More importantly though, I'm trying to answer some larger questions: Should we use taxes to make fossils more expensive than other energy sources, and is our tax code currently preventing us from doing that? It's impossible to answer these questions unless we have a full understanding of what oil actually costs the American people.
Scope of usage
This comes up in different ways. In this report from the Tax Foundation that's been making the rounds recently, the study encompassed subsidies/ tax breaks to companies receive to produce electricity. Crude oil goes to a lot of different sources, and one of the big gaps in looking at oil consumption is gasoline.
Gasoline has some interesting tax elements to it. Favoring oil companies is the depletion allowance. There are good arguments both for and against this allowance, but this can and should be considered a tax break for oil and mineral companies. That's not considered in Thomas' data.
On the other side of things, there's also a lot of tax breaks for increased efficiency and buying cars with higher gas mileage. I'm not sure if my data encompasses this as "green tax breaks." But they should be considered that.
So just taking those two, both sides are probably underestimating tax incentives given to oil companies and money going towards green technology. And these are two examples; thousands of more exist.
Scope of operations
One of the big issues in our debate is the scale of operations of some of the companies we are looking at. Thomas perfectly correct (and I am wrong for generalizing) when he says that American oil companies do invest a lot in communities, create jobs and contribute a large amount of money to governments.
My criticism has been of international oil corporations, and Exxon Mobile in particular. The supermajor oil producers can hardly be considered American companies. Exxon, for example, conducts most of its business outside of the US, where it pays taxes, but its sizable American revenue is not taxed here. This is a specific case, not reflective the of the industry as a whole, but still a problem.
Also, when looking at the supermajor's tax expenses, they are granted a specific tax credit for having foreign operations. This is supposed to prevent double taxation (I'm tax exempt in the US because of it), but many people (probably all on the left, but whatever) have pointed out that this is exploited by oil companies to avoid taxes altogether. Essentially, they use this to declare revenues in the most tax friendly environment, and that seems to be not the US. This kind of stuff is definitely not included in the report Thomas published.
Economies of Scale
Part of the reason that you should definitely have higher subsidies for an emerging industry like renewable energy is that the cost of production goes down the larger the industry gets. This is a part of every economics class and called economies of scale. From a policy standpoint, subsidizing heavily now will pay big dividends later on, since a larger renewable industry will produce electricity much more cheaply on a per unit basis than a smaller one.
Economies of scale also give oil companies a barrier against competition from other forms of energy. Since they benefit largely from being in a highly developed industry, companies that focus on renewables must spend much more on investment to compete. It gives oil basically a natural monopoly in energy markets.
So just taking those two, both sides are probably underestimating tax incentives given to oil companies and money going towards green technology. And these are two examples; thousands of more exist.
Scope of operations
One of the big issues in our debate is the scale of operations of some of the companies we are looking at. Thomas perfectly correct (and I am wrong for generalizing) when he says that American oil companies do invest a lot in communities, create jobs and contribute a large amount of money to governments.
My criticism has been of international oil corporations, and Exxon Mobile in particular. The supermajor oil producers can hardly be considered American companies. Exxon, for example, conducts most of its business outside of the US, where it pays taxes, but its sizable American revenue is not taxed here. This is a specific case, not reflective the of the industry as a whole, but still a problem.
Also, when looking at the supermajor's tax expenses, they are granted a specific tax credit for having foreign operations. This is supposed to prevent double taxation (I'm tax exempt in the US because of it), but many people (probably all on the left, but whatever) have pointed out that this is exploited by oil companies to avoid taxes altogether. Essentially, they use this to declare revenues in the most tax friendly environment, and that seems to be not the US. This kind of stuff is definitely not included in the report Thomas published.
Economies of Scale
Part of the reason that you should definitely have higher subsidies for an emerging industry like renewable energy is that the cost of production goes down the larger the industry gets. This is a part of every economics class and called economies of scale. From a policy standpoint, subsidizing heavily now will pay big dividends later on, since a larger renewable industry will produce electricity much more cheaply on a per unit basis than a smaller one.
Economies of scale also give oil companies a barrier against competition from other forms of energy. Since they benefit largely from being in a highly developed industry, companies that focus on renewables must spend much more on investment to compete. It gives oil basically a natural monopoly in energy markets.
Externalities
The full price of oil is not just what we pay at the pump. It also includes all of the other costs that a fossil fuel based economy forces us to endure. In particular, this includes pollution clean up and the effects of global climate change.
While oil companies pay when there's an oil spill (partly), no one pays for the pollution created when oil is consumed. Because there is a cost associated with this pollution, it is necessary for government to increase the cost of oil to offset this cost. If you compare oil taxes in the US to those in other countries, it seems clear that we are not fully accounting for all of the other costs that burning fossil fuels brings. This is strong justification for taxing oil companies and oil consumption more than the taxes in other industries.
In fact, increasing the cost of oil now in order to limit the effects of global climate change will actually be more economically efficient in the long run.
The full price of oil is not just what we pay at the pump. It also includes all of the other costs that a fossil fuel based economy forces us to endure. In particular, this includes pollution clean up and the effects of global climate change.
While oil companies pay when there's an oil spill (partly), no one pays for the pollution created when oil is consumed. Because there is a cost associated with this pollution, it is necessary for government to increase the cost of oil to offset this cost. If you compare oil taxes in the US to those in other countries, it seems clear that we are not fully accounting for all of the other costs that burning fossil fuels brings. This is strong justification for taxing oil companies and oil consumption more than the taxes in other industries.
In fact, increasing the cost of oil now in order to limit the effects of global climate change will actually be more economically efficient in the long run.
A world without oil
All things being equal, if you could derive all of the world's energy without using a drop of oil, would you? For me it's an easy decision. Oil is a dirty fuel, whose emissions are poisoning our atmosphere and whose profits go to supporting corrupt regimes around the world that actively seek the destruction of our country. When talking about oil's role in the US energy mix, you cannot ignore the fact that OPEC accounts for 45% of global oil production, generating more than 700 billion dollars a year. Cutting US oil consumption means going after the oil that these countries produce. Americans oil companies will likely always have a large market for their product here.
If, for example, the US was not oil hungry, we would have never needed to invade Iraq, as Sadam's regime would have had no material base to stand on. A huge portion of US security spending goes towards Middle Eastern countries, which is something we simply wouldn't have to do if we didn't depend so much on the supply of foreign oil. While everyone is celebrating the recent events in Egypt, let's not fool ourselves into believing that the Saudis are one iota better or that the US doesn't a key role in keeping this brutal regime in power.
All things being equal, if you could derive all of the world's energy without using a drop of oil, would you? For me it's an easy decision. Oil is a dirty fuel, whose emissions are poisoning our atmosphere and whose profits go to supporting corrupt regimes around the world that actively seek the destruction of our country. When talking about oil's role in the US energy mix, you cannot ignore the fact that OPEC accounts for 45% of global oil production, generating more than 700 billion dollars a year. Cutting US oil consumption means going after the oil that these countries produce. Americans oil companies will likely always have a large market for their product here.
If, for example, the US was not oil hungry, we would have never needed to invade Iraq, as Sadam's regime would have had no material base to stand on. A huge portion of US security spending goes towards Middle Eastern countries, which is something we simply wouldn't have to do if we didn't depend so much on the supply of foreign oil. While everyone is celebrating the recent events in Egypt, let's not fool ourselves into believing that the Saudis are one iota better or that the US doesn't a key role in keeping this brutal regime in power.
