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
Putting to one side the obvious talking point that any company will take government money if it is offered to them, it is worth saying that the energy sector costs a ton of time and money to get a project up and running. The oil and gas is getting harder to extract using traditional and inexpensive technologies. You have unconventional plays that need special tools, and you are also operating in all sorts of environments all around the world, all of which costs money to develop inversely proportional to the ease of accessing the area.
Now put on top most companies both need some energy infrastructure within their borders to get energy where it needs to go, and also want energy infrastructure within their borders both for job generation and for resource security and independence, and you start seeing how it’s not a question of, “Should the government pay energy companies to do business here?” but “Which countries are going to prioritize attracting energy companies to do business here?” There is an ongoing calculation driving a bidding war at all times of what it costs to operate, what are the benefits of domestic production, global pricing, global distribution, market demands, geopolitical concerns, and that’s all before the energy company has even lobbied for anything or offered people in positions of power the opportunity to work for energy companies during or after their time in government (depending on the rules of individual countries), all of which has been happening since energy production was sometimes as easy as sinking a well a few feet into the ground.
The country that cuts its subsidies tomorrow is going to lose long-term future development and employment in their country as the energy companies choose to go elsewhere. Meanwhile, energy prices in their country will rise, and the government that set that price rise in action will be punished for it. Also, the decision-makers behind that policy are not going to be welcomed into many avenues of employment after their time in power has ended, which —rightly or wrongly— is a factor many of those decision-makers do have in mind when they are deciding on something as radical as spiting some of the biggest companies in the world.
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