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
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.
Latest Answers