
Do Oil Companies Really Need $4B per Year of Taxpayers’ Money? - JumpCrisscross
http://mobile.nytimes.com/2016/08/06/upshot/do-oil-companies-really-need-4-billion-per-year-of-taxpayers-money.html?em_pos=small&emc=edit_dk_20160805&nl=dealbook&nl_art=5&nlid=65508833&ref=headline&te=1&_r=1&referer=
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exabrial
Whenever I see people discuss topics like this in person I usually ask them
what percentage of crude oil is actually burnt?

To my surprise most people don't know where plastics come from and a myriad of
other materials that are important in your daily life.

More than ~2/3 of crude is burnt in one way or another, but that remaining
~1/3 has life saving utility.

Even moving to an electric economy will still require crude oil: we need
carbon composite wind turbine blades, plastic insulators on wire, feed stock
to create bearing lubricants, chemicals to wash silicon to produce power
inverting chips, coke to produce steel, interior plastics for cars trains
buses etc.

I think it should go without saying burning hydrocarbons is not our best use
of them, but this industry requires more than just outright banning/taxation,
we do actually have to reach across the political bridge and begin to think
intelligently.

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CyberDildonics
What does any of that have to do with ending subsidies?

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thansharp
The fact that it underpins so much of our daily life, implying that
subsidizing them helps in ensuring those functions still remain intact.

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seanp2k2
From the examples, it sure sounds like there's a lot of opportunities for them
to turn a profit without all the help.

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nicholas73
"As a result, he thinks, the worldwide price of oil would inch up by only 1
percent."

This is total ivory tower quackery. Not even professional oil traders can
predict oil prices 1 year out.

Oil fundamentally has boom and bust cycles, due to large investments in time
and capital, and its demand inelasticity. That means that supply imbalances
cause wild swings in price.

Supply is not a constant function and cannot be predicted with so many actors.
You cannot reasonably assume players will manage the supply/demand balance. In
fact, they are incentivized to allow it to swing to either extreme (longer
discussion).

Long story short, you do not f __* with supply sources.

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ErikVandeWater
The 1 percent claim is probably ceteris peribus: 1 percent greater than it
would otherwise be. Not very well written though.

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nicholas73
Even that would not result in a mere 1 percent increase. Oil inelasticity is
extreme - can anyone think of a better example besides food and water?

Total world demand is ~96m bpd, and a mere 2m bpd oversupply caused the price
to collapse from $100 to $26 at lowest.

The only time 1 percent might be plausible is if oil had already reached
prices so high it's near the marginal benefit for consumers, or over long long
periods of time (but who cares, since you would have to pay exorbitant prices
in the meantime).

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tim333
There are no net subsidies to the oil and gas industry. Instead they are taxed
at about 45%. If a company's tax bill when you break it down is some large
number minus some allowances that doesn't mean the allowances are paid out of
taxpayers money, it's just how the tax is calculated.

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briantakita
> Natural gas is a slightly different story. It is not as much a global
> commodity. A decline of 3 to 4 percent in American production would raise
> prices by as much as 10 percent.

> In terms of carbon emissions, nothing much would happen at all, he concludes

There's no mention of fracking or other environmental damage encouraged by
these subsidies

It goes without saying that these subsidies cost all Americans money &
channels focus away from renewal energy.

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nicholas73
Fracking does not exist because of subsidies. The concept itself existed since
the 60's or so, but it never become economical until $100 oil (natural gas is
also produced as a byproduct). Currently American production is declining year
over year due to low prices, subsidy or not. Furthermore, one needs to
separate the subsidies that go to the oil industry - not like it all goes to
fracking companies.

Natural gas wouldn't just increase by 10%. That statement alone makes me not
click on the article. Gas is still under half of global prices in the US (due
to poor transport), despite this summer's runup. A decline in production,
meaning supply balance, would wildly swing prices higher. It wasn't long ago
that prices were $4-5 per mcf.

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fnordfnordfnord
Yes. Natural gas is absurdly cheap in most of the US, most of the time due to
the facts that (as you say) most of it is landlocked, or stranded, or some
form of can't get it to market because of the pipeline network; and that
Aubrey Mcclendon leased up half the damned country and frac'ed it all as fast
as he could, flooding the markets. We see periodic rises when the Northeast
has a cold winter, but unless LNG exporting becomes a thing we'll be in the
low single digits for another five or ten years or more.

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jorge-fundido
Not sure how I feel about characterizing this as a subsidy, but... while tax
breaks aren't the same as subsidies, they can effectively act like subsidies
in some cases. I found this list more informative than the article or even the
Metcalf paper:

[https://www.americanprogress.org/issues/green/report/2016/05...](https://www.americanprogress.org/issues/green/report/2016/05/26/138049/it-
is-time-to-phase-out-9-unnecessary-oil-and-gas-tax-breaks/)

The optimist in me wants to believe that our dependence on foreign oil
encouraged new domestic oil production via tax policy. I don't think that
nudge is warranted any longer. I'm not a fan of governments interfering in
markets, but in this case, better to incentivize alternative energy and not
fossil fuel.

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barney54
The title of the article is incorrect. The oil companies do not get $4B a year
of taxpayers' money. This isn't a transfer of money to the oil companies, this
is about tax credits and tax deductions, specifically--percentage depletion,
intangible drilling costs, and the manufacturing deduction.

Here's the actual article:
[http://i.cfr.org/content/publications/attachments/Discussion...](http://i.cfr.org/content/publications/attachments/Discussion_Paper_Metcalf_Tax_Preferences_OR.pdf)

A few more notes. The major oil companies cannot take full advantage of
percentage depletion or intangible drilling costs, only smaller companies.

The manufacturing deduction is available to all US manufacturers. If we get
rid of this deduction for oil companies, we should do the same for all
manufacturers.

An alternative perspective is that these tax preferences are similar to the
tax preferences all businesses receive (ie. being able to deduct certain
expensive, etc.). We should reform the tax code, but do so for all businesses.
More here: [http://instituteforenergyresearch.org/analysis/the-obama-
adm...](http://instituteforenergyresearch.org/analysis/the-obama-
administrations-dishonest-claims-on-big-oil-tax-giveaways/)

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Retric
Money is fungible so Tax credits are identical to directly handing money. Is
this a good reason to directly hand them money Y/N is a separate question, but
we do hand them money.

~~~
Lazare
There is a sense in which a tax credit is "identical" to handing over cash
directly. But in a very similar sense, that tax credit is identical to a tax
cut, and a tax cut is identical to the absence of a tax raise. Would it be
accurate to say that your income tax not being sharply increased next year is
"identical" to being handed a large pile of cash? Is every dollar that you are
not taxed actually a gift from the government?

Or to flip it around: If we decide collectively that the correct tax rate for
some activity is 20%, then that's the correct rate. Just because you might
feel a better rate would be 30% (or 10%) doesn't mean that we're actually
gifting the entity 10% of the revenue (or stealing 10% of their revenue).
Similarly, there's no objectively correct answer to how large pieces of
industrial plant should be depreciated beyond the accounting rules that
Congress, the IRS, FASB, etc., have enacted. Those rules not matching what you
or I would have chosen doesn't mean they're either a gift nor theft.

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toyg
_> a tax cut is identical to the absence of a tax raise_

Wat?

Assume I earn $100 and tax is 30%: I pay $30.

Tax gets cut to 20%: I pay $20.

Tax doesn't rise: I pay $30.

30 != 20. A tax cut is a tax cut, "absence of raise" is a different thing.

 _> Those rules not matching what you or I would have chosen doesn't mean
they're either a gift nor theft._

It doesn't mean they're _not_ a gift either. Those rules are the result of a
complex set of factors including campaign contributions, lobbying, revolving-
door promises and occasional outright bribes. They are not Holy Scripture and
everyone is entitled to criticise them, which includes defining this or that
break with words like "gifts", "giveaways", "pork" and so on.

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jgalt212
Does Elon Musk need all the corporate welfare he gets?

Do the drug companies need Medicare to not have the right to negotiate drug
prices?

Do large banks need to borrow over night at 0.25%?

The list goes on...

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appleflaxen
these questions are off-topic.

the existence of a problem is not invalidated by the existence of several
other problems.

~~~
jgalt212
I think you either have a very narrow definition of on/off topic, or you don't
understand the term.

