Taking a closer look at the full costs of energy acquisition and dissipation
Most Americans, whether democrat or republican, fear the ever-growing projected budged deficit of over a trillion dollars. Subsequently, most Americans would agree that major budget cuts need to be made in many different areas of the budget. Personally, I was pleased to see proposed cuts happening through the elimination of tax credits for the oil and gas industries. Yes, this will cause changes in the price of energy for consumers, but this would provide incentive to conserve and develop alternatives- something we should be working towards anyways. Considering the fact that there have been proposed budget cuts of tens of millions of dollars for public education, aka the for the future of America, I think people should be pleased to see a proposed cut in energy industry subsidies. And, according to the polls, this seems to be the case.
I agree with the previous post and am also convinced that the decrease in tax credits for the oil and gas industry will be beneficial to the US, even though consumers will have to face higher retail prices. However, compared to citizens of other advanced economies, the US gasoline consumer would still have nothing to complain about. On the international fuel price chart (http://www.gtz.de/de/dokumente/giz2011-international-fuel-prices-2010-2011-data-preview.pdf), the US today belongs to the category of countries with “very high gasoline subsidies, with a retail price BELOW the price for crude oil on the world market” at 76c/litre = $2.87/gallon. the US is listed next to Iraq, Azerbaijan, Kazakhstan and Burma. In comparison, almost all other advanced economies are categorized on the other extreme of the spectrum, the “very high gasoline taxation” category with the following exemplary gasoline retail prices: Germany at $1.90/litre = $7.18/gallon, France at $1.98/litre = $7.48/gallon and Denmark at $2.00/litre = $7.56/gallon. The elimination of tax breaks in the coal industry, even though not as large, should also benefit the environment and bring more focus on investments in renewable energy sources. I don’t really understand why there needs to be a $6bn cut in subsidies for renewable energy sources though or I think there needs to be more clarification in the report about WHICH kind of renewable energy industries will be targeted by the budget cuts, since there is a substantial difference of costs and benefits associated with the production and use of different renewable energy sources, for instance wind and solar energy vs. biomass... Moreover, there is a lot of anxious talk about how the Chinese are investing more and more in R & D in alternative energy sources (China now being the largest producer of solar panels and also the country with the largest wind resources) and how the US might be lacking behind not just in quantity, but also in quality. If we assumed this to be true (which I personally do not believe) and given the fact that Americans seem to worry a lot about soon having to “catch up” with the Chinese in renewable energy technologies, why is there not more investments in these areas, but instead a subsidy cut? (Apart from the fact that I don’t see why it’s so problematic that another country develops the technology first? - it might even be cheaper for the West to import it from China?)
After everything we've talked about in class, it seems completely logical to me that we begin by decreasing oil and gas subsidies in order to slow the rising deficit. While the result would be increasing prices for current energy use, it would encourage innovation and result in new, more efficient alternatives sooner. The statistics in this poll show that majority of Americans are in favor of eliminating tax credits in the oil and gas industry, which is great; but I am still wary of these numbers. While it's easy for people to support the idea of certain changes like this in the abstract, the consequences of putting those thoughts into action is a bit more sobering.
I agree that cutting oil and gas subsidies to slow the deficit makes sense as these funds comprise 52% of total benefits allocated to energy sectors. As Parker and Kelsey pointed out, this will increase the price for current energy use. Increased price would encourage consumers to conserve. Cutting oil and gas subsidies would also encourage innovation and perhaps a shift towards more diversified sources of energy.
After being thoroughly disappointed that I could not discover if I was smarter than Al Gore, because the link was dead, I continued to read an article that proved to tag on to a similar issue that we have discussed in class. It seems Obama is thinking of cutting these energy subsidies simply to relieve the pressure on our enormous budget deficit. The article does not talk about the other effects that could be caused by a decrease in subsidies. Oil prices will rise, which could lead to a macro shock. It could also lead to a larger incentive to develop new technologies or use more alternative energy sources. Energy use may also decrease. Even though the poll shows that the majority of Americans agree with a subsidy cut, they are only saying that because they see the oil companies as malicious. They don't take the other things into account.
If the majority of Americans already feel that it is acceptable to cut subsidies to energy produces, it seems like a politically friendly move. It would help to reduce the deficit while at the same time increase the price of energy. I am not sure that consumers, when polled, realized that these two things are correlated. Increasing the price of energy, as Katie said, would ultimately be beneficial because it would make it impossible for people to use as much as they do now. This will also create incentives to develop new technology as the subsidies will no longer be as beneficial.
I find it interesting that 75% of Americans would be in favor of cutting oil subsidies even though people complain about gas prices as they are. This is a stated preference survey though, so the respondents may be in agreement with the idea of subsidy cuts now, but then they may complain about the cuts once they go into effect and gas prices rise even further. It is a good thing anyway that the public is at least starting to realize that there is an externality caused by these oil subsidies and that they agree, at least in principle, that we should cut subsidies to align private costs with social costs.
This is quite absurd. I have trouble understanding what drives policy makers to opt for policies which essentially increase consumption - evidently these subsidies are not efficiently targeted and so provide somewhat of a blanket benefit for the energy industry. The amount here is nearly 20% of the GDP of Denmark - what can this money do in other industries? The oil industry in particular has been doing quite well in the past decade (they pulled through the crisis better than most others), yet they are still subsidized. Politics aside, this money may very well be badly invested. It really depends on which policy objectives we are seeking to fulfill, but even if low oil prices were out top most priority, could subsidies not weaken the ability of the domestic oil companies to weather supply disruption from the rest of the world? One of the customary reasons why we deem subsidies to be bad is their ability to prevent efficiency in a sector. I mention this not because I am concerned with profit outcomes or the like, but because healthy companies tend to weather shocks better than those which have not had "to stand on their own two legs". Also, it seems entirely absurd to subsidize a sector which has significant externalities - in effect we are externalizing these further.
It's quite annoying to know how profitable oil companies are, particularly when oil barrels are being sold for more than a hundred dollars each, yet they are the ones who get the largest share of subsidies. As others have mentioned, it's probably a step towards the right direction the fact that 70% of the American people are willing - at least this is what they say - to see credit cuts for the oil industry, even though most of them are probably unaware that fewer subsidies inevitably imply greater gas prices.
I agree with previous posts and am also convinced that the decrease in tax credits for the oil and gas industry will be beneficial to the US, even though consumers will have to face higher retail prices. However, compared to citizens of other advanced economies, the US gasoline consumer would still have nothing to complain about. On the international fuel price chart (http://www.gtz.de/de/dokumente/giz2011-international-fuel-prices-2010-2011-data-preview.pdf), the US today belongs to the category of countries with “very high gasoline subsidies, with a retail price BELOW the price for crude oil on the world market” at 76c/litre = $2.87/gallon. the US is listed next to Iraq, Azerbaijan, Kazakhstan and Burma. In comparison, almost all other advanced economies are categorized on the other extreme of the spectrum, the “very high gasoline taxation” category with the following exemplary gasoline retail prices: Germany at $1.90/litre = $7.18/gallon, France at $1.98/litre = $7.48/gallon and Denmark at $2.00/litre = $7.56/gallon. The elimination of tax breaks in the coal industry, even though not as large, should also benefit the environment and bring more focus on investments in renewable energy sources. I don’t really understand why there needs to be a $6bn cut in subsidies for renewable energy sources though or I think there needs to be more clarification in the report about WHICH kind of renewable energy industries will be targeted by the budget cuts, since there is a substantial difference of costs and benefits associated with the production and use of different renewable energy sources, for instance wind and solar energy vs. biomass... Moreover, there is a lot of anxious talk about how the Chinese are investing more and more in R & D in alternative energy sources (China now being the largest producer of solar panels and also the country with the largest wind resources) and how the US might be lacking behind not just in quantity, but also in quality. If we assumed this to be true (which I personally do not believe) and given the fact that Americans seem to worry a lot about soon having to “catch up” with the Chinese in renewable energy technologies, why is there not more investments in these areas, but instead a subsidy cut? (Apart from the fact that I don’t see why it’s so problematic that another country develops the technology first? - it might even be cheaper for the West to import it from China?)
I definitely agree with the majority of Americans who think that we should cut the subsidies to the oil companies. I had no idea that the government spent that much money on subsidies for energy. With the amount of money that oil companies are making currently, I think that cutting this money would be extremely beneficial for our country. I do not think that money should be cut from coal, nuclear, or renewable fuels though. It seems like the majority of that money is being used for research and development, which is extremely important for creating cleaner energy. Hopefully they will be able to find the right balance between cutting costs and promoting sustainable development.
It doesn't make much sense to me that the sources of energy with the greatest negative externalities are receiving the largest subsides. I know people want cheep energy but the price of the energy does not reflect the actual cost of the energy production much less the social costs associated with oil, coal, and ethanol. Since the government is looking for areas to make budget cuts, this is a great place to start. Not only would it help to reduce the deficit, but it would raise the prices of the most damaging sources of energy. This would encourage energy conservation and give alternative energy a fighting chance. It wouldn't quite have the benefits of a carbon tax but it would be a good start. The biggest challenge in such a move would be the political repercussions of hurting "traditional" american industries that have a lot of political power. I am glad such a high percentage of americans are interested in such a budget cut. Maybe having two clear benefits from such an action will bring about enough public and political approval for this to actually happen. I also would like to see more of these subsidies redirected into research and development of cleaner forms of energy realizing this would still include cleaner coal and oil technologies as well.
As mentioned above by most of the other Econ 255 students, it seems that if President Obama is looking for a place to make budget cuts, a good place to start would be the subsidies and tax breaks that the oil and gas companies receive annually from the U.S. government. However, as we have seen from our readings in the Harvard and Schrag articles, maybe we should wait before completely removing all of that money out of the energy sector of the budget. Redistributing some of these funds from carbon-emitting energies to alternative energies may be in the country’s (and the world’s) best interest.
I agree with the Americans polled in this article that we should decrease federal oil and gas subsidies. Something definitely needs to be done about the rising deficit, and I think that decreasing these energy subsidies is a step in the right direction. As many people already mentioned, the decrease in these subsidies would lead to an increase in the price for oil and gas. Although no one wants to pay more for oil and gas, I think it can ultimately be a good thing, because it will encourage people to conserve more energy, as well as increase the pursuit for less costly alternatives, which we need anyway. Although I think it is a good idea, I too am surprised that most Americans in the poll are in favor of cutting gas and oil subsidies, because most Americans seem to think that high gas prices are a crisis. I wonder if they realize all of the consequences of these proposed budget cuts.
US budget cuts proposal 2011 I agree with previous posts and am also convinced that the decrease in tax credits for the oil and gas industry will be beneficial to the US, even though consumers will have to face higher retail prices. However, compared to citizens of other advanced economies, the US gasoline consumer would still have nothing to complain about. On the international fuel price chart (http://www.gtz.de/de/dokumente/giz2011-international-fuel-prices-2010-2011-data-preview.pdf), the US today belongs to the category of countries with “very high gasoline subsidies, with a retail price BELOW the price for crude oil on the world market” at 76c/litre = $2.87/gallon. the US is listed next to Iraq, Azerbaijan, Kazakhstan and Burma. In comparison, almost all other advanced economies are categorized on the other extreme of the spectrum, the “very high gasoline taxation” category with the following exemplary gasoline retail prices: Germany at $1.90/litre = $7.18/gallon, France at $1.98/litre = $7.48/gallon and Denmark at $2.00/litre = $7.56/gallon. The elimination of tax breaks in the coal industry, even though not as large, should also benefit the environment and bring more focus on investments in renewable energy sources.
The rising deficit has been a major political concern indefinitely, and it makes sense that subsidies for oil and energy companies could be cut significantly to address the problem. The taxpayer money that previously went to subsidizing oil assets could be utilized for research in alternative energy and technologies that could make gas combustion more efficient. The fact that $41 billion is given to oil and gas companies compared to a much less significant $6 billion for emerging technologies like ethanol and renewable fuels seems counterproductive for technology advancement in the energy industry. Although gas price rises would be unpopular with the public, it would teach people to cut down on their personal consumption. Ultimately, this decrease in the burning of fossil fuels would have major environmental benefits.
I agree that it seems logical to cut oil companies budgets as the country attempts to cut its debt. However, oil companies receive 52% percent of the energy subsidies but they provide more than 52% of the energy supplied to the country. I agree that more money could be allocated to research and development for alternative energies however natural gas is a domestic form of energy that is clean burning. Also, subsidizing coal contributes to environmental degradation but must be considered as an energy source if the US wants to be independent from foreign oil. Another thought about oil companies and that not every oil company is a huge corporation such as Shell or Exxon that has billions of dollars of revenue. Independent small oil companies exist across the country and a government subsidy may make the difference whether a small company drills or not. Choosing not to drill eliminates jobs and lowers gdp. I agree that it is absolutely beneficial to promote and explore alternative energy but I am unsure that hurting oil and gas companies is the most effective way to do so. Also, if the country is still in an economic slump it would seem more important to store the economy to full vitality before slashing spending.
It's good to see that the administration are looking to cut the energy susidies, outside of nitpicking at the much smaller funds, in comparison, to educations or elderly. If only the administration will take into account the environmental damages of their actions, there would be less hestation in cutting much of the energy susidy. With the current global warming and possible depletion of some energy sources, it doesn't make much sense that the government continue to provide susidy which while keeping the price constant, also keep energy use constant and even increasing it, rather than decreasing consumption. Taxpayers need to be aware of the situation, knowing that these susidy cuts, will increasing their current cost, will provide more future benefits. Also the consumers should know they are paying for much of the susidies already, for example, the $58 billion loan to nuclear energy, which is very likely picked up by the taxpayers. With better information distribution, it seems everyone is going on the right track.
As we talked about in class, it has long been assumed that low energy prices are a requisite for economic growth. However, this is empirically proven to be a false assumption in countries with high energy prices. Subsidizing coal and oil, to keep energy prices lower, and thus stimulate consumption, also raises the environmental and security costs of using these fuels. The environmental costs we've discussed are very high and the extent of the damage and future damage is still unknown. The costs of securing oil in the Middle East, especially our relationship with Saudi Arabia, are extremely high. If oil and coal prices rise, firms will be incentivized to invest in research on alternative energy sources, such as biofuels. Cutting subsidies to these companies may be both part of an answer to the budget issues and help to develop alternative energy sources.
The growing national debt is rightfully causing Americans to reexamine spending to determine where money is being “wasted”. There are so many inefficiencies that the government has allowed that backtracking seems almost impossible. It is understandable to provide incentives for energy producing firms to be created. But once that firm has reached a mature, profitable stage, I believe the subsidies should be reduced/if not eliminated. Providing subsidies for companies that make record profits as everyone else suffers seems unbelievable. There are so many sectors such as alternative energy, education, etc. that should be focused on to provide increase in society’s well-being. Consumers may not realize that cutting subsidies for oil companies may increase the price of oil. However, wouldn't that increase be distributed globally? And higher prices would force more innovation from the private sectors. Also, the money taken from the subsidies could be relocated to lower SES individuals so that the extra burden could be mitigated. Subsidizing already high profit oil companies just shows how inefficient our government budget allocation has become.
The budget deficit continues to be a hot topic for debate in the United States, and there is constant debate over how to reduce spending. I think that a reduction in oil and gas subsidies would be beneficial as it would require companies to raise gas prices. These prices would allow a move towards more alternative energies. I, however, still believe coal subsidies are important as we have yet to utilize other forms of energy with respect to electricity. Moreover, subsidies that go into R&D for carbon capture and sequester should continue if nothing else.
Although eliminating tax credits for the oil and gas industries will raise energy prices, it will encourage conservation and the development of alternatives. As eliminating these tax credits will make an insignificant difference in the deficit, I think most or all of that money should be put toward research and development for clean energy. Seeing that $41b goes in to oil and gas and only $6b to renewable energy is concerning. These amounts should be reversed as the environment is being significantly damaged and an alternative is very important to find.
When the American people think about who in this country does not need help they tend to think about bankers and big companies. Most drivers feel like the oil companies have them by the throat, and feel silly having their tax dollars help these major corporations. I also imagine that most of these companies would be fine without the subsidies. For many situations, one could imagine that prices would not increase too much, since consumers find ways to use less if price increases. Maybe people will use less heat in the winter and less AC in the summer, or drive less or buy more energy-effecient appliances. Yet, I worry that many energy companies have monopolies- especially local utilities. However, I worry about cutting the government funds for research into alternative energy. We need to continue looking for alternatives, even in times of depressed economy.
I found it interesting that the majority of Americans find it acceptable to cut subsidies and tax credits to the oil and gas industries. That is a good side that people are starting to understand our oil dependence and want to begin to break away from it. I hope to see these subsidies reduced at some point in the near future. However, I do not think right now is the best to cut the subsidies, with unrest in Libya and places in the Middle East oil is over 107 dollars a barrel and gas prices are very close to 4 dollars a gallon. Cutting these subsidies would increase the price of gas to even higher levels. I am no Sarah Palin, but our economy is just getting out of a tough recession and a large jump in energy prices could cause problems. Once things calm down and the price of oil declines to normal levels, I think the subsidies should be cut. It will force people to conserve and look for alternatives.I would hope that the amount of subsidies for renewable fuels will increase in the near future. Those types of fuel are the future and R&D needs to be done to make them more affordable. Solar, wind, and geothermal fuels are the best way for America to begin to deal with the environmental issues
Admittedly, I do have a bias in that I find the incentive structure to be counterproductive towards its original intentions (a.k.a. representing the interests of U.S. citizens). However, I do find it rather odd that the oil industry had continued to be subsidized, not that it was subsidized initially. Although, I feel that completely eliminating all subsidies might not be the best idea in terms of thinking about the environment. Specifically looking at oil, gas, and coal, subsidies might help in the short-term with reducing carbon emissions if it were put towards producing greener energy. Like the article mentions, the subsidies are going towards carbon sequestration.
Although it is generally agreed upon among Americans that the government must work to cut the budget and reduce the deficit, it is both ironic and typical that 47 percent say "eliminating tax credits for the oil and gas industries" is totally acceptable and another 27 percent find it mostly acceptable. While it is currently popular to be environmentally conscious and in favor of reducing the deficit, i would argue the majority of these voters would vote in the other direction if asked would you impose a tax on gas to internalize the externalities and help sequester carbon. While eliminating the subsidy on oil and gas has inherently the same type of effect as a tax on oil or gas, Americans are much happier to see the burden placed on producers and do not realize that they are in fact forcing producers to internalize the externality which will in effect raise the price of gas.
As Jeff wrote in his post, the „ Are you smarter than Al Gore?“ link unfortunately doesn’t work :( However, the real game here could be named „Is it smart to cut subsidies for energy industries?“ From a purely economic viewpoint, disregarding politics, cutting energy subsidies will cause the marginal cost curve of fossil fuel and alternative energy companies to shift up, thereby causing price to increase and quantity of fuels to decrease. This is a way to help these companies push their marginal private cost curves back towards the aggregate marginal social cost curve, by internalizing some of the externalities that the consumption of energy, especially fossil fuels, causes. Hopefully this will lower pollution through decreased amounts of energy consumption. However, I’m not convinced that some of that money shouldn’t go somewhere. Investment in research and development of cheap, clean and effective alternative fuels needs to made at some point in order to push our society away from heavy carbon emitting fuels and towards a more environmentally friendly future. The part I find absurd about this article though is just how small a huge number like 40 billion dollars can seem in relation to a more than 1 trillion dollar deficit…
I think the quote that the article ends on is fantastic:"I suspect that the relative share of subsidies to renewables has increased more quickly in recent years than subsidies to fossil," Koplow writes in an e-mail.It's a rather deceiving quote because the statement is so indefinite. Whether or not renewable energy sources have received more subsidies in recent years than fossil fuels, overall renewable energy receives the same amount of subsidies as ethanol, which is just a terrible energy source. Ethanol is not renewable and receives 6 billion. On the other hand, renewable energy sources receives 6 billion in subsidies but these subsidies are divided among the many different forms of renewable energy sources, so in reality each form of renewable energy receives far less subsidies than any other nonrenewable source. This is a crime. I hope Obama does make some cuts on fossil fuel subsidies, or at least show renewable energy sources some legislative love and increase their subsidy amount so that it is twice as much as coal.
Rather than providing subsidies to oil companies it makes much more sense to tax their production of fossil fuels. As we talked about in class, the revenue from such a tax could be used to fund research and development into alternative fuels such as solar, nuclear, wind, etc. Increasing the cost for fossil fuels is the only way to expediate the development of technologies that can help to ween our ever-growing dependancy on fossil fuels. Our current fiscal policies with respect to the acquisition of fossil fuels are antiquated and desperately in need of revitalization.
Based on this article and material covered in class, I agree with most of the students that the subsidies provided to oil and gas are unreasonably high. I'm interested in the performance of renewable energy here in the states. The blog article mentioned wind energy being the largest growing alternative energy source - on pg. 28 of this article (http://www.nrel.gov/analysis/pdfs/46026.pdf.) there's evidence to show that lack of credit actually led to a decline in wind energy despite the availability of producing more. Granted, this data is from the '08 credit crunch, but it's a growing industry (unlike oil) that could have greatly benefited from an increase in government subsidies.Another interesting article - http://www.world-nuclear.org/info/inf01.html. Not so much for content, but for the graphs. It provides a nice comparison of US energy consumption compared to the rest of the world.
I think that once the ~75% of Americans polled who said that they think eliminating tax credits for oil and gas companies is definitely or mostly acceptable realize that this means higher gas prices they will find it mostly unacceptable. Although it is nice to think that Americans support this idea, I don't believe that they are realizing future monetary consequences that they will have to bear, and thus this plan will most likely end up being politically unfeasible, a recurring issue when talking about environmental policy.
The budget deficit continues to be a highly publicized topic in which the government is struggling to find solutions. I like the idea of cutting subsidies to oil companies for multiple reasons despite the inevitable rise in the price of gas. If this rise in price causes fewer people to drive, then this initiative is reducing the negative impact imposed on the environment from the burning of oil. In addition, the rising price of gas will also lead to research and development of environmentally friendly alternatives which will combine with less gas use to further decrease humanity's harmful impact on the environment through the burning of fossil fuels.
I would agree with many of the previous posts that the best move seems to be cutting subsidies to the oil and gas industry. They are receiving a substantial amount of money compared to all other energy sectors; if budgets need to be cut, it would make sense that it would come from there. I personally feel if the administration finds it acceptable to cut millions of dollars in funding to education programs, they can also get rid of some tax breaks for the oil and gas industry. It might push prices up, but that would hopefully lead to more research and development and quicker implementation of alternative energy sources. Many of our readings have emphasized that diversifying our energy portfolio should be one of our prime goals. I don’t think cutting a few billion dollars to the oil and gas industry will achieve that goal, but it’s a place to start.
It is encouraging that a majority of Americans support the elimination of subsidies to the oil and gas industries. But it is very possible when the subsidies are cut and energy prices begin to rise that there might still be a backlash against this policy. The last couple of weeks have shown that even the thought of higher gas prices can cause people to overreact, driving the price even higher. Even though Americans may support these cuts now, they will probably be angry with the president when energy prices increase. It might be wise to make the cuts in increments, instead of decreasing them significantly all at once, in order to temper the effect on the economic recovery. In the long run, however, these cuts will hopefully fuel research into alternative energy sources in two ways. First, the demand for a cheaper alternative to the conventional energy sources that have been subsidized but are now more expensive, and a diverting of tax payer money into research and development instead of subsidies.
It seems to me that a total of $41 billion in subsidies to the oil and gas industry is extremely high. This number, at 52% of benefits to the energy sector, does not reflect the increased concern for lowering carbon emissions by using renewable fuels. Jonathan Shaw, in his article “Fueling our Future”, discusses this issue and offers some insight. Something I learned from his article is that diversification of fuel sources is a key method for lowering our carbon emissions. The world needs an energy portfolio that balances oil, gas, nuclear power, coal, and renewable sources. The subsidy plan does not promote balance. It is clearly skewed towards protecting the oil and gas industry rather than letting market forces determine the price.
Post a Comment