Mid American/Wind Farms/Madison County

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#18

I’d include a couple hundred billion/year in military spending and “foreign aid” to deeply unpleasant regimes with oil, as well as the occasional multi-trillion dollar invasion

You don’t really have to include those to come up with a big number.
You get to about half a trillion a year in direct subsidies with just production tax credits and direct product price subsidies.
Different people come up with different numbers, but that’s the general range.

At the extreme upper end, the IMF estimate of oil and gas “support” globally is 5.9 trillion, or 7% of GGP.
But that includes a lot of indirect stuff, like the cost of the pollution and global warming.
Of course, just because it’s indirect and isn’t a “subsidy” doesn’t mean it isn’t happening.
Still Not Getting Energy Prices Right: A Global and Country Update of Fossil Fuel Subsidies. IMF Working Paper WP/21/236

Jim

11 Likes
#19

While we’re at it, let’s poll oil-burning Americans (present company included) to see how they feel about seeing oil prices spike 67% IN A MONTH in the winter season due to “market forces”. It’s complete cow excrement to posit the idea that the war or supply issues or whatever has constrained supply or oil availability by 67%

Can you provide a link to the economics class that teaches the price of a commodity will only go up 67% when the supply is cut by 67%?

Note: see https://www.investopedia.com/terms/p/priceelasticity.asp

Mike

2 Likes
#20

Some of these responses also miss the huge global advantage the US would have if it could both a) meet it’s domestic energy demand with renewable sources and b) export its oil/gas/coal to countries it needs to wean away from adversaries.

The power to tell Russia we don’t want it’s oil was a boss move, but being able to tell Europe we’ll meet their energy needs with our surplus would put us way over the top. What would it take to develop a similar power militarily? $20 billion in spending? $200 billion in spending? trillions? We’re at the point where everyone’s too apprehensive to strike at countries that have nukes, so there might not actually BE a military level of spending that can come close to the power we could wield economically.

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#21

Christine Lagarde of the IMF has talked about global fossil fuel subsidies for years and then there is this article.

https://amp.theguardian.com/environment/2021/oct/06/fossil-f…

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#22

…and then there is this article.

https://amp.theguardian.com/environment/2021/oct/06/fossil-f……

This is a perfect example of how you get these big numbers involving ‘trillions of dollars’ of ‘subsidies’. From the cited article:

“Explicit subsidies that cut fuel prices accounted for 8% of the total and tax breaks another 6%. The biggest factors were failing to make polluters pay for the deaths and poor health caused by air pollution (42%) and for the heatwaves and other impacts of global heating (29%).”

Cutting through the jargon, ‘explicit subsidies’ is what most people think of when they talk about subsidies - things like tax credits for developing oil and gas wells. And it is a tiny amount of money, globally, 8% of the $5.9 trillion cited in the article, or $11m per minute…

In other words, there are regular subsidies of about $470bn, oil and gas exploration and production (E&P) industry, which has total revenues of about… $2.1 trillion. That’s still a big number, and it should be eliminated, but most of these real subsidies are in countries like Russia and Venezuela where the state sets a domestic oil price far lower than the world price, so this is indeed subsidization, and should be eliminated.

For a more realistic comparison, try this: https://www.irena.org/-/media/Files/IRENA/Agency/Publication…

They find that, as of 2017, there were total world energy subsidies of $634 billion, with about $447b in subsidies to fossil fuel industries. Subsidy support for the far smaller renewable power industry was $166b, if you count $38b to biofuels. There is doubtless a lot more now, 54 years later.

So how does The Guardian get to $5.9 trillion of annual subsidies in an industry with 'only $2.1 trillion in revenues? Most of it is assigning some social cost to the pollution, including CO2, which is associated with the activity. So you estimate the health cost of global warming, the extra losses due to forest fires, the cost to air condition the heat back down 1 degree in hot countries, etc.

These may be real costs associated with carbon-based fuel use, but they’re not subsidies. There’s a cost involved in having a country become obese and sedentary, but it’s not a state subsidy to television, movie and video game production and professional sports.

dtb

4 Likes
#23

“Explicit subsidies that cut fuel prices accounted for 8% of the total and tax breaks another 6%. The biggest factors were failing to make polluters pay for the deaths and poor health caused by air pollution (42%) and for the heatwaves and other impacts of global heating (29%).”

Cutting through the jargon, ‘explicit subsidies’ is what most people think of when they talk about subsidies - things like tax credits for developing oil and gas wells. And it is a tiny amount of money, globally, 8% of the $5.9 trillion cited in the article, or $11m per minute…

Somehow I never see a study about how much good abundant, low cost, energy does for the world economies and the people therein.

I suspect the reason so much is being used is that the payoff is huge.

That doesn’t say we don’t need to deal with the emissions. But those emissions come from things that make modern living in developed countries a much higher standard of living than even the wealthiest enjoyed 150 years ago.

But that’s not news that sells, is it?

It also suggests that the way to reduce the emissions is to tax them - for everyone. That will provide both the incentive to use less, and the money needed to capture the emissions.

But that touches too close to home for most people I guess. A version of NIMBY.

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#24

I’ve noticed something in the months of March and April every year. Some “hit” piece on a Berkshire Subsidiary. It was the supposed Predatory lending at Clayton Homes, something about precise Correlation between sugar in Carbonated drinks and chronic diseases, or train derailments or the Rooftop solar/ net metering or noise in the rail yard at LA port at the BNSF intermodal etc etc.

Something to do with the annual meeting in early May, I suspect. There’s always a follow up question at the Annual Meeting. Hmmm…

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#25

It also suggests that the way to reduce the emissions is to tax them - for everyone. That will provide both the incentive to use less, and the money needed to capture the emissions.

Yeah, economists almost universally agree that a carbon tax would be the most efficient way to address global warming, and it would have huge co-benefits of reducing toxic and smog-forming pollution. But, in politics it’s extraordinarily hard to muster support for a tax on such a universally used and necessary item as energy derived from fossil fuel.

A commonly proposed way to make it more palatable is the provision that proceeds will be 100% reimbursed to legal US residents, in equal share, 1/2 share for kids.

#26

For those who have been invested in oil for decades, can you explain in a simple way, why the US has relativelyvlower retail gasoline prices than so many other countries?

On the surface, it woild sedm that there may be (guess) US subsides at work here?

Just wondering :^|

#27

can you explain in a simple way, why the US has relativelyvlower retail gasoline prices than so many other countries?

On the surface, it woild sedm that there may be (guess) US subsides at work here?

In a word, taxes. Most countries tax gasoline heavily, as a way of financing road infrastructure and now, as a way of reducing fossil fuel consumption. The US does this too, but the taxes are not as high.

For instance the US and Canada are both big fuel producers, but gasoline prices in Canada are much higher in Canada, and about half of the difference is taxes: 50c (USD) in the US and $1.20 (USD) in Canada. Average gasoline cost is about US$4.30 in the US, and US$5.90 in Canada.

Even Canada is an outlier, along with the US, with much less taxation of gasoline: https://www.theatlantic.com/business/archive/2011/05/gas-pri…

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#28

For instance the US and Canada are both big fuel producers, but gasoline prices in Canada are much higher in Canada…

Remember, though that, unless things have changed, an Imperial gallon contains 5 US quarts so the price per gallon could appear 25% higher because of that. And if it is sold in liters now, a liter is somewhat larger than a US quart.

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#29

Even Canada is an outlier, along with the US, with much less taxation of gasoline

Indeed–the rich world norm is high taxes on liquid vehicle fuels.
Not just to pay for the road system, but also to explicitly discourage fuel use.
The car I own that’s used the most has a 989cc three cylinder engine.

The US is the big outlier, and Canada tends to be between that and the rest of the pack.
Taxes tend to be a bit lower for diesel than for gasoline in a lot of places because truckers have a lot of lobbying (and road blocking) power.

Sample data point:
I just filled my car an hour ago. Don’t you hate it when that danged little red light comes on?
It cost me €154.71 for a whisker under 65 litres of premium at €2.38 per litre.
Converting for the US readers, it cost (USD) $172 at $10.03 per US gallon for 17.13 gallons.

Jim

14 Likes
#30

< Converting for the US readers, it cost (USD) $172 at $10.03 per US gallon for 17.13 gallons.>

A Tesla would make lots of sense.

1 Like
#31

Converting for the US readers, it cost (USD) $172 at $10.03 per US gallon for 17.13 gallons.

How do European electricity prices compare to the US (let’s say, to CA, one of the most expensive markets at ca. $0.25-$0.42/kWh depending on your usage and billing plan)? No reason to put a weak motor in an EV just to save on fuel.

#32

For instance the US and Canada are both big fuel producers, but gasoline prices in Canada are much higher in Canada…
========
Remember, though that, unless things have changed, an Imperial gallon contains 5 US quarts so the price per gallon could appear 25% higher because of that. And if it is sold in liters now, a liter is somewhat larger than a US quart.

There are no Imperial gallons involved here, and that is not why the price seems higher in Canada. There is a US gallon (3.8 litres; we never use gallons any more, neither US gallons nor Imperial gallons), and there is a US:Canadian exchange rate (with the USD being worth about CA$1.25, or inversely, one C$1 is worth almost exactly US$0.80. So to convert the Canadian price to the US price, you have to do 2 calculations: take the Canadian price per litre and convert it to the price per US gallon, by multiplying by 3.8, and then convert to US dollars by multiplying by the CAD:USD exchange ratio.

So the average price in Canada today, according to the CAA, is C$1.72/litre, meaning about C$6.54/US gallon, which is US$5.23/gallon. The AAA says that today’s average price in the US is US$4.22, so there’s a difference of about US$1.01. US taxes are higher in Canada, by about US$0.70/US gallon, so a little over two thirds of the price difference is just the different tax level.

Funnily enough, despite higher gas prices in Europe and Japan, their gasoline prices excluding taxes are even lower than they are in Canada and the USA, don’t ask me why: https://www.canadianfuels.ca/our-industry/gasoline-prices/. Their higher pump prices in most countries are because taxes are much higher there. Why Canadians, and especially Americans, are so resistant to higher taxes requires a sociological or political explanation that is beyond my ken, but my guess is that our societies are built around individual car ownership (and not walking, using bicycles, subways, tramcars and trains), so there is less popular support for increasing the cost of automobile use.

dtb

8 Likes
#33

"Why Canadians, and especially Americans, are so resistant to higher taxes requires a sociological or political explanation that is beyond my ken…

Hint: People prefer to keep their money. In other words pay less.

If that isn’t enough, think about what governments do with our tax dollars for further insights.

1 Like
#34

Why Canadians, and especially Americans, are so resistant to higher taxes requires a sociological or political explanation that is beyond my ken…
===
Hint: People prefer to keep their money. In other words pay less.

If that isn’t enough, think about what governments do with our tax dollars for further insights.

OK, but Europeans (especially Scandinavians) and Japanese and Australians are people too, aren’t they? I suppose I should have said it is not obvious why Canadians and Americans are more resistant to higher gasoline taxes than people seem to be elsewhere.

Looking at places where gasoline is cheapest, another possible explanation is that people living in countries that are big net producers of carbon-based fuels don’t want to pay high prices for them, whereas government in non-producing states probably want to discourage people from importing so much of it.

Low cost (in order of USD/litre): https://statisticstimes.com/economy/countries-by-petrol-pric…

Less than $0.50/litre:
Venezuela $0.03!
Libya $0.03!
Iran $0.05!
Algeria $0.32
Kuwait
Russia $0.37
Kazakhstan
Nigeria

Less than $1/litre:
Saudi Arabia $0.62
Argentina

$1.00-1.24
USA: $1.18
Ukraine

$1.25-$1.49
Brazil
India
Australia
China
Japan
Canada $1.48

$1.50-1.74
small countries

$1.75 and up
Pretty much all of Europe (except Ukraine and Russia)
New Zealand
Israel $2.21
Finland
Sweden
Denmark $2.40
Norway $2.69
Hong Kong $2.83

Taxes on gasoline are surely influenced by all sorts of cultural and historical considerations, but there is definitely an association where non-producing countries add on a lot more tax.

3 Likes
#35

Converting for the US readers, it cost (USD) $172 at $10.03 per US gallon for 17.13 gallons.

On the paid Tesla board it was recently calculated that, at average electricity rates in Europe, even at an eye-watering E2.09/liter, the range-equivalent electric charge cost was 75% lower (25% of the cost of gas).

Wow.

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#36

On the paid Tesla board it was recently calculated that, at average electricity rates in Europe, even at an eye-watering E2.09/liter, the range-equivalent electric charge cost was 75% lower (25% of the cost of gas).

As noted higher in the thread, a lot of the cost of transport fuel is the tax, and a lot of the
destination of that tax revenue is maintaining the road network and related services like lighting and plowing.
Since there is no road use tax on electricity yet, to a large extent this gap is not an inherent price
advantage of electrical power but one measure of the current subsidy to electrically powered vehicles.

Not that there is anything wrong with that, but the situation will have to change eventually.
If at some point we succeed at getting nearly all the internal combustion engines off the road, somebody still has to pay for the road.
Electronic tolls would likely work better than taxing the electricity.
If you charge at home with a solar panel but use the roads a lot, you shouldn’t be able to be a free rider.

As a close analogy, a lot of people in the UK like to fill their diesel vehicles with commercial vegetable oil.
This is unlawful, so they get fined.
But it’s forbidden not because it doesn’t work or pollutes more, but because the vegetable oil hasn’t had the road use tax paid.
The reason the same fine isn’t applied to electricity “diverted” from household to vehicular use is the current EV subsidy policy stance, not because the tax dodging logic doesn’t hold.
Again, nothing wrong with that–there is probably a good case to be made for EV subsidies. But it’s not a free lunch.
The electricity is cheaper than gasoline to a large degree because EV users are largely free riders on the road network. For now.

There will likely be a taxation tipping point. If half of road miles are from EVs, the road use tax per mile of fuel-using vehicle will have to double.
If 2/3 are EVs, the road use tax on fuel has to triple. That is unlikely to continue to the point that the last gas guzzler pays for the whole country.

Jim

21 Likes
#37

Not that there is anything wrong with that, but the situation will have to change eventually.
If at some point we succeed at getting nearly all the internal combustion engines off the road, somebody still has to pay for the road.
Electronic tolls would likely work better than taxing the electricity.

There are already increased annual vehicle license fees for EVs in some US states, and that’s a plausible point to add higher road taxes - or perhaps smog tests could be replaced with EV mileage reporting / invoices. N.b. with average yearly mileage / MPG of 15000 / 25, even the highest US state / federal gas taxes amount to less than $500/year - much less in most states (though given the terrible condition of California highways, higher taxes are a good idea).

I gather European gas taxes are much higher, but am unsure what that additional money goes for - general fund? mass transit? carbon tax?

2 Likes