Stephen Leahy, Inter Press Service,
UXBRIDGE, Canada, Sep 30 (IPS) - Why do U.S. oil companies -- some of the most profitable corporations on the planet -- receive 20 to 40 billion dollars a year in subsidies from the U.S. government?
And, in a time of skyrocketing oil prices and profits, why did the George W. Bush administration in 2005 authorise an additional 32.9 billion dollars in new subsidies over a five-year period?
"Those are very good questions," said Doug Koplow of Earth Track, Inc., an independent energy information research organisation in
"I don't have a good answer other than to say we've been subsidising American oil companies since 1918," Koplow told IPS.
Koplow's 2007 report to the Organisation for Economic Cooperation and Development puts the annual
"The EIA has a very narrow definition of what constitutes a subsidy," said Koplow.
Like many industrialised countries, the
Experts agree that both forms of subsidies encourage consumption and thus increase the price of oil.
Among the most common subsidies are construction bonds and research-and-development programmes at low interest rates or tax-free, assuming the legal risks of exploration and development in a company's stead and income tax breaks. Despite record high prices at the pump, the federal sales tax on petroleum products is lower than average sales tax rates for other goods. And on it goes.
Originally these production subsidies were intended to help the nascent industry meet a growing nation's energy needs. Despite record-high prices, that rationale remains firmly in place. In 2007,
And subsidy programmes from 1918 are still in place.
"I'm not aware of any oil and gas subsidy that has ever been phased out," said Koplow, the leading expert on
Energy subsidies are often simply hidden from public scrutiny. It's only recently been revealed that 40 companies granted leases between 1996 and 2000 for drilling in the
That study also revealed that the Energy Policy Act of 2005 would generate an additional 32.9 billion dollars in new subsidies in the form of tax breaks, reduced royalty payments, and accounting gimmicks over a five-year period.
"The report only includes the explicit subsidies we could find," said Erich Pica, an energy analyst at FOE.
"There are a whole lot of others out there that are less explicit," Pica told IPS.
These production subsidies do nothing to lower the price of petrol at the pump for
Skyrocketing oil company profits and prices did put some pressure on the
"It's outrageous that the big five oil companies who made 123 billion dollars in profit last year [ExxonMobil, Royal Dutch Shell, BP, ConocoPhillips, Chevron Texaco]continue to be subsidised by the U.S. taxpayer," he said.
"It's very easy to be in the oil business in the
And the public is largely none the wiser, she said.
This massive government intervention distorts energy markets, making it very difficult for alternative energy sources to compete without similarly massive subsidies. "And it promotes
While reducing consumption subsidies results in people taking to the streets in
The energy sector's control of the government is the strongest and clearest evidence of the corruption of the
"The private sector is manipulating the government for its own ends," Gelbspan, author of books on the energy sector's influence over government, told IPS.
The pace of global warming is already moving into overdrive and will become catastrophic without urgent action to reduce emissions. But action will not come from the White House, no matter who is charge, he lamented.
Copyright (c) 2008 IPS-Inter Press Service. All rights reserved.