Just read a bit about the massive subsidies the fossil fuels industry receives in the U.S and I was confused. Aren’t these companies one of the most profitable ones in the U.S?
In: Economics
Because if the price of gas goes up a bit, governments topple. Can’t have that. Reelection efforts start the night after the election.
Yea, they are stupidly rich and they make even more money because they are heavily subsidized. Then they donate a lot of that money to politicians, who in turn give them more subsidies.
Then they all go to the same parties (which you and I aren’t allowed anywhere near) and give each other awards.
Good gig if you can get it.
Because they like money. Why would you not pay your politicians a few millions if you can make billions of it?
From a politicians stand point there are some reasons for these subsides (other than getting money from the companies). First is always creating/keeping jobs in the country and without subsidies it might be more profitable to produce somewhere else. Then there are strategic concerns about fossile fuel production in case of a war or durring a crisis.
Also if they are profitable depends very much on the specific sector and if you include things like ecological deamages.
Fossil fuels enable you to move goods around. If you can’t move goods to where people need them, their quality of life suffers. When people’s quality of life suffers, they vote for somebody who will promise to make it better. Therefore it’s in every politicians best interest to keep fossil fuels cheap and abundant. One of the tools they use to do that is subsidy.
Is this a trick question? They’re stupidly rich because they’re so heavily subsidized.
If the prices at the gas stations go up while you are in government you are going to lose.
It’s that simple. People will vote against everyone trying to remove those subsidies.
You’re not going to find a single answer because like a lot of things, the answer is complicated. Some things that go under the subsidies:
1. Heating subsidies for low income people. In some areas these subsidies are needed because otherwise low income people might not be able to afford energy to heat their homes. These fall under the fossil fuel subsidies.
2. Subsidies for farmers. This is less about whether or not the farmers can normally afford it as it is more about food stability. Farmers can’t always absorb large fluctuations in fuel costs, so some level of subsidies keeps their work stable. Fossil fuels also tend to be massive inputs into things like fertilizers.
3. Expanding exploration. This can be incredibly capital intensive and take years to start a new well and the firm doing the drilling/extraction might not be able to afford the upfront investment. Keep in mind that a lot of extraction in the US is not necessarily done by the big oil companies. Many of them are smaller operations that just sell the extracted fuels to the big oil companies who own many of the refineries.
It’s easy to think of the fossil fuel industry as some large monolith. In reality it’s an entire sector of the economy with a lot of separate players. Like with a lot of industries, most of us don’t deal with all of these smaller players and only seen the consumer-facing big names. And things like oil subsidies are incredibly broad and complicated involving a lot of different laws and initiatives. It’s easy to clump them all together, but like with anything a nuanced understanding is a requirement to drive toward any real change.
The more money you have the more you can spend on lobbying and ~~bribing~~ donating to political representatives for more subsidies, favourable conditions for you, and less favourable conditions for any potential competition and your employees. This tends to make your business even more profitable at which point you pay for even more lobbying etc
[https://www.eesi.org/papers/view/fact-sheet-proposals-to-reduce-fossil-fuel-subsidies-january-2024](https://www.eesi.org/papers/view/fact-sheet-proposals-to-reduce-fossil-fuel-subsidies-january-2024)
Per that the fossil fuel industry got about $750B in subsidies in 2022, but worth noting that **less than half of a percent** of that was actual cash handed over.
https://www.statista.com/statistics/294614/revenue-of-the-gas-and-oil-industry-in-the-us/#:~:text=In%202022%2C%20the%20total%20revenue,of%20211.2%20billion%20U.S.%20dollars.
In 2022, the US gas and oil industry had about $300B in revenue, so about 1% of that is the direct subsidies.
How else are they going to get stupidly rich?
Also remember that money lets you lobby politicians to get the govt to give you more money, or less taxes, same same.
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