Reader Question: Oil Subsidies?

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Here’s the latest reader question, along with my reply!

Susan writes: Hi Eric, I just listened to you on the Energy Week podcast. I agree on most of your assessment of EVs. However, you addressed the subsidization of EVs but did not mention the subsidization of fossil fuels. Was that a deliberate omission or do you think that doesn’t equate?

My reply: It’s a red herring that oil is subsidized. If anything, money is spent – on “defense” to keep prices high by limiting supply.

If the proverbial spigots were opened up, the price of oil would plummet. It is kept artificially high by throttling back on production, by restricting what is brought to the world market – to maintain petro dollar control over oil.

The price of oil is also made artificially higher by confiscatory taxes which amount to more than 20 percent of the cost of each gallon of gas made from the oil. Meanwhile, EV owners pay no motor fuels taxes whatsoever – another subsidy designed to make the EV seem less costly than it is – and it still costs far too much to be cost-competitive with IC.

Oil does not need to be subsidized.

There is ample supply – and natural demand. The “peak oil” shibboleth has been exposed for the shibboleth it always was. America is now the world’s leading producer of oil – and may soon become its largest exporter. Twenty years ago, there were hysterical ululations about the wells running dry and imminent scarcity. Now that we know scarcity isn’t a threat, a new threat had to be created – carbon dioxide “emissions” and “climate change” – to justify the force-feeding of electric cars and their necessary subsidization.

EVs cannot survive – as other than toys for the very affluent – without massive subsidies. IC cars do not need subsidies of any kind to be functionally or economically viable.

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13 COMMENTS

  1. Saddam Hussein in his war with Iran ran up huge bills. As a result they were pumping oil like mad to pay them off. This drove oil prices way down. Then SH asks fedgov about Kuwait slant drilling into Iraq’s oil fields. Fedgov says they won’t get involved in their disputes. SH launches an invasion. Fedgov gets involved. Gulf War 1, the first of the modern oil wars begins. Oil prices increase. Why did SH get set up? Because he was driving the price of oil down. Oil “subsidy” keeps control of oil in the “correct” hands and as such the price up. There are oil leases on federal land that do not get developed. It’s about keeping the oil off the market.

    But the era of LIRP and ZIRP had a problem. Oil prices were high and money was looking for a return. It found the small companies in shale and other non-traditional oil extraction. Oops. Then the Saudis failed in putting them all out of business.

    • The drop in crude oil prices AND natural gas in the mid-1980s also contributed to the downfall of the Soviet Union, especially the latter. The same problem exists for its primary successor, the Russian Federation. Every Putin goes on a temper tantrum, it’s about driving oil and natural gas prices UP to bring money into Russian coffers, especially via Gazprom, which Putin has a significant share of.

      IDK if Sadaam’s gripe about Kuwaiti “slant-drilling” into Iraqi oil deposits was legit, but certainly he had a long-running feud with the Kuwaiti royalty (Al Sabah) which he figured he’d resolve by booting them out and taking their little kingdom as the “19th province”. He figured, incorrectly, that the USA et al. wouldn’t do anything about it, and really doubled down on his political miscalculation by firing Scud missiles at Israhell (Israel). Wrong folks to piss off, and had he forgotten how they managed to bomb his nuclear reactors at Osirak back in ’81?

      • the SCUDs fired in Israel’s general direction were after fate was already sealed and fedgov had decided to wage war. At that point it didn’t much matter consequences wise.

  2. Here in New Zealand, unleaded is currently at $2.19/LITER or almost $11/US gallon and over half of the price is theft (taxes), including a 15% GST (goods and services tax) on the tax that’s already in the retail price!

    I hate theft, but taxing a tax is as dystopian as it gets in the Nanny States of the world. Meanwhile, the latest government “Wellness” Budget includes over $450/household for (government owned) rail subsidies. An enterprise that is not only supposed to be self supporting, but paying dividends!

    Yeah right, Tui.

    • Hi Alexander,

      Amen!

      People have become accustomed to tiered taxes (theft) which makes it go down easier, apparently. You earn a dollar; the central government steals say 28 percent of that in “income” and “medicare” and “social security” taxes/theft. Then the local/state government steals another 5-10 percent. What you are left with is about 50-60 cents of the original dollar – and you use this to buy things like a car, which is taxed – and then the fuel, which is also taxed.

      If these taxes didn’t exist, most people could live comfortable/middle class lives on $20k a year. But because of taxes, they have to earn at least twice that just to maintain a $20k standard of living.

      Imbeciles claim that “we” get so much in return for all the taxes ripped out of our earnings. If so, why the need to rip them out of our earnings? Surely, it would be worth it to most of us to freely pay for all the wonderful services and so on “we” are getting from the government…. right?

      • It’s not that bad..YET…here in the (once) great state of Californ(icate), where our gas and diesel is almost a buck a gallon MORE than in other states, thanks to local Dummycrat nitwits, especially our erstwhile (mis)Governor, Jerky Brown(nose), whom made a once “temporary” fuel tax permanent, and the idiot voters failed to repeal it with Prop Six last November (I suspect they actually DID vote to repeal, such is how bad voter fraud in this state has become, never mind all the last-minute “vote harvesting” that turned so many close elections in Dummycrat favor).

        It’s time to GTFO out of Cali(porn)ia. Or, along with the likewise disaffected southern counties in Oregon, the Northern CA counties secede and form the State of Jefferson.

        http://www.soj51.org

      • Do NOT move to NZ, the horseface who runs the joint is a mooslim loving woman. Her gov’t is in win the process of removing guns from law abiding people, while leaving moozies to keep their guns to practice jihad. And both NZ and Australia governments are sucking up and appeasing the chinese and the moozies in hopes of avoiding wars that have plagued the rest of the world. Australia is in the process of selling prime infrastructure to the chinese in return for huge bribes that get deposited into overseas bank accounts. The wars the msm keep out of the papers. Lots of other shit going on in both countries here too.

    • Illinois also taxes the tax on gasoline. It’s just not as severe. There is a specific order that the taxes are applied and the percentage sales tax is applied after some per gallon taxes but before others.

  3. Regardless of whether oil is a finite resource, there is NO way that oil is subsidized by any government. Oil provides the lions share of transportation fuel, of which transportation is something that governments natually oppose. Gas taxes pay 100 percent of state and “federal” road mileage in the United States. The gas tax, stuck at 18 cents federal and about 20-40 cents “locally” subsidizes other forms of transit and numerous saaaaaaaaaaafety programs coming out of Washington Dc. It would be nice for the gas tax subsidies of other transport modes and regulations to stop. Dead.

    • In Cali(porn)ia, the Dummycrat politicians raise the gas taxes and defeated an initiative last year to end the “temporary” part, whining that our roads would go to crap. They were crap already and have gotten steadily WORSE, but Gavin Newsome and his ship of fools still route the gas taxes into the General Fund and continue to neglect our transportation infrastructure. And even what they do is poorly managed. Witness how the replacement of just HALF of the San Francisco-Oakland Bay Bridge cost, adjusted for inflation, THREE TIMES what the entire bridge cost in 1936, and now the nominal toll is $7. I can remember some 35 years ago when it was a buck! Also, Trump did the smart thing and cut off the high-speed rail boondoggle, and Gov Newsome had to stop all work as there’s no way that CA would ever make this pipe dream feasible.

      • Hi Doug,

        I have family (sister, niece) out West, in San Diego. I do not grok why they stay. Taxes are confiscatory; they pay in excess of $12k each year on a 900 square-foot ’40s-era cinderblock house, just because it’s near the beach. This is the equivalent of what I am mulcted for in SW VA over the course of six years for my 16 acre Redneck Southfork. I do not have winos sleeping in the ditch in front of my place – and I can shoot guns in my back yard.

  4. A study just came out that confirmed what you and we have known for years. Ev subsidies are only benefiting those who are rich and would have already bought the ev. Another interesting theory i heard was that the cause of crude oil is not million year old fossil fuel. Wells that were once dry have become active again in texas and the us. Some scientist think oil is produced in a much shorter time and replenishes itself. An analysis of crude shows it contains more than just the compressed plant and animal life. Scientist were also able to recreate crude with algae.

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