pump up and let us burn every single bit just faster before climate conditions become to bad and disinformation no longer works as it did.
Do you happen to know what each of the ten things mentioned are relative to the same subsidies in other industries? I am inclined to agree with you but I haven't done the due dilligence on what each thing is, why it makes sense o&g get it and where this policy is evenly applied to other industries based on, for example, high capex rather than because it is o&g explicitly. If you are willing, a sentence or two per point summary of what you discovered would really help me point out where the environmental nut jobs are being environmental nut jobs and where they have a point when talking to other people.
Because it's purely political and not related to technology.
> Off-Topic: Most stories about politics, or crime, or sports, unless they're evidence of some interesting new phenomenon. Videos of pratfalls or disasters, or cute animal pictures. If they'd cover it on TV news, it's probably off-topic.
At this point the conversation doesn't amount to much more than activism and trying to encourage people to get out and vote for their representation.
Once it becomes law then it becomes intellectually interesting as the fallout is tangible.
So many things like this are proposed and fail to come to fruition, especially when heavily leaning towards one specific political group, that it's not very interesting.
A bill that could raise gas prices as a tertiary outcome and push people towards green energy (read: tech) is pretty relevant to the people that'd be browsing hackernews IMO.
Since when has that ever been tried? Furthermore, when has that ever really succeeded? Free markets will end up in monopolies. And then you have things like a cigarette company suing Uruguay for their anti-smoking campaign or factories polluting rivers to make a quick buck and never have to deal with the environmental consequences of their actions
I am a hardcore advocate for cutting oil and gas as much as possible, but even ignoring the war, the order of operations is more or less wrong. Electrify your homes, fix your grid, then cut subsidies.
Do the hard parts first. (The alternative only ends up making things worse for the average person)
Speaking of order of operations, first fix your grid, then electrify the homes.
Look at California which has banned new gasoline cars in 2035, banned new natural gas hookups, and also told people to reduce electrical usage and not charge their cars!
California’s great held during a literally historic heat wave. That’s a vote of confidence for me that they can handle this transition. Sure they tried to reduce load, but that’s a sensible thing to do in a historically high demand for electricity!
The end of oil cannot and will not come due to its (market) price.
As electrification happens demand for oil will drop and oil will get cheaper. In a world without externalities this would lead to a state of having a mix of both.
But we need oil to go away entirely. Price won't do that unless green tech is so crazy cheap that it makes oil literally not worth pulling out of the ground. I don't see it happening.
Or --- I could see it happening, but that's only after most wells run dry - if that happens we have failed to prevent global warming.
To get rid of oil we just:
* Have the tech that allows it.
* Tax the crap out of oil so that it is forced to maintain a certain price.
* Let the market squeeze oil out. The oil will be cheap, but taxes will make it not worth anything.
And there are many incentives to electrify. Including government subsidies, the fact that green tech is already often cheaper than oil, and the fact that oil is an unreliable resource.
Right now? We need gas to run our society. It's OK to take steps to keep it going so long as we also take steps to ensure we can stop the tap when it's time.
For what it's worth, unless I'm missing something, this was introduced late last March (2021) and has gone no where since. So slightly different climate at the time.
Bills like this that would cause a huge change all at once are generally not intended to move forward legislatively. They’re introduced to be fodder for political activity like awareness campaigns, fundraising, or GOTV.
I'm from the EU: we could cut energy requirement for heating by 50% in a very short time just by properly insulating buildings. It's also rational to reduce the regulations blocking + further incentivise build out of wind/solar along with prolongation of existing nuclear where possible.
Lets do that instead of sucking yet more oil/gas out of the ground.
I achieved a 50% heating cost reduction after investing in the insulation of an older house. This included replacing the single pane glass.
Such properties are common over Europe; especially in properties built before the 1980s (which thank to the rebuild after WW2 are a decent percentage of all building stock).
Overall you'll maybe cut gas usage by 20% in 2-3 of years by insulating those buildings, building out renewable electricity with storage and incentivising heat pumps (which reduce/remove gas usage of resident-owned properties where they are viable).
How long would it take to properly insulate all the buildings that need to be heated but are inadequately insulated?
I have no idea what the situation is with availability of insulation contractors and supplies, but I'm guessing years? Certainly won't be possible by this winter.
A huge amount of property is not owned by the energy consumer and the owners are not incentivised (or forced) to do it - so they don't. It's not a cash problem - the owners are earning exceptional returns at this time - it's a problem of poor regulation.
One fix would be to have the owner pay for heating/cooling costs of the structure. My apartment pays for the heating so as a result the place is very well insulated even though it is older.
I'll note that it's not always worth it to further insulate or replace functional though inefficient equipment. For example my apartment has an electric bill of about $50 a month, half of that is a fixed infrastructure cost. Even if I could bring my electric use to zero, it could at best save $25 a month. Replacing my AC with a more modern one could probably at best save $5 a month of that, taking many years to pay off even if you pay nothing for labor.
I think yes, not doing this at all (for 4 years until election cycle) is a better decision than making us less prepared to deal with this immidiate future.
Big assumption that 4 years from now it can be done. Politically, you should do it when you can do it. When clinton failed to pass healthcare reform in 1992, we had to wait almost 20 years to pass the ACA.
>But wait for the war to be over and we know Germany won't be freezing, please.
If we're going to subsidize energy production until the war is over, might as well put all those subsidies into renewable energy that will further reduce Russia's global influence.
Sure, but any incentive to speed up that effort will help. In the meantime, oil and gas will fine without the existing subsidies, given they are still posting record profits in the midst of the war:
Record profits won't matter when a company looks at a project and sees it will result in a loss. It's rare they will decide to subsidize that loss unless there is incentive.
No idea how the math works out. It may be that the subsidies may be totally excessive.
I'm skeptical the layman's perspective on this is actually accurate. The reasoning presented screams "arguments made in bad faith by activists" to me. Stuff that seems super reasonable but breaks apart once you understand in depth.
>Record profits won't matter when a company looks at a project and sees it will result in a loss
What long-term projects are you imagining oil and gas to start investing in now? To hit 2030 / 2050 emission goals, we can't afford to invest in new long term oil and gas projects.
>I'm skeptical the layman's perspective on this is actually accurate. The reasoning presented screams "arguments made in bad faith by activists" to me. Stuff that seems super reasonable but breaks apart once you understand in depth.
Here are a couple of resources on how much these subsidies work out to be:
This is political suicide. There's no way this wouldn't directly and immediately affect gas prices at a time when they are already creating political turmoil. Not to mention strengthen Russia's hand significantly.
I would like to hear in what possible way this is a better idea (practically or politically) than just a straight carbon tax.
Is there any online forum for tech where people talk about tech instead of pretending like their one-sided political team is THE answer to all of the worlds problems despite both "teams" proving they are incompetent?
If we spent half as much time thinking of what we could do as individuals instead of finger pointing, we wouldn't need government intervention at all.
I don't see much partisanship in this comment section, mostly people discussing the O&G amortization schedules. I agree that, in general, it would be better if HN had less political posts. That said, just upvote the type of posts you think are interesting and move on.
To echo your last point: If we spent half as much time upvoting as individuals instead of finger pointing, we wouldn't need HN moderator intervention at all.
Not that I've seen but if you want to jam together on setting one up let's do it: ryan.glover@cheatcode.co. I'll even do the heavy lifting, would just be nice to have someone around and encourage engagement.
"Individuals" don't build railroad networks, schools, bridges, etc. Individuals are never gonna build a nuclear power plant or get a person on the moon either
The democrats are completely out of touch with the people they're supposed to serve. Let's hope the dems lose both the House & Senate in November so we can regain some normalcy.
I support this policy, and expect my gov to lean into mitigating climate change and getting to net zero as fast as possible. If something was poisoning your loved ones, we wouldn’t be haggling over it. We’d treat it as an emergency. Same deal. It’s an emergency. Treat it as such.
Actually, most of the democrats policies poll much better than the party itself. It's somewhat of a mystery why there's such a huge disconnect between how popular their policy positions are vs how well they do in the polls
Abortion, healthcare, climate change, voter rights, etc. Even a plurality of people support DC statehood!
>Before seeing any messaging, voters support the government eliminating tax subsidies and other financial incentives for fossil fuels by a 24-percentage-point margin (54 percent support, 30 percent oppose). Democrats support this proposal by an overwhelming 52-point margin (70 percent support, 18 percent oppose), while Independents support it by a 15-point margin (49 percent support, 34 percent oppose). While Republicans are nearly split, they oppose it by a narrow 3-point margin (39 percent support, 42 percent oppose).
What is the argument against this? Honestly asking. I do know that profit margins need to exceed cost of finding, extracting and refining the oil and US's natural gas was decimated because of saudi vs russia price wars in 2020 after covid hit because prices weren't high enough which meant shutting things down. Do subsidies artificially allow a good enough profit margine to continue operations? If so is it for crude, lng,etc...? Because if it means depending more on russia and venezuela I can see that argument being good.
Also, why not get rid of farm subsidies or industry subsidies in general? Or is the point of this bill "oil bad" ? Because that would be silly, I mean sure it is bad but reducing supply just means it will be aquired elsewhere complicating the politics of switching to renewables. In other words, if the US used only its own fossil fuels it would be easier to regulate prices and such to make renewables more appealing, and russia,saudi and china getting more business means they are less motivated to reduce fossil fuel usage. But in general I agree with subsidies being a bad thing but with oil, I would rather have it in the US where we have control over the extraction and refinement process as well as distribution and ability to wind down dependence on it in a planned manner, but that doesn't mean they should be subsidized.
I just don't know what the reasons are for keeping subsidies and I'm keeping an open mind.
Most of farm subsidies that people talk about goes towards food stamp-type programs. Not wanting the poor to starve may be a good reason.
And when people talk about product subsidies (like corn subsidies) they are referring to the insurance system operated by the government. Due to the nature of what is being insured (i.e. something that is likely to affect most policy holders when disaster strikes), it is difficult for private business to provide the necessary insurance.
Traditional insurance products rely on only a few policy holders needing insurance each year. When mass disaster strikes, such as a hurricane destroying homes across a wide area, the government typically does step in to cover the difference. Since this is the norm for agriculture, the government stays at the ready. Farmers still have to maintain a paid policy to be participants in the insurance system.
Perhaps insurance should be abandoned, but it's generally considered a social good.
> over half of all direct payments to farms are from Commodity programs
As you can see in your second link, the direct payments ended under Obama. All of the remaining programs for commodity producers are insurance-based.
Perhaps what you are trying to say is that there are time travellers coming to us from the past to tell us about how things used to be (from our perspective)? But why would anyone listen to them?
I would also not call the price protection programs an insurance program. Being able to sell at a certain price seems like a pretty strong and direct subsidy.
And the export credit, which is not overseen by the USDA at all, continues.
> The site still reports commodity payments for the last several years
And when you look the breakdown you'll see when direct payments ended. Insurance is going to pay out, yes. That's what insurance is for...
> I would also not call the price protection programs an insurance program.
I would. It is setup as an insurance system. Price/income insurance isn't uncommon, even outside of agriculture. If you work as an employee, you are afforded access to similar insurance.
Irrigation water is only cheap from a demand perspective. There is no subsidy in that case, simply the lack of a free market and poor resource allocation.
Most of these are not so much "subsidies" so much as normal bookkeeping practices as employed by the oil industry. Developing a new copper mine would count as an R&D expense, but not a new oil well.
Like it or not, the oil and gas industry are pretty dang critical to supplying strategic and economic needs of the US. Punishing them while still depending on them would be incredibly silly.
Addressing climate change is first and foremost a consumption problem. Addressing it in a supply-side, trickle-down method should be self-evidently counter-productive.
> Most of these are not so much "subsidies" so much as normal bookkeeping practices as employed by the oil industry. Developing a new copper mine would count as an R&D expense, but not a new oil well.
Which part specifically seems like "normal bookkeeping" to you?
This bill:
- repeals the tax credits for producing oil and gas from marginal wells and for enhanced oil recovery;
- repeals the tax deduction for the intangible drilling and development costs of oil and gas wells;
- repeals percentage depletion;
- repeals the tax deduction for tertiary injectant expenses;
- repeals the passive loss exception for working interests in oil and gas property;
- denies the tax deduction for income attributable to domestic production activities for oil and gas activities;
- prohibits the use of the last-in, first-out (LIFO) accounting method by major integrated oil companies;
- limits the foreign tax credit for dual capacity taxpayers (i.e., taxpayers who are subject to a levy of a foreign country or U.S. possession and receive specific economic benefits from such country or possession); and
- expands the definition of crude oil for purposes of the excise tax on petroleum and petroleum products to include any oil derived from a bitumen or bituminous mixture (tar sands), and any oil derived from kerogen-bearing sources (oil shale).
The IRS maintains a nicely detailed guide on how tax deductions work: https://www.irs.gov/publications/p535 Almost no one would say a business deducting COGS would be a "subsidy".
How is that just "bookkeeping"? These are benefits that provide an actual tangible benefit to oil and gas companies. The fact that some of these subsidies are happening in other industries doesn't mean it's not a subsidy...
I mean, do you consider every tax deduction to be a subsidy? The standard deduction for all US families? Is paying anything less than 100% of income a subsidy?
The US government has a very established tax code to specifically determine what amount of money it should consider taxable and to smooth out expectations. Claiming a deduction is not inherently a subsidy. Especially if you are a business and might lose 3x as much money in a year as you make to invest in long term growth.
If Oil and Gas have unfair tax advantages, that's a problem. These seem boilerplate.
> a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.
Yes, tax deductions (to businesses) are absolutely subsidies. It's the most common form of subsidization!
> Especially if you are a business and might lose 3x as much money in a year as you make to invest in long term growth.
This bill extends the amortization schedule from 24 months to 7 years. It's actually helping ease this burden. The rest of the clauses are removing what are essentially government handouts to oil and gas companies.
I'm not sure I see how reducing supply is 'evidently counter-productive'.
For example reducing capital available to oil/gas companies -> reduces supply -> increases price -> drives reduction in consumption / switches to alternatives.
You're missing the global nature of the market. If every oil producer agreed to reduce supply it might work. But less US oil means others step in and make more refineries and dig more oil wells to meet the demand. Price isn't set based on demand only either, opec basically fixes the price. The oil price will go up for a few months and then stabilize. I mean have you seen oil prices this year? They surpassed prices in apocalyptic movies and people are still using fossil fuels just the same. Maybe tariffs on oil can help hike foreign oil prices but what politician want to be responsible for increasing gas prices? The result will be when you eventually have widespread EVs and charging stations short of supermajority popular support, you will need to beg saudi, russia,etc... to reduce supply or increase prices so people actually switch to EVs.
I for example, almost never drive but at the same time I will not get EVs unless you force me because they are unreliable for long distance, I hate queues (for charging stations) and living in apartments means either they get dozens of chargers for the complex or I have to drive somewhere and wait like an hour to charge (if I can make it to the station). So you really have to twist my arm to get anything short of a hybrid.
That said, I am only responding to your question I don't support or oppose oil subsidies since I am not informed enough on the subject
Thanks for your thoughts. If I'm understanding correctly your argument basically comes down to arguing there is a high elasticity of supply and a low elasticity of demand.
I guess I'll look into the estimates and see.
One thing I would say is that reductions in supply in one jurisdiction will compound with restrictions in other jurisdictions.
For example NZ banned new oil and gas exploration a while ago but some parties want to repeal it with the same argument as yours, someone else will sell it. But if it happens in NZ, then the US, then ... I think you reach a point where there is a non-trivial challenge to increasing supply. Then these measures will have stronger effects at increasing prices and hence reducing consumption.
Reducing supply without reducing it enough does more harm than good and reducing it enough without political backfiring is not possible. On the demand side, people mostly live viable alternatives like Tesla cars for example so that is where rhe focus should be. Cars aside, airlines are not going to convert their fleet to a yet non-existent electric commercial planes because of low supply, matter of fact, if all of US stopped extracting and refining oil, they will use it as an excuse to hike prices but in reality that will may not change prices because at the end of the day it costs what people are willing to pay for it, there will not be a global oil shortage, just a temporary logistics nightmare. On the other hand, cruise ships are by far the most notirious class of polluters. So perhaps targeted taxation of oil is what you need.
If I can compare it to something it would be trying to get a heroin addict (or even serious alcoholic) to stop using. If you succeed in cutting off all supply right away, they die. If you cut off supply locally, they will get it somewhere else where you can't help them get rehabilitated. Half measures are almost always worse than not doing anything.
> "Expands the definition of crude oil for purposes of the excise tax on petroleum and petroleum products to include any oil derived from a bitumen or bituminous mixture (tar sands), and any oil derived from kerogen-bearing sources (oil shale)."
Seems like the industry got its lobbyists to write in a loophole, and that loophole should be eliminated.
If you have high "ordinary income" from salary, RSUs, NSOs, etc, you can essentially convert that ordinary income to dividends and long term capital gains using these oil & gas tax subsidies.
Let's say you invest $100k into a drilling fund. You can deduct intangible drilling costs in year 1, which is usually about 95% of your investment. So you save ($maginal_tax_rate * 95k) in year 1, and get a dividend (with extra tax break) of 10-20% per year for about 7-10 years.
When the oil slows down after 7-10 years, the fund sells the asset for 20-30% of your investment, and I believe you can realize that loss.
What does this mean: "repeals the tax deduction for tertiary injectant expenses" ?
If I'm an oil driller and I spend $25 on "tertiary injectants" to produce $200 of oil, my real income is $175. So, the government should only be taxing me on $175.
Does this deduction mean simply that? Or is it an extra bonus deduction allowing me to claim $200 - $25 - $25 bonus = $150 income?
If it's just a normal allowed expense, then why is the government even involved in deciding which of my expenses are legit (beyond fraud levels)?
If it's a bonus expense that counts twice, then why was this even passed in the first place?
Politics aside, I'm getting a strong "chesterton's fence" feeling here - we're removing something that sounds like it shouldn't exist in either scenario, without understanding what led it to exist in the first place...
The general idea behind these kinds of bills is to do supply-side management of fossil production: reduce oil production is order to help with pollution/global warming. This sounds alluring but in reality, the same demand exists - it's just being directly or indirectly satisfied by imports from less scrupulous countries, usually dictatorships or theocracies. Inasmuch as there's an effect on demand, it's a very slow one.
The proper way to limit fossils is at the demand side, even if this plays less to the view of oil companies as the ultimate villains.
Price of oil goes up, demand for EVs and other non fossil energy uses goes up. Demand will only go down when you make consuming fossil fuels economically painful.
No one is going to voluntarily leave cheap energy in the ground unconsumed/non combusted. You must continue to drive down the cost of clean energy and using that clean energy for work (mobility, battery storage for grid balancing and energy arbitrage, etc).
>Price of oil goes up, demand for EVs and other non fossil energy uses goes up.
Also prices of every thing in the economy goes up, including EVs and non-fossil energy. Eventually we just substitute local production with imports from various bad actors.
Besides, EV production is no longer limited by demand, but by availability of batteries.
>Demand will only go down when you make consuming fossil fuels economically painful.
Demand can be lowered by mandating fuel savings and some mild taxation. Sometimes even just asking (like a recent UK campaign did) helps.
>No one is going to voluntarily leave cheap energy in the ground unconsumed/non combusted.
The lower demand is, the less economic to extract.
>You must continue to drive down the cost of clean energy and using that clean energy for work (mobility, battery storage for grid balancing and energy arbitrage, etc).
Yes, we must keep plugging away at this. But IMHO supply side manipulation of fossils is not effective anymore, and has significant downsides.
As always, the truth lies somewhere in the middle. Continual economic forces must be applied to force an energy transition at a rate that is not punitive at scale, while also rapid enough that we don’t backslide away from escape velocity.
I want to stress that a carbon tax with a rebate model would solve a lot of this, it’s just politically untenable in the US. People should suffer as little as possible during this transition.
Note: introduced in March 2021 and hasn't made it out of committee (Ways and Means). This probably isn't going anywhere.
Here's something to consider though: energy is a matter of national security. Don't believe me? Look at what's happening in Europe right now with energy shortages as a direct result of Russia cutting off the natural gas supply.
The US isn't really suspceptible to this at the moment.
We subsidize food production for much the same reason: the US can't be starved by external forces. I have an issue with corn subsidies in particular but having enough food is a matter of national security. Just as having enough energy is. Over-producing food means severe events like droughts and floods don't mean a large number of people will starve.
If we cut anything it should be the ridiculous amount we spend on the military. We need this generation's version of the Truman Investigation Committee [1]. Some of our weapons programs are unjustifiably expensive (eg F35) and the amount of money thrown about in 2 decades of war in Iraq and Afghanistan in defense contracts and private militaries ("security companies") is disgusting.
But oil and gas? LIke it or not, this is something we need and will need for some time to come.
262 comments
[ 2.6 ms ] story [ 289 ms ] thread“The basic algorithm divides points by a power of the time since a story was submitted. Comments in threads are ranked the same way.”
Currently 32 points, in the ten minutes since it was posted.
*edit: now 43 points in 11 minutes
It gets to number 1 I suppose as it got those votes very quickly. It's likely to be a hot topic if you give it a bit of time.
It's kind of like the concept of a child prodigy: not every single one grows into something significant but performing well early gets you into spotlights.
It's a bit of a prisoner's dilemma, it would be a nice platform if everyone didn't do that, but like many other things it tends to result in a defect-defect scenario.
Democrats also consider energy a priority, but don't like hydrocarbon fuel, so are conflicted with bills like this - I bet it won't get every Democrat on board either.
Also, the current situation isn't directly a subsidy, it's a tax reduction, which is sort of a subsidy if you squint, but it's different enough. Republicans do like tax reductions.
Oh, it's dead in the senate. There really is no way Joe Manchin would vote for this given the state he represents. West Virginia has WAY too much interest in burning coal.
There may also be others, but Manchin will happily take the blame to stop it from passing. His voting base will love him for it.
And finally the dams that were removed were small ones, not ones that are used to store water.
Not true though. It's something they talk but don't walk.
Texas will literally buy the land for your factory, build it, and lease it to you for free. AND then they'll recruit and train all your employees for free.
As far as this bill specifically goes, I haven't read the entire thing, but the bullet points seem to be all about reducing tax burdens. As an overall opinion, I think more people and industries ought to have tax breaks.
Given the extreme shortsightedness of Europe's leaders in trying to tackle their energy needs, I have little doubt that this act will come back to bite all of us in some way.
Further from this bill’s chances. Almost irrespective of the partisan balance, given the candidates and political mood around energy prices.
[0] https://www.climatechangemakers.org/
[1] https://www.climatechangemakers.org/issue-briefing-ffs
You need no further proof that the left isn't controlled by some elite secretive singular entity. Lefty groups keep stepping on obvious rakes like this one and "defund the police" -- the underlying policies may make actual sense but there's no understanding of optics or timing whatsoever.
Maybe for the democratic party as a whole, but it might be beneficial to the bill sponsor(s) if this wins votes in their own district. The main sponsor's district is Portland, OR so I suspect it's locally savvy for them.
So my questions was motivated by trying to understand if the bill is an actual attempt to pass legislation or just a few people scoring some green votes before an election by floating a bill they know is doomed.
We add alcohol because it is subsidized, so it is cheap.
Does the actual regulation issued by the EPA require the addition of corn-derived ethanol? Or is just ethanol?
2. The Iowa Caucus has a fairly low correlation with nomination success
3. 99% of congress will never need to give a shit about the Iowa caucuses
It’s not the only thing that is making America very fat, but it is certainly a large component to it and there’s basically no reason for the subsidy to exist.
Government Cheese wasn’t to ensure that prices of dairy would stay low, it was to bail out dairy farmers after the price of it dropped to unsustainably low levels. It’s not even a very good product to stockpile. The market would correct itself.
FTFY
But seriously, this experiment is already playing out in NYC[0]. Every marginal % you tax a product, you push some number of consumers into the black market. At some point, the black market reaches a critical mass where the thing you're taxing might as well be banned.
[0]https://www.google.com/search?client=firefox-b-1-d&q=new+yor...
This doesn't make sense, because you're still getting taxes on the white market merch. Even if black market merch dominates, its different from prohibition where you get no taxes.
EVs are supply constrained. Raising gas prices when the average EV is months from delivery and tens of thousands of dollars more expensive than ICE comparables is just mean.
That increases demand. The problem isn’t demand. People are putting down deposits and paying over sticker price. The problem is supply. The government buying EVs for everyone does nothing to solve that problem.
Add a $10/litre tax to all petroleum products that enter the country.
Give everyone $2000 a month.
People who continue current average driving habits and buy their normal products are unharmed.
People who car pool or switch to a lighter vehicle or other transport method or purchas low local transport cost products win.
This is, in fact, what is happening; in NL they're slowly but sharply increasing taxes on tobacco products. The other day they found and dismantled an "illegal" cigarrete manufacturing plant. Only illegal because it was sold untaxed, smoking itself isn't illegal yet.
Mind you, taxing and the other measures are working; the amount of people smoking has been reduced by a lot in the past few decades. But there will always be a market for tobacco and tobacco products.
When I get a tax break with my 401k am I get a “subsidy”?
Only if we don't pay any taxes in the first place and the tax benefit is a credit, or if all our income belongs to the government and they just let us keep some of it. Few companies pay no net tax and our income belongs to us and is taken away by taxes for various debatably beneficial/justifiable uses.
The government is saying "You don't have to pay these taxes" when it's not saying the same to something/someone else. Your 401k is subsidized.
You can try and draw a line between the two but in practice it's kind of inherently fuzzy: if government takes money from company A and nominally gives it to an arts program, everyone agrees it's a subsidy. If it takes the same money and uses it to cover a shortfall due to reducing company B's tax burden (i.e. an incentive) it's pretty similar.
I suspect people who really contort themselves to draw a distinction have strong views about taxation as a whole which lead them to dislike the term subsidy, and want to have it not apply to government incentives they like to take advantage of.
Taxes are mandatory payments for (allegedly) services the government provides.
Tax breaks let people/companies keep more of their own money. They are not subsidies. Subsidies would be additional money provided (which could be the case in a refundable tax credit where you end up getting a refund on taxes you never paid).
A lot of them rely on oil/gas; Wind turbines, for example, are made with synthesized laminates and glues, use grease and oils to operate, and require large fleets of diesel trucks to assemble and maintain.
Thought experiment: What do you think would happen if people and companies could not spread the costs of their assets out over time?
You can therefore make the argument (though I don't agree with it myself) that subsidies to big oil that reduce competition from upstarts is, in a twisted way, a climate-positive policy.
This of course fails because subsidizing big, publicly-traded oil companies reduces their cost of capital. This causes rational capital allocators to rationally invest in fossil fuel exploration, resulting in more carbon being dug out of the ground and added to the atmosphere.
It is the non-tax subsidies that add up. The US' military interest in the Middle East seems to be entirely based on the oil reserves in the region. How much less oil would be pumped with warring countries and unstable regimes? Also, oil companies largely don't pay for the environmental damage they do. If burning oil left a stinky purple gas instead of an invisible gas, they would be paying far, far more to stop it or get rid of it.
This is possibly the largest subsidy given to energy companies. Maybe the damage they do to human health is larger.
I do agree that allowing oil and gas companies to avoid paying the full costs of environmental damage is effectively a form of hidden subsidy.
Why? The US is the largest producer of natural gas in the world, and by quite a large margin[1].
Europe tied themselves to Russian natural gas, heeding no warnings in the process, and now find themselves cut off due to conflict. Oh, if only this could have been predicted and avoided in advance...
It makes sense for Europeans to experience ludicrous natural gas bills, but not someone in NY. Further, the US should not make citizens suffer in order to prop up European nations that couldn't have cared any less about their own security until it was too late.
[1] https://yearbook.enerdata.net/natural-gas/world-natural-gas-...
It's a globally traded commodity. If someone in NY won't pay 40% more, someone in Europe will. Just like you work for who gives you the most compelling offer, so too does natural gas go to who presents the most compelling offer.
> the US should not make citizens suffer in order to prop up European nations
Given that the US is where most of the natural gas is produced, per your comment, the US will realize a huge windfall by shipping its product to Europe at a high markup. The citizens of the US will be emboldened by it. They may have to pay more for heat, but stand to gain even more than that. Europe loses either way.
I have to disagree here. The citizens of the US gain nothing from the US permitting natural gas companies to export to Europe instead of filling local demand first. These are private companies anyway... so not sure how this logic holds up.
> It's a globally traded commodity.
Sure it is... however a nation can and will prohibit exports when local demand exceeds available reserves. Natural gas is a strategic asset after all, and we're already dangerously dancing with inflation/recession - it wouldn't make sense to accelerate that path just because Europe needs gas after a series of terrible, completely avoidable choices.
Sure. There is no doubt a tipping point. Seeing 100% exports wouldn't work. But the nation of the US is made up of its citizens, so only when the citizens start to feel that tipping point has nearing or has occurred will they take measures to prohibit such exports.
Clearly we're not there. There is still more upside than downside.
Majority of citizens just accept the half-truth that Putin's War caused high gas (both natural and petroleum) for everyone, and that there's nothing that can be done except end the war.
Europe needs to suffer for their poor decisions. Enough of the US swooping in and solving European mistakes... then getting villainized for being the world's safety net.
No, that isn't practical. Which is why government is set up in reverse: The citizens tell Biden what they want. The citizens are the boss, after all. It stands to reason that the message comes down from the boss. Except that isn't practical either, so middlemen are employed to combine and distill the information they receive from the boss into a more digestible form that can be presented in a practical manner to the worker.
Those middlemen are chosen by the citizens through a long and arduous process to ensure that they are trustworthy enough to accurately convey the desired message to the worker on the ground. Yes, theoretically an unscrupulous middleman could spread false information, but through hundreds of years of using this system the citizens have shown to have a strong degree of confidence in the effectiveness of the selection process.
Not only do they have confidence, but they also find utility. It would be downright silly to go to all of the trouble of selecting the most trustworthy middleman and hire him, at a decent rate of pay I might add, only to never use his services. The citizens recognize the value they get by hiring these people to pass their orders to the workers.
You personally may have no use for said middlemen as you management style sees you sit back and forever wait for Biden to knock on your door, but citizens (plural) is inherently about more than you.
Again, that's some great theory, and it's how it's supposed to work, but it doesn't. If it did, the government wouldn't be busy misdirecting reasons why the prices are ludicrous - ie, they have to sell a fake narrative to the general population, and most of the population won't question authority.
This is, in principal, why things like the electoral college exist - the framers knew the general population was busy living their own lives and either wouldn't pay enough attention or would deliberately be misled for political gain.
So while yes the government eventually answers to the people, and in theory election outcomes will be based on what people want - the problem is when the people are deliberately misled and then vote based off half-truths and lies, which is what's going on here.
High natural and petroleum gas prices are the Administration's own doing - the result of explicit domestic and foreign policy decisions the executive and team have made... but they've done a great job convincing casual voters they had nothing to do with it. That's where the way government is supposed to work starts to fall apart.
The citizens may have made a mistake in their direction for government, I can accept that. To squarely blame to workers on the ground following orders for those mistakes is strange, though. That's like blaming the developers at Google who work on chat code for the constant churn in chat applications.
Maybe those developers at Google really did tell management, rightly or wrongly, that the codebases were terrible and that Yet Another Rewrite™ was the only way out. But even if that's the case the bosses should have the wherewithal to see through what is reality and what is not, and if the claim is valid to ensure that it didn't happen in the first place.
Bosses are going to screw up, of course. No human is infallible. But they are to blame when they do. They're the boss exactly because they are in charge and responsible for seeing through the good and the bad. The worker merely serves the boss.
A rational person might say “A global pandemic and lockdown turned the supply and demand curves upside down.” and “A tyrant is holding a continent hostage by turning off fuel supplies to a major market.”, and perhaps conclude that instability, uncertainty and risk affect prices.
Or… you can listen to a windbag rant about the closure of a pipeline that doesn’t exist, and meanwhile see gasoline prices fall 30% as production imbalances improve, and still conclude that a politician chose to commit political suicide for lolz.
You shut off the gas, and the counterparty says “Ok, enjoy our new 150% tariff on software, vehicles and soy”.
On a long term scale, keeping the pumps going is good for the petroleum industry, as sustained high prices justify the capital expense for alternatives. Once you buy an electric car, you don’t really give a hoot about gasoline.
Really, you can say that the industrial revolution is defined by energy getting exponentially and artificially cheaper as we got better at digging up burnable stuff, burning it, and using the resulting energy to do stuff, including digging up more burnable stuff even faster.
As a non-user of cars, I still pay for highways. But a non-user of trains doesn't pay for railways.
Buyers of electric cars get more cash subsidy than my ebike costs to build! Why don't we give out same subsidy to people who want yo buy a bike or to spend on railway tickets?
I am a user of Cycles, and I don't get shit - I dont even get space to ride - there are almost no dedicated roads for bikes.
For the ampunt we spend on fixing roads, we could give everyone a new ebike every two years.
Airplabes are even worse. Ebikes, Cars and trains pay taxes on fuel and electricity, but airplanes don't.
So why are subsidies distributed so unfairly? At least make them equal
Everyone may use transport, and everyone may benefit from transport - but that does very little to address the extreme imbalance in transport funding we've seen in America.
1. (The Katy Freeway) https://img1.wsimg.com/isteam/ip/b856accd-c3e3-4d97-8365-327...
I think if we take a look at the world at large we'd see that the eastern seaboard and southern california could look a lot more like the Rhine valley and the lowlands while improving quality of life for residents.
Roads need to exist and I am not trying to say they don't - but they shouldn't be the primary transit option for most people on most of their routes.
While in Spain for several months it was only economical for me to take a train a single time. It was several times more expensive than the alternatives in every other case. This left me either flying or bussing.
In Stockholm it's actually cheaper to take a bus to the airport than the train, and that's just local travel.
This is such a common trope that's clearly not true. Afghanistan doesn't have any real oil production, and Iraq had a tiny OPEC quota. To the extent that oil production had any real strategic purpose in the US conflicts, it was the income they provided local regimes.
Why is the US so less concerned about South East Asia or Africa than the Middle East?
Afghanistan and Iraq II and III are just knock-on effects of all that and we're not doing because like MBS for his personality.
I’d agree that policing the Middle East is by far the biggest subsidy though, and that externalities are the thing we should be focusing on. But absent a coherent CO2 tax proposal I’m ok with chipping away at smaller subsidies where they exist (Though now seems to be a politically suicidal time to propose doing so. Wait until inflation is under control before increasing the cost of gas again.)
>>>
This bill limits or repeals certain fossil fuel oil and gas subsidies for oil companies. Specifically, it
increases to seven years the amortization period for geological and geophysical expenditures;
repeals the tax credits for producing oil and gas from marginal wells and for enhanced oil recovery;
repeals the tax deduction for the intangible drilling and development costs of oil and gas wells;
repeals percentage depletion;
repeals the tax deduction for tertiary injectant expenses;
repeals the passive loss exception for working interests in oil and gas property;
denies the tax deduction for income attributable to domestic production activities for oil and gas activities;
prohibits the use of the last-in, first-out (LIFO) accounting method by major integrated oil companies;
limits the foreign tax credit for dual capacity taxpayers (i.e., taxpayers who are subject to a levy of a foreign country or U.S. possession and receive specific economic benefits from such country or possession);
and expands the definition of crude oil for purposes of the excise tax on petroleum and petroleum products to include any oil derived from a bitumen or bituminous mixture (tar sands), and any oil derived from kerogen-bearing sources (oil shale).
Less oil being pumped globally would be beneficial to American oil companies.
> Also, oil companies largely don't pay for the environmental damage they do. If burning oil left a stinky purple gas instead of an invisible gas, they would be paying far, far more to stop it or get rid of it.
Then tax the people burning the oil, not the ones the ones that are producing it. It's not like Middle Eastern oil burns any cleaner than domestic oil. The sad truth is that nobody in America actually gives a damn about the environment. They'll virtue signal about wanting change, but back off at any proposal that requires personal sacrifice.
The thing about those prices that would be a concern would be pushing people towards not using fuel altogether, not the existence of more expensive biofuels.
Correct me if I'm wrong, but you speak as if "subsidy" were a derogatory term, a word associated to wasteful ideas that cannot be applied to something that you consider necessary. That's a highly ideological view, not an objective view of the term.
Amortization is a bookkeeping concept that most industries get to control. The government would be forcing companies here to change how they do their bookkeeping to (theoretically) extract more tax from them specifically.
In this case, the government is not currently giving them a benefit, it's taking away a right most other industries have.
Otherwise, I would have to believe that any tax rate under 100% is a subsidy.
To forestall this sort of back and forth the government has set standardized amortization schedules. It says that first year trucks decline 35% in value, second year an additional 25% and so on until it's 0.
So that's why we have standard amortization schedules. The policy implications come into play when you set those schedules. If you want businesses to buy more trucks you allow them to amortize them faster so that they are cheaper when accounting for tax implications. If you don't want them to buy more trucks you slow it down so that businesses pay more taxes sooner which makes them more expensive.
If oil companies are getting a faster than warranted amortization schedule then it is a tax subsidy.
This seems like an unfair characterization of the bill. Most of the things listed are not amortization:
This is just partisan politics, there's no reason this should be here.
> Off-Topic: Most stories about politics, or crime, or sports, unless they're evidence of some interesting new phenomenon. Videos of pratfalls or disasters, or cute animal pictures. If they'd cover it on TV news, it's probably off-topic.
Once it becomes law then it becomes intellectually interesting as the fallout is tangible.
So many things like this are proposed and fail to come to fruition, especially when heavily leaning towards one specific political group, that it's not very interesting.
Datacenters run on something.
Not the poor. It pushes them further into poverty and closer to death.
Yes, we need to get off of oil and gas
Yes, we don't need subsidies.
But wait for the war to be over and we know Germany won't be freezing, please.
Do the hard parts first. (The alternative only ends up making things worse for the average person)
Look at California which has banned new gasoline cars in 2035, banned new natural gas hookups, and also told people to reduce electrical usage and not charge their cars!
The 2035 ban doesn't change the present either way and Cali has a ton of time to beef up its power grid in the meantime.
As electrification happens demand for oil will drop and oil will get cheaper. In a world without externalities this would lead to a state of having a mix of both.
But we need oil to go away entirely. Price won't do that unless green tech is so crazy cheap that it makes oil literally not worth pulling out of the ground. I don't see it happening.
Or --- I could see it happening, but that's only after most wells run dry - if that happens we have failed to prevent global warming.
To get rid of oil we just:
* Have the tech that allows it.
* Tax the crap out of oil so that it is forced to maintain a certain price.
* Let the market squeeze oil out. The oil will be cheap, but taxes will make it not worth anything.
And there are many incentives to electrify. Including government subsidies, the fact that green tech is already often cheaper than oil, and the fact that oil is an unreliable resource.
Right now? We need gas to run our society. It's OK to take steps to keep it going so long as we also take steps to ensure we can stop the tap when it's time.
https://www.climatechangemakers.org/issue-briefing-ffs
Lets do that instead of sucking yet more oil/gas out of the ground.
You might get 50% on a leaky barn with zero insulation, but how many homes in Europe are like that?
(Note I'm not saying not to do this - certainly do this, just have proper expectations.)
Add-on insulation can help but it’s much harder and not as great.
Such properties are common over Europe; especially in properties built before the 1980s (which thank to the rebuild after WW2 are a decent percentage of all building stock).
Overall you'll maybe cut gas usage by 20% in 2-3 of years by insulating those buildings, building out renewable electricity with storage and incentivising heat pumps (which reduce/remove gas usage of resident-owned properties where they are viable).
I have no idea what the situation is with availability of insulation contractors and supplies, but I'm guessing years? Certainly won't be possible by this winter.
I'll note that it's not always worth it to further insulate or replace functional though inefficient equipment. For example my apartment has an electric bill of about $50 a month, half of that is a fixed infrastructure cost. Even if I could bring my electric use to zero, it could at best save $25 a month. Replacing my AC with a more modern one could probably at best save $5 a month of that, taking many years to pay off even if you pay nothing for labor.
>Yes, we don't need subsidies.
>But wait for the war to be over and we know Germany won't be freezing, please.
If we're going to subsidize energy production until the war is over, might as well put all those subsidies into renewable energy that will further reduce Russia's global influence.
Long term, 100 percent. We need renewables and we should be Manhattan projecting fusion, energy storage, and transport lines.
But until we have breakthroughs, we are stuck with brown energy.
https://www.cbsnews.com/news/oil-companies-record-profits-20...
No idea how the math works out. It may be that the subsidies may be totally excessive.
I'm skeptical the layman's perspective on this is actually accurate. The reasoning presented screams "arguments made in bad faith by activists" to me. Stuff that seems super reasonable but breaks apart once you understand in depth.
What long-term projects are you imagining oil and gas to start investing in now? To hit 2030 / 2050 emission goals, we can't afford to invest in new long term oil and gas projects.
>I'm skeptical the layman's perspective on this is actually accurate. The reasoning presented screams "arguments made in bad faith by activists" to me. Stuff that seems super reasonable but breaks apart once you understand in depth.
Here are a couple of resources on how much these subsidies work out to be:
[0]: https://www.theguardian.com/environment/2021/oct/06/fossil-f...
[1]: https://www.imf.org/en/Publications/WP/Issues/2021/09/23/Sti...
For those doubting/disputing this - it was over 50% in q1 2022 https://www.cleanenergywire.org/news/renewables-cover-50-ger...
It seems like for it to even have a chance we need to go big on fission fow now.
https://news.ycombinator.com/item?id=32777774
[0] https://www.climatechangemakers.org/issue-briefing-ffs
I would like to hear in what possible way this is a better idea (practically or politically) than just a straight carbon tax.
Why not both?
If we spent half as much time thinking of what we could do as individuals instead of finger pointing, we wouldn't need government intervention at all.
Pushing the responsibility on individuals is pretty much what happened for the past 30 years with the results we know.
To echo your last point: If we spent half as much time upvoting as individuals instead of finger pointing, we wouldn't need HN moderator intervention at all.
FWIW absolutely nobody would share your "this should be on individuals not policy" conclusion. They're quite explicit in stating the opposite.
I support this policy, and expect my gov to lean into mitigating climate change and getting to net zero as fast as possible. If something was poisoning your loved ones, we wouldn’t be haggling over it. We’d treat it as an emergency. Same deal. It’s an emergency. Treat it as such.
Abortion, healthcare, climate change, voter rights, etc. Even a plurality of people support DC statehood!
>Before seeing any messaging, voters support the government eliminating tax subsidies and other financial incentives for fossil fuels by a 24-percentage-point margin (54 percent support, 30 percent oppose). Democrats support this proposal by an overwhelming 52-point margin (70 percent support, 18 percent oppose), while Independents support it by a 15-point margin (49 percent support, 34 percent oppose). While Republicans are nearly split, they oppose it by a narrow 3-point margin (39 percent support, 42 percent oppose).
[0]: https://www.dataforprogress.org/blog/8/6/voters-support-endi...
Also, why not get rid of farm subsidies or industry subsidies in general? Or is the point of this bill "oil bad" ? Because that would be silly, I mean sure it is bad but reducing supply just means it will be aquired elsewhere complicating the politics of switching to renewables. In other words, if the US used only its own fossil fuels it would be easier to regulate prices and such to make renewables more appealing, and russia,saudi and china getting more business means they are less motivated to reduce fossil fuel usage. But in general I agree with subsidies being a bad thing but with oil, I would rather have it in the US where we have control over the extraction and refinement process as well as distribution and ability to wind down dependence on it in a planned manner, but that doesn't mean they should be subsidized.
I just don't know what the reasons are for keeping subsidies and I'm keeping an open mind.
Most of farm subsidies that people talk about goes towards food stamp-type programs. Not wanting the poor to starve may be a good reason.
And when people talk about product subsidies (like corn subsidies) they are referring to the insurance system operated by the government. Due to the nature of what is being insured (i.e. something that is likely to affect most policy holders when disaster strikes), it is difficult for private business to provide the necessary insurance.
Traditional insurance products rely on only a few policy holders needing insurance each year. When mass disaster strikes, such as a hurricane destroying homes across a wide area, the government typically does step in to cover the difference. Since this is the norm for agriculture, the government stays at the ready. Farmers still have to maintain a paid policy to be participants in the insurance system.
Perhaps insurance should be abandoned, but it's generally considered a social good.
There are a few other notable sets of subsidies:
- Irrigation water in the US is artificially cheap for farmers
- The US offers several Export Credit Guarantee programs (the WTO has specifically found to be illegal internationally): https://www.fas.usda.gov/programs/export-credit-guarantee-pr...
- There are amply funded Conservation programs - which can often involve payments to do nothing with certain pieces of land: https://www.fsa.usda.gov/programs-and-services/conservation-...
- And bigger than anything, over half of all direct payments to farms are from Commodity programs: https://en.wikipedia.org/wiki/Commodity_programs https://farm.ewg.org/region.php
As you can see in your second link, the direct payments ended under Obama. All of the remaining programs for commodity producers are insurance-based.
Perhaps what you are trying to say is that there are time travellers coming to us from the past to tell us about how things used to be (from our perspective)? But why would anyone listen to them?
And it does seem the government continues to give direct payments to farmers - even though it is under the guise of the insurance program: https://www.fsa.usda.gov/news-room/news-releases/2021/usda-p...
I would also not call the price protection programs an insurance program. Being able to sell at a certain price seems like a pretty strong and direct subsidy.
And the export credit, which is not overseen by the USDA at all, continues.
And when you look the breakdown you'll see when direct payments ended. Insurance is going to pay out, yes. That's what insurance is for...
> I would also not call the price protection programs an insurance program.
I would. It is setup as an insurance system. Price/income insurance isn't uncommon, even outside of agriculture. If you work as an employee, you are afforded access to similar insurance.
Like it or not, the oil and gas industry are pretty dang critical to supplying strategic and economic needs of the US. Punishing them while still depending on them would be incredibly silly.
Addressing climate change is first and foremost a consumption problem. Addressing it in a supply-side, trickle-down method should be self-evidently counter-productive.
Which part specifically seems like "normal bookkeeping" to you?
LIFO is illegal in some countries but is acceptable under GAAP. The Oil industry is not special here.
Percentage depletion is the IRS standard for non-renewable resources. Again, oil is given the same percentage as copper: https://www.law.cornell.edu/uscode/text/26/613
Passive loss exception is also standard: https://www.irs.gov/taxtopics/tc425
The IRS maintains a nicely detailed guide on how tax deductions work: https://www.irs.gov/publications/p535 Almost no one would say a business deducting COGS would be a "subsidy".
The US government has a very established tax code to specifically determine what amount of money it should consider taxable and to smooth out expectations. Claiming a deduction is not inherently a subsidy. Especially if you are a business and might lose 3x as much money in a year as you make to invest in long term growth.
If Oil and Gas have unfair tax advantages, that's a problem. These seem boilerplate.
> a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.
Yes, tax deductions (to businesses) are absolutely subsidies. It's the most common form of subsidization!
> Especially if you are a business and might lose 3x as much money in a year as you make to invest in long term growth.
This bill extends the amortization schedule from 24 months to 7 years. It's actually helping ease this burden. The rest of the clauses are removing what are essentially government handouts to oil and gas companies.
In reality the government is simply just punishing all other businesses that can't take the same deductions.
You might as well consider it a subsidy to you if your neighbor gets mugged.
For example reducing capital available to oil/gas companies -> reduces supply -> increases price -> drives reduction in consumption / switches to alternatives.
What am I missing?
I for example, almost never drive but at the same time I will not get EVs unless you force me because they are unreliable for long distance, I hate queues (for charging stations) and living in apartments means either they get dozens of chargers for the complex or I have to drive somewhere and wait like an hour to charge (if I can make it to the station). So you really have to twist my arm to get anything short of a hybrid.
That said, I am only responding to your question I don't support or oppose oil subsidies since I am not informed enough on the subject
I guess I'll look into the estimates and see.
One thing I would say is that reductions in supply in one jurisdiction will compound with restrictions in other jurisdictions.
For example NZ banned new oil and gas exploration a while ago but some parties want to repeal it with the same argument as yours, someone else will sell it. But if it happens in NZ, then the US, then ... I think you reach a point where there is a non-trivial challenge to increasing supply. Then these measures will have stronger effects at increasing prices and hence reducing consumption.
If I can compare it to something it would be trying to get a heroin addict (or even serious alcoholic) to stop using. If you succeed in cutting off all supply right away, they die. If you cut off supply locally, they will get it somewhere else where you can't help them get rehabilitated. Half measures are almost always worse than not doing anything.
> "Expands the definition of crude oil for purposes of the excise tax on petroleum and petroleum products to include any oil derived from a bitumen or bituminous mixture (tar sands), and any oil derived from kerogen-bearing sources (oil shale)."
Seems like the industry got its lobbyists to write in a loophole, and that loophole should be eliminated.
Let's say you invest $100k into a drilling fund. You can deduct intangible drilling costs in year 1, which is usually about 95% of your investment. So you save ($maginal_tax_rate * 95k) in year 1, and get a dividend (with extra tax break) of 10-20% per year for about 7-10 years.
When the oil slows down after 7-10 years, the fund sells the asset for 20-30% of your investment, and I believe you can realize that loss.
If I'm an oil driller and I spend $25 on "tertiary injectants" to produce $200 of oil, my real income is $175. So, the government should only be taxing me on $175.
Does this deduction mean simply that? Or is it an extra bonus deduction allowing me to claim $200 - $25 - $25 bonus = $150 income?
If it's just a normal allowed expense, then why is the government even involved in deciding which of my expenses are legit (beyond fraud levels)?
If it's a bonus expense that counts twice, then why was this even passed in the first place?
Politics aside, I'm getting a strong "chesterton's fence" feeling here - we're removing something that sounds like it shouldn't exist in either scenario, without understanding what led it to exist in the first place...
The proper way to limit fossils is at the demand side, even if this plays less to the view of oil companies as the ultimate villains.
No one is going to voluntarily leave cheap energy in the ground unconsumed/non combusted. You must continue to drive down the cost of clean energy and using that clean energy for work (mobility, battery storage for grid balancing and energy arbitrage, etc).
Also prices of every thing in the economy goes up, including EVs and non-fossil energy. Eventually we just substitute local production with imports from various bad actors.
Besides, EV production is no longer limited by demand, but by availability of batteries.
>Demand will only go down when you make consuming fossil fuels economically painful.
Demand can be lowered by mandating fuel savings and some mild taxation. Sometimes even just asking (like a recent UK campaign did) helps.
>No one is going to voluntarily leave cheap energy in the ground unconsumed/non combusted.
The lower demand is, the less economic to extract.
>You must continue to drive down the cost of clean energy and using that clean energy for work (mobility, battery storage for grid balancing and energy arbitrage, etc).
Yes, we must keep plugging away at this. But IMHO supply side manipulation of fossils is not effective anymore, and has significant downsides.
I want to stress that a carbon tax with a rebate model would solve a lot of this, it’s just politically untenable in the US. People should suffer as little as possible during this transition.
Here's something to consider though: energy is a matter of national security. Don't believe me? Look at what's happening in Europe right now with energy shortages as a direct result of Russia cutting off the natural gas supply.
The US isn't really suspceptible to this at the moment.
We subsidize food production for much the same reason: the US can't be starved by external forces. I have an issue with corn subsidies in particular but having enough food is a matter of national security. Just as having enough energy is. Over-producing food means severe events like droughts and floods don't mean a large number of people will starve.
If we cut anything it should be the ridiculous amount we spend on the military. We need this generation's version of the Truman Investigation Committee [1]. Some of our weapons programs are unjustifiably expensive (eg F35) and the amount of money thrown about in 2 decades of war in Iraq and Afghanistan in defense contracts and private militaries ("security companies") is disgusting.
But oil and gas? LIke it or not, this is something we need and will need for some time to come.
[1]: https://en.wikipedia.org/wiki/Truman_Committee