Well, who would have thought... But seriously, why do we (or rather, G-19) even listen to them? Why can't we just cut the subsidies ourselves, have investments in renewables grow and watch SA slowly drown it its oil?
The United States maintains global hegemony, props up the value of its currency, and reduces the cost of imports for its citizens, in some significant part due to the "petrodollar". That's the agreements the US formed with oil producing nations like Saudi Arabia to only sell oil denominated in US dollars.
Forcing all oil trade be done in USD requires nearly every nation carry large USD reserves, increasing demand for and the strength of the US dollar, increasing the currency's stability, and increasing other nations' reliance on relations with the US.
A weaker Saudi Arabia, and a weaker oil market, is also a weaker US dollar, and weaker US power internationally. This pits environmental concerns against economic and political ones at a very high level. While the subsidies may be small enough that they're eventually dropped, this is my understanding of why the US maintains such close ties to S.A. even when our goals are not otherwise aligned.
http://www.bloomberg.com/news/articles/2016-05-16/u-s-disclo...
The positive effects like seignorage are outweighed by other effects. Japan discouraged an attempt by China to hold the yen. Similarly Europe and China have opposed purchase by foreign central banks.
> It turns out that foreign investment is only good for an economy if it brings needed technological or managerial innovation, or if the recipient country has productive investment needs that cannot otherwise be funded. If neither of these two conditions hold, foreign investment must always lead either to a higher debt burden or to higher unemployment. Put differently, foreign investment must result in some combination of only three things: higher productive investment, a higher debt burden, or higher unemployment, and if it does not cause a rise in productive investment, it must cause one of the other two.
It's really questionable why Iran is seen as bad guys while Saudi Arabia is not. Saudi Arabia is many times worse than Iran.
For the USA, total subsidies of ~$20 billion (which are mostly things like tax deductions and exemptions, not direct payments) vs. energy market size of over $1 trillion.
You could eliminate them to "feel good" but that's mostly what it would be.
The 20G$ is only the direct cost. But what about the environmental cost? The social cost of concentrating wealth in the hands of rich companies? The loss of water resources to hydraulic fracturing? Or the lost benefits of not investing in something besides a dead-end energy technology?
Seriously. The worst problem with economists is that they tend to confuse the cost of something with its price.
Now in SA, to keep the population calm and quiet, they subsidize petrol to be (well) under 1 Riyal per liter. Last time I checked a riyal was about an american quarter. So the subsidies are so incredible in SA that gasoline is less than a buck per gallon. At least last time I checked.
Now if we get rid of subsidies nothing will really change in the USA as the day to day noise level in prices and stuff is way higher than the tiny level we have. But if SA got rid of subsidies, I bet you could estimate the lifespan of the kingdom in hours. Minutes? It wouldn't last long.
Its very much like people arguing about American foreign aid spending and Americans think that foreign aid spending is like 20% of the federal budget whereas reality is its more like 1% and almost all of that 1% is sent to Israel and "the rest of the world" gets like 0.01% of the federal budget in aid.
Without subsidies the government in S.A. will fall.
Would you agree its not a matter of if, but when the failure occurs?
The problem with made up subsidies is they can be carried to content free absurdity. So providing election donation funds to a candidate opposing condom distribution in schools is a subsidy because it increases crude consumption for 75 years when a kid pops out and starts consuming.
Aren't these types of alliances fluid and opportunistic?