Hacker News Reader

Comment by shanemhansen | Hacker News Reader

I live in Utah and I can tell you exactly what happens when oil is no longer in demand. They offer numerous tax breaks per well to encourage exploration and increase production. I believe the term is "corporate welfare". One of the tax breaks has a stated goal of providing tax relief when oil prices are low. https://oilgas.ogm.utah.gov/pub/Publications/Lists/tax_incen...

This is the same government attempting to roll back solar tax credits because they insist that the solar industry needs to stand on it's own 2 feet and compete in the "free" market.

View on HN

I agree that this is a stupid policy, but there is some attempt at logic behind it.

Oil production has the problem that increasing in oil production requires spending money that will only pay off if the price of oil remains high for several years. Cheap producers like Saudi Arabia know this, and so try to make the price fluctuate with enough lows to wipe out expensive oil producers, and enough highs to get rich themselves. More marginal properties would make money, but it is hard to survive the lows.

Therefore government policy that produces an effective price floor encourages the production of otherwise marginal oil. This is effectively a bet that increased tax revenue from future production is worth the risk of that tax guarantee. And in the short run you get an increase in jobs for no actual outlay of resources. Which is a trick any politician can appreciate.

That said, it remains a bad policy. Once implemented, lobbying efforts are virtually guaranteed to expand government support until the public is guaranteed to lose money. Doubly so because oil producers can now play one government off against another in a race to see who can offer more. (Sports teams have mastered that particular game...)

And if they didn't, we might have built a sustainable society faster and invested in sustainable energy sooner. It could have been done in the 80s. I know it's scary to imagine Americans driving on smaller cars and bicycles and public transport like Europeans... but we would survive it :)

Average commute time in the us is lower than almost all of europe (https://goo.gl/r8DJqz) and public transport not only needs billions in investment to be built but there are very few places where it doesn't run on subsidies. So yeah you're asking americans to a) take longer to get to work b) constantly subsidise a system that will keep on losing money. Based on the political makeup of the country i'd say you can keep on dreamin' :)

I live in NYC where it is reality :-P

Commute times can be misleading. It takes me about an hour to get from my house in downtown Shanghai to my office on the other side of the city. However, this is about 15 minutes of walking and 45 five minutes on the metro. Even though its longer than the US average of 25 minutes, I much prefer this option.

Commuting by car is dead time. When I'm on the subway, I can read, send emails, catch up on work. Its also much better for the environment and costs a grand total of $200/year.

> b) constantly subsidise a system that will keep on losing money

If you take into account the total cost of car ownership you will see that also is heavily subsidized. From car production to roads, parking spaces, oil production... if the accounting is done properly it is obvious that when you make 100 people travel all together in the same vehicle it is a lot cheaper that using 100 different machines to move that same 100 people. Cost wise it is a no-brainier.

I agree with you that lack of political will, and also suburban landscape, are going to make it very difficult for it to happen in the USA.

Isn't that what oil futures are designed to hedge against?

Yes, this basically socializes the cost of figuring out how to hedge (assuming the state actually hedges, which it probably doesn't), since the intersection of oil producers and prudent users of derivatives is probably rather small...

That still isn't risk free, a producer could sell some futures contracts and not be able to produce on delivery; then they either have to sell the future on at a below market price (it will be closer to the spot) or purchase oil to make delivery. It only has less risk on the buy side.

Yes.

But the government has more economic incentives to extend those futures than other participants because they stand to earn money from taxes.

Or politicians could catch a glimmer of the future & put some tax dollars towards:

* battery factories * electric car incentives * open source car sharing / planning services. (get rid of the 30% uber tax meanwhile steering people towards shared services) * carbon taxes

it's been said a million times, but may as well keep saying it.

it'll fix the problem for good. no more wars. less environmental destruction.

Cars would actually be cheaper this way, if you wanted to bother owning one. way less maintenance. car pretty much lasts forever, just swap out the battery pack now & then.

"car pretty much lasts forever, just swap out the battery pack now & then."

Not in Michigan. You will have far more problems from a car than just battery maintenance.

Electric cars don't have non-zero maintenance aside from the battery, but -- due to the lack of an internal-combustion engine, simplified drive train, and absence of emission-control equipment -- maintenance costs should be considerably lower.

Pennsylvania has tax free fracking because it provides high paying jobs. We are the only state that provides tax free fracking and it blows my mind. Texas and other strong Republican states take taxes from oil production but in PA nothing.

The "Pro-Fracking" groups says that PA had 250,000 jobs but it ended up including This number captured everyone in those industries including every road construction worker, trucker, engineer, and steel worker in Pennsylvania.

The number is actually around 20,000 and the state makes no tax money from the production and only from income tax.

'Tax breaks' are offered to all sorts of industries.

Almost all entertainment in Canada for example, is done nearly tax free. Pharma, energy, small business etc. etc..

It's particularly perverse, however, to give tax breaks for an industry that has immense negative externalities.

Oil companies don't emit a whole lot of CO2.

You emit the CO2 when you use your car (almost 50% of CO2 emissions are from autos).

And a bunch of other industries are responsible for most of the rest of CO2 emissions.

I think you're missing the negative externalities inherent in oil extraction, like groundwater pollution, earthquakes, above ground pipelines, etc.

Not to mention it's a little like saying Pablo Escobar doesn't OD on drugs or steal your TV very often, it's the crackheads that do that...

" like groundwater pollution, earthquakes, above ground pipelines, etc"

Groundwater pollution and earthquakes are rare, and the latter are minor and have negligible impact. It's no more problematic than most other extraction industries.

'Above ground pipelines' are completely benign entities with almost zero environmental impact. Leaks are rare enough, and most of them are very minor and easy to clean up. Oil is an organic product, found commonly in nature, and small amounts of Oil spilled have no real impact. Unlike the big tanker spills, which can be devastating.

The highway you drive your car on has considerably more environmental footprint than any 'above ground pipeline'.

Would you want one in your back yard?

My friend lived in house with an oil well in the back yard. Really wasn't noticeable after you got used to the noise it made. After a week I forgot it was there.

Doesn't it stink?

I remember very clearly the first time I visited western Texas (from Europe) as a child. The smell was sickening.

Generally it is refineries that stink.

I wouldn't want a coffee shop 'in my backyard' and I have nothing against coffee shops.

But if I had to chose between an Oil Pipeline and a 'highway' - I (and I think most people) would chose the Oil Pipeline any day of the week.

You do realize they are quite common? And that natural gas pipelines - which carry the same carbon-based materials run everywhere in urban areas - and that there's a good chance there is a gas pipeline, literally, in your backyard right now?

If you are living in an urban area, my guess is there is an 80% chance there's a carbon-based pipeline within 500m from where you are.

The Energy Information Agency has a nice map of them:

http://www.eia.gov/state/maps.cfm

(turn off some layers to make it easier to look at)

I guess that's transportation pipelines and not distribution pipelines though.

That's a cool map. Pipelines are everywhere :). And yes, those don't include distribution which are nearly ubiquitous in many places.

It used to be that earthquakes were rare, but they aren't now, in places with fraking, such as Oklahoma and Dallas (!).

That injections wells ( not fracking - although they are related, hydrocarbon extraction activities ) cause earthquakes is still in the hypothesis phase.

There seems to be correlation. Causation is not yet proven.

In health and sciences that would be enough to prohibit certain activities. But when industry for the benefit of jobs, GDP, etc has its way it means continue as normal regardless of the warnings.

This is why we are nearing a climate crisis. I suppose it is a form of the tragedy of the commons.

The ready availability of hydrocarbons is a pretty significantly public good. Secondarily, the oil industry was one of the first ones regulated ( Sherman Act ) and when an industry is regulated, they get better and better at finding the edges to slip past over time.

"In health and sciences this would be enough to.." is a massive problem, IMO. If the full measure of tobacco law is brought to bear on "energy companies", you could pretty well wreck the US economy without meaning to.

It appears to be clearly in the middle cigarette processing phase of actively denying any science, passing state laws prohibiting local control (see for example Dallas Texas). I expect it will take a while to get to the levels of the late cigarette industry (recognition that it has impact and controlling it to reduce danger).

The problem is that there's nothing illegal about "actively denying science." Nor should there be. The science of earthquakes is unlikely to ever be capable of even making those sorts of predictions. But who knows?

As socially agreeable as the D.O.J v Phillip Morris decision may be in many circles, it's a terrible precedent. All - all - prohibitions are Bad.

I don't think there will ever be any "control"; if there's regulation of it, the effect will be to send people out of the business. You'll be left with the people who feel up to tangling with the government over it. Guys like Dick Cheney.

>>I think you're missing the negative externalities inherent in oil extraction

The same can be said for the production of lithium-ion batteries. The mining and production of these batteries is just as bad for the environment. This is mainly due to the high concentration of Copper and Aluminum needed to make them work properly - which both need to be mined.

Fuel cells are a much better alternative to both combustion engines or lithium-ion electric vehicles:

https://www.bloomberg.com/news/articles/2016-02-08/phones-wi...

Even if they don't use much, they tend to spill a lot which is worse than burning it.

"they tend to spill a lot which is worse than burning it."

Both parts are not correct.

First, they spill very little in the grand scheme of things.

Second, an 'oil spill' unless it's quite large, is not a hugely damaging thing for the environment. Oil is a plentiful, organic material, found everywhere in nature. It's just not concentrated enough in most places to be extracted.

The soil in northern Alberta (an area the size of Florida) is literally oozing with hydrocarbons - same for Venezuela and many other places. Nobody considers those parts of the world 'toxic' - they are otherwise normal places.

What sort of technologist thinks like you?

Are you sys admin?

I guess it's arguable whether it's worse or not, but CO2 doesn't typically kill any wildlife whereas oil spills do.

There is a certain percentage that is leaked from every pipeline in addition to the large leaks that occur during tanker and drilling accidents. Even a small percentage of the large volume they extract is a large volume to pour on the ground.

I'm not sure why you think the concentrations of oil in the soil occurring naturally approach even the smallest pipeline leak; would love to see some sources though if you have them.

Crudely (haha) crunching some numbers, if we consider the oil spilled in the US in 2011 (incl. Deepwater Horizon) of 4.95e6 bbl compared to the total oil consumption in 2015 of 7.09e9 bbl, the oil spilled is less than 0.07% of the oil consumed. This, mind you, is considering a massive outlier year for spilled oil. In a more typical year it's an order of magnitude less.

Not to minimize the damage from spilled oil or suggest that it's no problem, but let's keep "spill a lot" in perspective.

4.95e6 bbl ( 41 L/bbl) = 203 million liters. Your only reference for scale can't be just net product, absolute numbers seem to more accurately approximate the scale of damage.

Do your numbers include pipeline and other small but continuous sources of loss?

As I said, crude, so I just grabbed some numbers I found quickly to illustrate "a lot."

Here's where the 2010 (I notice a typo now in my original post, it's not 2011) comes from:

http://ops.fhwa.dot.gov/Freight/freight_analysis/nat_freight...

That includes spills from vessels, facilities, pipelines, and other unknown sources. Regardless, the spill due to Deepwater Horizon was so massive compared to more typical years.

Also, it's 786,987,110 liters (there are ~159 liters in an oil barrel).

>> Oil companies don't emit a whole lot of CO2.

The Saudis certainly don't. That oil is easy to tap and, under some circumstances, be used with little refinement (shipping). But Canadian oil, shale oil, requires massive energy to extract.

Not to mention flaring of natural gas in the Bakken fields. It's a significant percentage of the US's total greenhouse emissions.

Fracking requires an immense amount of water.

It requires "barrels-per-minute for hours" amounts of water. 100 BPM is unusually high for fracking. One acre-foot is about 7753 barrels.

The problem is that water is increasingly scarce in many parts where fracking is done for reasons outlined in the book "Cadillac Desert".

When you subsidise extraction the price goes down and other industries burn more of it.

Oil companies don't emit a whole lot of CO2.

Not true. Refining crude oil into gasoline or diesel is itself very energy-intensive.

It takes around 4.5kWh to refine each gallon of gasoline from crude. In many cases that energy is supplied by fossil-fuel burning power plants.

Volts for oil: https://m.youtube.com/watch?v=BQpX-9OyEr4

You proved my point.

4.5 kWh is not a lot of energy.

It's the amount of energy needed to light a 1K lightbulb for 4 hours.

It's a pittance compared to what you burn in you car.

4.5Kw/h won't get you around the block :)

A 1kW lightbulb is rather bright and not used in homes, more so in studios. A better comparison might be 10 100W bulbs or maybe an average chandelier.

Even 100W bulbs are pretty rare now days (illegal in the EU), replaced with LED versions that consume far less energy.

4.5 kWh is really a tremendous amount of energy just to refine a single gallon of gasoline. And it's energy that's completely lost, just converting hydrocarbons from one form into another.

By putting that energy directly into electric vehicles instead, you'd be able to power around half of all the vehicles on the road!

I think you may be mistaken about amounts of energy. Typical modern domestic-use light bulb (ccfl) are rated around 20 watts. 100 W was the typical maximum in incandescent light bulbs for domestic use, excluding some very bright halogen bulbs at around 200 W. 1000 W bulbs are mainly used in studio applications (as someone else mentioned) and for stage lighting.

On the subject of getting around the block: A kilogram of gasoline contains some 46 MJ of energy. Gasoline is a bit lighter than water, so one kilo is around 1.3 liters. 46 MJ is equal to, roughly, 13 KWh, so 4.5 KWh are around 300 grams, or around 400 ml. A Manhattan city block is around 80x280 Meters, for a circumference of roughly 720 Meters. An inefficient modern car might use 8 Liters per 100 Kilometers, so 400 ml (or roughly 4.5 KWh) will move an inefficient modern car by around 5 Kilometers.

In other words, it'll get you around the block. Not once, not twice, but slightly less than 7 times.

4.5Kw/h won't get you around the block :)

4.5 kWh will take you nearly 20 miles in an electric vehicle. Not far short of what 1 gallon of gasoline will get you.

At the expense of cleaner, safer ones no less.

And many of those are bad. Ask people in the visual effects industry how they feel about Canada's tax breaks for film production.

These tax breaks incentivize wasting money on travel and uprooting families to trot around the globe chasing favorable tax laws.

It's one thing to set a low tax rate, it's another thing to create the tax equivalent of a "loss leader" as marketing for a broader economy. I'm not saying it's immoral, but it causes chaos in the pricing signals and should be done carefully.

> Almost all entertainment in Canada for example, is done nearly tax free.

Categorically untrue.

The entertainment industry in Canada receives tax incentives to encourage sustaining and sharing Canadian heritage & values, which would otherwise be lost due to the media juggernaut to the south. It is not always successful, but that is the intent.

What is the motivation to give a highly profitable industry tax incentives?

Carrier is the latest recipient of a tax break.

http://www.zerohedge.com/news/2016-11-30/carrier-issues-stat...

That only goes so far.

If people literally don't want the oil, at some point those tax breaks are going to look vulnerable.

Solar tax credits are also corporate welfare.

No, it's a reflection of the lower externalities inflicted by solar.

Reply on news.ycombinator.com