Big Oil Welfare

Jeff Siegel

Written By Jeff Siegel

Posted May 16, 2011

I got the following instant message from my colleague Keith Kohl last week:

77% of global energy will be renewable by 2050? They taking bets on that one?

Keith was commenting on a report released last week that suggested renewable energy could supply 77 percent of global electricity demand by 2050.

The truth is this is absolutely correct.

In theory, the world could get 77 percent of its power from renewable sources by 2050.

But in practice, well, I wouldn’t hold your breath.

As I told Keith last week…

Read the Fine Print!

On page three of the report issued by the Intergovernmental Panel on Climate Change, you can find the following sentence:

Public policies that recognize and reflect the wider economic, social and environmental benefits of renewable energies, including their potential to cut air pollution and improve public health, will be key for meeting the highest renewable deployment scenarios.

And there you have it: the escape clause — at least for the United States, anyway.

When it comes to providing strong public policies that support renewable energy — on a federal level — we continue to come up short. And that will continue to be the case, as special interests with fat pockets will always dictate policy in Washington… especially when it comes to energy.

Why else do you think Washington continues to allow billions of dollars in continued welfare for the oil industry — an industry that is both profitable and mature?

And despite what some “news” sources would have you believe, it isn’t just Republicans turning a blind eye to these subsidies. They’re all on the take.

In fact Louisiana Senator Mary Landrieu recently had a temper tantrum over her party seeking to end $4 billion in Big Oil handouts. She actually called it “unfair”, saying the end of those subsidies would not reduce gasoline prices by one penny.

Interestingly, that was never the point. And she knows it.

It’s not about reducing the price of gasoline. Thanks to the basic fundamentals of supply and demand, you can kiss that pipe dream goodbye. And I say good riddance!

No, this is about no longer expecting the oil companies to do business on the backs of hard-working American tax payers.


But wait, there’s more

Check out this excerpt from a ConocoPhillips press release that went out last Wednesday:

Further expanding on the outlook for the company, Mulva expressed concerns about the challenging political environment facing the energy industry, in particular, the potential impacts of increased regulatory burdens and proposed tax increases.

“These unprecedented proposed taxes, targeted at only five companies, would have serious effects on our company. We already have the highest effective tax rate among companies in the United States and these proposals unfairly single us out for additional taxes,” said Mulva.

“Not only would increased taxes cost jobs, raise consumer prices and shrink government revenue, but they would also hamper our ability to remain competitive and reinvest in jobs, new energy technologies and resources in the United States and internationally.”

So basically, Conoco CEO James Mulva (along with plenty of his supporters in Washington) has turned the idea of ending $4 billion worth of subsidies for a mature and profitable industry into “additional taxes”.

Can you believe the stones on this guy?

Then he claims that these “additional taxes” — or as we like to call them, unnecessary uses of your tax dollars — will hamper the oil industry’s ability to reinvest in new energy technologies.

Is it just me, or does it seem a little ridiculous to expect all of us to pay for the oil industry to develop new technologies?

These guys made $32 billion in profits in the first quarter of this year alone. And they need your money in order to remain competitive?

Meanwhile, over the past 20 years, huge advances in solar and wind technology have been made — without billions in annual subsidies. Electric cars have gone from being nothing more than glorified golf carts to high-torque monsters rocketing from 0 to 60 in 3.7 seconds — again, without billions of tax payer dollars.

And over the past 20 years, how far has oil drilling technology advanced?

It’s advanced tremendously!

Yet, even with those advances — partially funded by your tax dollars — we still can’t quench our thirst…

My friends, it’s supply and demand, not lack of effort, that’s dictating our energy future.

But those dolts in Washington are still betting on the losing horse in this race. And their doing it with your money.

Of course, no matter how hard Big Oil tries to keep sucking off the government teat, essentially stealing your tax dollars via high-priced lobbyists and bureaucratic prostitutes, they can’t change the basic fundamentals of supply and demand in a post-Peak world.

So my take: Come election day, remember who voted to pilfer your pockets for Big Oil welfare.

And keep buying oil on dips. Make no mistake about it — $100 oil is a gift!

To a new way of life, and a new generation of wealth…

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Jeff Siegel
Editor, Energy and Capital

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