U.S. Subsidizes Oil Companies
|January 9, 2007||Posted by Staff under Progress Report, The Progress Report|
Corporate Welfare Details Released
U.S. Government Lavishes Welfare on Oil Companies to Deplete Natural Resources
by Kirsty Hamilton
During the latest round of negotiations under the UN climate treaty in Bonn, Greenpeace released a comprehensive and detailed analysis of US federal government subsidies to the oil sector. This follows a year after releasing a report comparing energy subsidies (fossil fuels, nuclear, renewables) in 17 Western European countries and the EU completed by economists at Vrije Universiteit, Amsterdam.
The new detailed report, “Fueling Global Warming: Federal Subsidies to Oil in the United States,” produced for Greenpeace by Doug Koplow and Aaron Martin at Industrial Economics, Inc found that the US government provided up to $11.9 billion in subsidies to the US oil industry in 1995 excluding the cost of defending Persian Gulf oil supplies (with their inclusion the figure rises to as high as $35.2 billion).
Among the major subsidies to the oil industry analyzed in the report are: the full cost to maintain the Strategic Petroleum Reserve at $5.4 billion; tax breaks to domestic oil exploration and production at $2.3 billion; and support for oil-related exports and foreign production at $1.6 billion.
Other key findings of the report:
- Oil companies continue to pay substantially less than the standard rate of corporate taxation, with payments in 1995 more than 23 percentage points below the statutory rate. The average tax rate paid by oil companies fell from 21.9% in 1981 to only 11.9% in 1995;
- Through creative accounting by oil producers and lapses in auditing practices by some government agencies, American taxpayers forfeit $200 million per year in royalties;
- Inadequate bond payments and user fees for the current stock of onshore and offshore oil operators shift up to $550 million in liability insurance premiums from oil companies to taxpayers;
- Subsidized export promotion through the Export-Import Bank and Overseas Private Investment Corporation continues to heavily favor oil over cleaner energy alternatives;
- The BTU tax proposed by Congress in 1992-1993, if enacted, would still not have been as large as federal subsidies to fuel.
The Executive Summary of the report “Fueling Global Warming: Federal Subsidies to Oil in the United States” is available at the address: http://www.greenpeace.org/~climate/oil/fdsub.html
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