When it comes to subsidies Big Oil takes the cake and eats it too

Written by Jonathan Eisenthal

Two weeks ago Exxon announced third quarter earnings of $7.35 billion dollars–up 55 percent from its third quarter profits in 2009. Chevron disappointed investors with its $3.77 billion in profits, down from $3.83 billion dollars third quarter last year. ConocoPhillips earned $3.1 billion dollars profit for the quarter–double the profits for 3rd quarter 2009.

If the top three keep up this rate, that’s an annual take of more than $50 billion dollars.

So one wants to know why they need government hand outs, why they can’t ‘stand on their own feet’ as the Wall Street Journal demands of the still developing renewable energy sector.

A raft of permanent ‘gimmes’ not only boost the profits of these titan oil corporations, but the manner of support actually encourages inefficiency and higher carbon emissions according to an analysis by Boston-based New Fuels Alliance.

“The renewable energy industry just wants to be competitive,” said Jerry Ploehn, chairman of Minnesota Corn Research & Promotion Council. “Either Big Oil can give up its tax breaks and credits, or they stop throwing their money around agitating to end the ethanol blenders credit. They can stop fighting E15 too. All we’re asking for is a level playing field.”

A tax credit of 45 cents per gallon is paid to gasoline wholesalers for every gallon of ethanol they blend into their gasoline. The credit is due to end on Dec. 31, though a number of members of Congress are working on extensions.

Big Oil doesn’t have to worry about extensions. It’s tax breaks are a permanent feature of the US tax code. Thanks to these favors, the oil industry achieves an average corporate tax rate of 11 percent, which compares to 18 percent paid by the rest of America’s energy industries (New Fuels Alliance analysis).

“Oil companies deduct a flat 15 percent of their gross income in order to account for the decline in value of their wells as reserves are pumped out,” New Fuels Alliance reports. “In most cases, the 15 percent deduction exceeds the actual decline in value. Companies that invest in technology to extend the lives of older wells also receive an ‘enhanced oil recovery credit,’ often resulting in damage to the environment as extreme measures are used to mine unproductive wells for the last drop of oil. Federal tax policies also allow oil companies to defer foreign incomes, write off capital investments, and take immediate deductions on exploration and development expenses.”

New Fuels Alliance projected the oil industry’s share of energy tax credits to amount to 86 percent of the total amount–$16.1 billion in tax breaks–offered to the energy industry between 2005 and 2009. 
 
The advantage doesn’t play out only in transportation fuels–current tax law overwhelmingly favors fossil fuels over renewables when it comes to electric power generation.

Paul Woodin, an advocate for biofuels in Oregon recently reported, “The Government Accountability Office (GAO) examined federal incentives for electricity between Fiscal Year (FY) 2002 and FY 2007 and concluded that ‘tax expenditures largely go to fossil fuels.’ To be exact, ‘about $13.7 billion was provided to fossil fuels and only $2.8 billion to renewables.’ The GAO also determined that ‘U.S. subsidies for oil, natural gas, coal, nuclear and hydropower totaled approximately $500 billion from 1950 to 1977, or approximately $18 billion per year (2004 dollars).'”

Biofuels advocates urge elected officials, policy makers and the general public to consider the value of supporting the shift to renewable energy–energy that is cleaner than oil–both to capture and to use, and even more importantly, energy that is made here–which will help us keep dollars, jobs, and even soldiers here at home instead of sending them overseas.

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