Watching the debates, a laborious affair, I noticed Biden talked about cutting oil subsidies. Oil subsidies? Oil is one of the most profitable industries in the world. How can you screw that up? Unless you are George W Bush an oil company should be a no brainer money making machine.
I looked it up. According to the Fuel Freedom Foundation, US oil companies had about $10.7 billion in subsidies when tax breaks are included in 2015. That boggles the mind. The Environmental and Energy Study Institute puts the number at $16 billion with another $4 billion for coal in 2019.
What this means is petroleum prices at the pump are held artificially low. According to David Roberts in this Vox article, the price would be about $1.00 more per gallon. In my research I found claims of between $0.57 and $15.00 per gallon but Roberts backed his estimate with research. Fuel in the US is running about $2.00 a gallon this week so we would be paying $3.00 instead.
As some industry analysts point out this benefits Americans who have less income. This is because the tax burden is shifted to higher tax brackets. We pay the $3.00 a gallon anyway. By excluding tax breaks and subsidies we would be closer to balancing the books however. Biden didn’t talk about eliminating tax breaks, he only referred to subsidies in the debate.
If fuel prices were higher, alternative fuels would again be competitive. Oil companies do invest in alternative fuels, in particular ethanol. They have the brain pool to develop E85 and the infrastructure already exists. Auto manufacturers have been making vehicles that run on on the fuel since the 1990’s. There are aftermarket kits to alter gasoline powered cars to run on E85. We’re talking about a 85% reduction in emissions from automobiles; no electric car necessary.
Why then, do we continue to use fossil fuels at the rate we do? What kind of madness is this? Could it be that to maintain influence in oil producing countries and regions we feel the need to keep buying their oil? If we don’t buy the oil other countries will. This is the case in Iraq. With trade comes political influence. We can grow the corn and make the ethanol here but we would be losing influence in oil producing nations.