Free Markets, Free People

The truth about government energy subsidies

The truth, unlike the common wisdom or at least the Democrat narrative, is that far and away the bulk of the $37 billion in government energy subsidies goes to “renewable” energy sources, not evil oil and gas corporations. The $37 billion is $19 billion more than was spent in 2007 in government subsidies, a 50% increase in spending.

It was a feature of the Obama administration’s recent narrative that government was subsidizing rich oil and gas companies and that should stop.  Never mentioned, of course, were where other subsidies were going.  For example:

Of that $19 billion increase, additional subsidies for renewables amounted to more than $9 billion, a 186 percent increase. Subsidies for renewables now total $14.7 billion.

Wind power was the biggest recipient of federal energy dollars. Last year, this sector took in almost $5 billion in subsidies – a more-than-tenfold increase from 2007. Meanwhile, solar energy subsidies increased six times over the same period, from $179 million to $1.13 billion. And biofuels (think ethanol) saw a jump from $4 billion to $6.6 billion.

Any idea what we’ve bought for that money?

Take wind power. Today, it represents a paltry 1.2 percent of total domestic energy production. Yes, that’s up from 0.5 percent in 2007. But only after spending billions in taxpayer resources.

What’s more, wind power is expected to fall well short of some key growth goals set by the Obama administration. The Department of Energy has officially declared it wants 20 percent of the energy market comprised of wind by 2030.

Currently, there are about 40,000 wind megawatts online in America. Meeting the Department’s target on time would require creating 13,000 new megawatts of wind energy every year — twice the growth notched by the industry last year, which was an all-time high. And warnings of a major contraction ahead have already been sounded by the American Wind Energy Association.

A classic example of government trying to pick winners and losers, or, in more succinct terms distorting the market.  Instead of letting the market decide what is viable, government hopes to force it.  And, predictably, the results are not good.

As for the evil oil and gas companies.  Well the Democrats try to sell them as the ones sucking down all the subsidy dollars and not paying their “fair share”.  The truth, of course, is almost the opposite:

Plenty of politicians, mostly Democrats, have advertised that eradicating federal dollars for oil and natural gas as a budget panacea.

The EIA [Energy Information Administration – part of DOE] study shows that these critics have fingered the wrong energies. Researchers report that last year, oil, natural gas, and coal received a total of 11 percent of all federal energy subsidies. And most of those oil and natural gas “subsidies” are typical deductions, deferrals, and credits that all businesses take.

In fact, as a share of net income, the oil and gas industry paid 41.1 percent in federal income taxes last year, compared to 26.5 percent for all non-oil and gas S&P 500 manufacturing companies. Meanwhile, oil and gas account for 78 percent of domestic energy production and are responsible for more than 9.2 million American jobs.

The myths, however, continue to persist.  On sector promises jobs and a new source of energy and is essentially a subsidy sink hole.  The other accounts for over 9 million jobs and actually provides the vast bulk of energy the country uses.  Guess which one is constantly under fire from the left?


Twitter: @McQandO

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10 Responses to The truth about government energy subsidies

  • Bu…but…the moonpony engineers are going to SAVE us…
    Them, and the unicorn economic job-creators with their WOOBA-WOOBA chants will replace all those “old energy” jobs…
    Meanwhile, the MARKET has been busting its hump to put the MOST efficient POSSIBLE heavy trucks on the road for DECADES, but Obama by edict will make them TWICE as efficient…AND
    And, from the Central Planning “Boy, can they pick ’em” department…

    • It didn’t just go into Chapter 11, before it did, it sent all of it’s manufacturing jobs offshore.
      In case anybody missed it, so the Cisco when it let go 10% of it’s domestic employees.  Few, if any, programs were stopped, merely sent to India.

  • Holy market distortions, Scatman…

    For the first time ever, more of the corn crop may go into gas tanks than into the stomachs of cattle and poultry destined for kitchen tables.
    The prediction drew little response last week when it was released by the USDA in its Crop Production and Supply/Demand Report for the 2011 crop season.


  • Which means, of course, that not only will food cost more but going to the store to buy it will also cost more.

  • Even if the Republicans get the government back in 2012, I still have no faith that they would do the right thing and get rid of all the ethanol subsidies and fuel requirements.

  • Don’t wait for the republicans to ride in on their white de-horned unicorns. They are not our friends either. “Ragspierre” has it right we have to make them listen to us. Just a few have so far.