Wednesday, April 26, 2006

This Just Isn't That Complicated

Stop It Stop It Stop Stop It Stop It Stop It!!!!!  EVERYONE STOP IT!  That means you, Jerome, desolee de vous dire (sorry to tell you).  You too, mateosf.  ALL OF YOU.

This whole oil business just isn't that complicated.  And in fact, the more you try to make it complicated, the more we all run into Republican traps.  

The code phrase when it comes to oil is: Keep It Simple, Stupid.

And in the case of oil, there's only really one word you need to remember: SUBSIDIES.

That's right: we can talk all day and all night about the Strategic Petroleum Reserve.  We can bluster on about Caspian pipelines, Menendez amendments, Nigerian Crude, refinery capacities, and every other oil-related buzzword du jour under the sun.

And it won't make a hill of beans' worth of difference.

The reason for this is that all of our oil use is heavily, heavily subsidized--and that very little else matters beyond the subsidies.  Subsidies that could be increased or decreased far easier than any of the proposed measures could be enacted.  It's just that no one will ever talk about it publicly.

In truth, the real price of gasoline on the actual free market would come close to $15.14 per gallon.  The subsidies on gasoline production and distribution are multiple--as WalkSacramento points out, these come in the form of Tax Subsidies, first and foremost:


The federal government provides the oil industry with numerous tax breaks designed to ensure that domestic companies can compete with international producers and that gasoline remains cheap for American consumers. Federal tax breaks that directly benefit oil companies include: the Percentage Depletion Allowance (a subsidy of $784 million to $1 billion per year), the Nonconventional Fuel Production Credit ($769 to $900 million), immediate expensing of exploration and development costs ($200 to $255 million), the Enhanced Oil Recovery Credit ($26.3 to $100 million), foreign tax credits ($1.11 to $3.4 billion), foreign income deferrals ($183 to $318 million), and accelerated depreciation allowances ($1.0 to $4.5 billion).

Tax subsidies do not end at the federal level. The fact that most state income taxes are based on oil firms' deflated federal tax bill results in undertaxation of $125 to $323 million per year. Many states also impose fuel

taxes that are lower than regular sales taxes, amounting to a subsidy of $4.8 billion per year to gasoline retailers and users. New rules under the Taxpayer Relief Act of 1997 are likely to provide the petroleum industry with additional tax subsidies of $2.07 billion per year. In total, annual tax breaks that support gasoline production and use amount to $9.1 to $17.8 billion.

And then there are the Program Subsidies...:


Government support of US petroleum producers does not end with tax breaks. Program subsidies that support the extraction, production, and use of petroleum and petroleum fuel products total $38 to $114.6 billion each year..

The largest portion of this total is federal, state, and local governments' $36 to $112 billion worth of spending on the transportation infrastructure, such as the construction, maintenance, and repair of roads and bridges.

Other program subsidies include funding of research and development ($200 to $220 million), export financing subsidies ($308.5 to $311.9 million), support from the Army Corps of Engineers ($253.2 to $270 million), the

Department of Interior's Oil Resources Management Programs ($97 to $227 million), and government expenditures on regulatory oversight, pollution cleanup, and liability costs ($1.1 to $1.6 billion).

And the Protection Subsidies:


Beyond program subsidies, governments, and thus taxpayers, subsidize a large portion of the protection services required by petroleum producers and users. Foremost among these is the cost of military protection for oil-rich regions of the world. US Defense Department spending allocated to safeguard the world's petroleum resources total some $55 to $96.3 billion per year.  The Strategic Petroleum Reserve, a federal government entity designed to

supplement regular oil supplies in the event of disruptions due to military conflict or natural disaster, costs taxpayers an additional $5.7 billion per year. The Coast Guard and the Department of Transportation's Maritime

Administration provide other protection services totaling $566.3 million per year. Of course, local and state governments also provide protection services for oil industry companies and gasoline users. These externalized

police, fire, and emergency response expenditures add up to $27.2 to $38.2 billion annually.

And that doesn't begin to mention the social and environmental costs.


These subsidies have been mentioned here many times, but usually in the context of demanding--for reasons of environment and energy policy--a raise in the price of gasoline to what it would cost on the free market.

But I bring it up to highlight something more out of the box: we ALREADY subsidize gasoline--why not subsidize it MORE?

I know that at first this may sound insane (and in some ways it is), but hear me out.

A nation is what its budget chooses to prioritize.

In our case, we are a nation that spends 60% of its budget on military, and only 6% on education.  But our government DOES pay for education.

We are a nation that pays massive amounts of money for farmers NOT TO GROW FOOD.

Every single tax incentive or abatement we have is essentially a subsidy--a reward for doing something that we deem to be valuable or necessary for our way of life.


The truth that we must never forget is that THIS COUNTRY CAN AFFORD WHAT WE CHOOSE FOR IT TO AFFORD.

Our annual budget for FY'07 is $2.57 TRILLION DOLLARS.

That's $2,570,000,000,000.

That means that if we want to pay oil companies and producers a shitload of money to reduce prices, we can do it.  All we have to do is clip the hogtoes of the massive pork going to big ag or to Lockheed Martin.

If we, as a nation, want to maintain the incredibly inefficient and gas-guzzling suburban mentality and open-range "freedom" so deeply ingrained in the American psyche, all we have to do is pay for it--with our taxes.  And CHOOSE NOT TO PAY FOR SOMETHING ELSE.  Like, say, wars in Iraq.  Or Missile Defense Shields.  Or subsidies for not growing food.

As for me, I believe that we should be subsidizing LESS, not more.  I believe that we need to pull ourselves from the brink and invest heavily in alternative fuel technologies.

But if we REALLY BELIEVE that the ability to live 90 minutes from work in a suburban gated community is terribly important, we CAN afford it.  And we CAN do something about it.

But we would have to remind the nation that we are living a welfare lifestyle, dependent on tax subsidies.  And that just wouldn't be popular--for either party.   BUT ESPECIALLY FOR THE PARTY IN POWER.

It would require reminding Americans that our Ayn Rand libertarianism is nothing but another welfare ponzi scheme that we can choose to maintain or not as we like. But it's either that or higher prices at the pump. As the party in power, it's up to the Republicans to make that tough, rock-and-a-hard-place decision. As the party out of power, it's up to us Democrats to make sure that the GOP is forced to make that ugly decision, and doesn't get a free pass.


And that's all there really is to it.

Keep it simple, people.  We are a rich nation.  We can afford to do what we need to do--we have the money.  The President is not powerless to make an effect on oil prices.

The Republicans act like the oil market is like a bull on steroids in a rodeo: free, untameable and out of their control. The truth is that few markets in the world are as deliberately and artificially subsidized by big government (and not just ours) as the oil market. It's manipulated already--and it can be manipulated some more.

And as the party out of power, the Democrats are in a position to remind America that the GOP COULD do something about it--if they wanted to.  They COULD increase the subsidies, and leave the pork behind.

There's so many things they could do--but they won't.

And that's how to win by making it simple.  Let's try to keep it that way.


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