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Comment by megaman821 | Hacker News Reader

I remember last time a looked into this is that there are really no tax subsidies that the oil and gas industry gets that are unreasonable. Absolutely every industry with high CapEx font-load their amortization.

It is the non-tax subsidies that add up. The US' military interest in the Middle East seems to be entirely based on the oil reserves in the region. How much less oil would be pumped with warring countries and unstable regimes? Also, oil companies largely don't pay for the environmental damage they do. If burning oil left a stinky purple gas instead of an invisible gas, they would be paying far, far more to stop it or get rid of it.

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The other big "hidden" subsidy is publicly-funded maintenance of tons of auto infrastructure like 16 lane interstate highways, sewer and water service to far-flung exurbs, etc. The automotive sector (auto manufacturing, petroleum, trucking, etc.) would probably not turn a profit at current levels of production if they were forced to pay for the maintenance of roads to a standard necessary for auto traffic. They might still exist but presumably without this artificial juicing of demand, it wouldn't have made sense to dig up so much oil (and produce and run so many machines to burn it) so fast.

How would the economy function without infrastructure and affordable transportation?

denser residential (or godforbid! mixed use) areas would require less capex and opex, so they would require less public funding

Indeed, basically the entire built environment is one giant fossil fuel subsidy. Almost all construction in the past ~200 years, certainly since WW2, has been malinvestment based on artificially cheap fossil energy.

Really, you can say that the industrial revolution is defined by energy getting exponentially and artificially cheaper as we got better at digging up burnable stuff, burning it, and using the resulting energy to do stuff, including digging up more burnable stuff even faster.

There wouldn't be no infrastructure, it would just have to be scaled back to a level where it could be paid for with real surpluses rather than the fake surplus created by pretending that only digging up oil and coal have a cost, while burning it is free.

We should have infrasteucture, but uts about who is paying for it.

As a non-user of cars, I still pay for highways. But a non-user of trains doesn't pay for railways.

Buyers of electric cars get more cash subsidy than my ebike costs to build! Why don't we give out same subsidy to people who want yo buy a bike or to spend on railway tickets?

I am a user of Cycles, and I don't get shit - I dont even get space to ride - there are almost no dedicated roads for bikes.

For the ampunt we spend on fixing roads, we could give everyone a new ebike every two years.

Airplabes are even worse. Ebikes, Cars and trains pay taxes on fuel and electricity, but airplanes don't.

So why are subsidies distributed so unfairly? At least make them equal

Everyone uses transport. Theoretically if you owned your own land and lived like a stone age person, making everything from scratch, using nothing in a modern economy then I guess yes the argument could be made you shouldn’t pay as much, but it’s such an unlikely situation it’s not worth legislating for. Actually even then, you need to be defended by your State from people who would take your land by force. So everyone uses transport whether they realize it or not.

This statement does nothing to address the unevenness of how transportation is funded. Train service in America is a joke and at the same time we've decided this[1] highway was somehow worth building. America has been investing immense amounts of capital into highway construction for decades and that investment has come at the expense of mass transit that could actually handle the transportation of millions of people up and down the eastern seaboard. Cars are an extremely space and energy inefficient method of transportation, we definitely need them for some purposes - but the fact that they're the default option for people's daily commute is bonkers.

Everyone may use transport, and everyone may benefit from transport - but that does very little to address the extreme imbalance in transport funding we've seen in America.

1. (The Katy Freeway) https://img1.wsimg.com/isteam/ip/b856accd-c3e3-4d97-8365-327...

Agree with your general sentiment but want to point out that is not the Katy Freeway. This is: https://s.hdnux.com/photos/30/10/14/6325030/32/450x0.jpg

Holy shit.

We don’t fund lots of potential transport modes, like canals, blimps, or horse carriage ways. Dollar per dollar, region specific studies in the US show that we get more out of roads, which is why the money goes there. It’s just about basic economics.

I don't accept the assumption that the US gets more potential value out of roads than trains and buses - I do accept that currently the train infrastructure is so insanely poor that nobody wants to ride it.

I think if we take a look at the world at large we'd see that the eastern seaboard and southern california could look a lot more like the Rhine valley and the lowlands while improving quality of life for residents.

Roads need to exist and I am not trying to say they don't - but they shouldn't be the primary transit option for most people on most of their routes.

Isn't this circular reasoning? Rails are terrible, so nobody uses them, hence nobody invests, hence poor ROI. Roads are heavily invested, so are usable to the point it is uneconomical to use any alternative, so roads get more investment, etc.

Plenty of people use rail in the US just for carrying goods instead of people. It turns out trains are most efficient at hauling large loads with high tolerances for latency, which humans are not and do not have.

I would like to direct your attention to Europe where they can do both and the passenger train service is extremely well run and used widely.

Except busses and airplane flights tend to be much cheaper than train tickets there (excluding subways/local trains). If trains were so efficient that would likely be shown in the pricing.

While in Spain for several months it was only economical for me to take a train a single time. It was several times more expensive than the alternatives in every other case. This left me either flying or bussing.

In Stockholm it's actually cheaper to take a bus to the airport than the train, and that's just local travel.

because trains pylay for railways but busses dont pay for the road

That's not necessarily true. Fuel taxes and registration pay for road construction and most railway construction is heavily subsidized by governments.

Those are not hidden subsidies of o&g, they are services demanded by the tax payers. They may have started as a subsidy a very long time ago but haven't been for a very long time because the average person can recognize how useful they are and demand they be built. Demand is slowly changing as people realize infrastructure needs to be designed to be human centric with roads still being a vital but secondary part of the transportation infrastructure and as that changes politicians will start changing what they fund eventually or risk not being elected. It is not right to say it is a subsidy to car manufacturers that car manufacturers should be paying for.

Whoever is demanding them, they are still subsidies. You can be sure that if there were a bill introduced tomorrow that (with a chance of passing) significantly redirected highway spending, or even just tried to cover the whole bill (including the cost to use direct air capture to undo the climate damage and store the carbon indefinitely) with fuel taxes, the fossil fuel and auto manufacturing lobbies would be tripping over themselves to see it defeated at almost any cost.

If that is your position then the word subsidy lacks all meaning because pretty much everything the government does with tax revenue is a subsidy by this definition. Also, it would not just be those lobbies calling their representatives to get that idea overturned, it would be a majority of the populace once they ran the numbers on their cost of living increase from that policy.

> Also, oil companies largely don't pay for the environmental damage they do.

This is possibly the largest subsidy given to energy companies. Maybe the damage they do to human health is larger.

From the OP, the list of “subsidies” is below. I’m not an expert but this sounds like lots more than amortization. Do these all sound like things that are reasonable after digging more to you? (Tone check - not accusatory, I’m curious if this matches up with your previous research or doesn’t overlap). Tax credits and deductions on the face sound unreasonable to me, but it’s unclear from the summary how substantial they actually are.

I’d agree that policing the Middle East is by far the biggest subsidy though, and that externalities are the thing we should be focusing on. But absent a coherent CO2 tax proposal I’m ok with chipping away at smaller subsidies where they exist (Though now seems to be a politically suicidal time to propose doing so. Wait until inflation is under control before increasing the cost of gas again.)

>>>

This bill limits or repeals certain fossil fuel oil and gas subsidies for oil companies. Specifically, it

increases to seven years the amortization period for geological and geophysical expenditures;

repeals the tax credits for producing oil and gas from marginal wells and for enhanced oil recovery;

repeals the tax deduction for the intangible drilling and development costs of oil and gas wells;

repeals percentage depletion;

repeals the tax deduction for tertiary injectant expenses;

repeals the passive loss exception for working interests in oil and gas property;

denies the tax deduction for income attributable to domestic production activities for oil and gas activities;

prohibits the use of the last-in, first-out (LIFO) accounting method by major integrated oil companies;

limits the foreign tax credit for dual capacity taxpayers (i.e., taxpayers who are subject to a levy of a foreign country or U.S. possession and receive specific economic benefits from such country or possession);

and expands the definition of crude oil for purposes of the excise tax on petroleum and petroleum products to include any oil derived from a bitumen or bituminous mixture (tar sands), and any oil derived from kerogen-bearing sources (oil shale).

I am no expert, but the only one the sticks out to me is the depletion allowance. If you sell a million barrels of oil you then get to say you land is worth a million barrels of oil less. What exactly is that supposed to be incentivizing? You have already taken the oil out of the ground and sold it. It is a pure gift to be able to write-off some of your land value after that.

while writing it without having to sell it is a bit of a gift, it is still just an amortization thing because your land is materially worth less now that the oil isn't available to be extracted. If you sold the land you would have a loss equivalent to that change in value to write off against your other profits. It's once again just a timing thing not an actual net change as the loss will be recorded and deducted from taxes payable at some point with or without this legislation and it really should be.

> How much less oil would be pumped with warring countries and unstable regimes?

Less oil being pumped globally would be beneficial to American oil companies.

> Also, oil companies largely don't pay for the environmental damage they do. If burning oil left a stinky purple gas instead of an invisible gas, they would be paying far, far more to stop it or get rid of it.

Then tax the people burning the oil, not the ones the ones that are producing it. It's not like Middle Eastern oil burns any cleaner than domestic oil. The sad truth is that nobody in America actually gives a damn about the environment. They'll virtue signal about wanting change, but back off at any proposal that requires personal sacrifice.

> Less oil being pumped globally would be beneficial to American oil companies. In the short term, yes. There is a point when you ruin the whole industry. Right now $4/gallon gas has no good alternatives, but at $15/gallon things like e-fuels and biofuels start competing quite nicely.

This is misunderstanding how the market works. If gas prices got that high, yes other fuels would come into the picture but they wouldn’t replace cheaper-to-produce American crude because of margins.

The thing about those prices that would be a concern would be pushing people towards not using fuel altogether, not the existence of more expensive biofuels.

it's easier to tax at the source (and then subsidize specific uses, eg. medicine)

> The US' military interest in the Middle East seems to be entirely based on the oil reserves in the region.

This is such a common trope that's clearly not true. Afghanistan doesn't have any real oil production, and Iraq had a tiny OPEC quota. To the extent that oil production had any real strategic purpose in the US conflicts, it was the income they provided local regimes.

My answer to that would be that the US was/is very concerned about spillover conflict. A few aggressive countries could easily draw the whole region in.

Why is the US so less concerned about South East Asia or Africa than the Middle East?

Because it's no longer the 1960s and the Trotskyist concept of permanent revolution is kaput?

If you're looking at it narrowly in terms of US's actual invasions, perhaps. But the US foreign policy in the Middle East has generally been directed towards "keep the oil flowing" to such a degree that there's not really any other coherent vision or grand strategy at play in that region.

If you want to get pedantic about hyperbole, let's get even more pedantic! Afghanistan isn't in the Middle East, although some consider it to be in the "Greater Middle East" (a recently coined term).

We built all that infrastructure decades back after Kuwait. Our entire force structure pivoted and remained that way because it was obvious the only thing that stopped Saddam from rolling into the northern Saudi fields was himself. If he'd been smart, he would have kept going and would still be there.

Afghanistan and Iraq II and III are just knock-on effects of all that and we're not doing because like MBS for his personality.

US military involvement in the Middle East is hardly a subsidy to the oil and gas companies that would be impacted by this Act. Most of the oil and gas companies in that region are state owned with Aramco being the largest by far. They aren't subject to US laws or taxes. And they don't even export much to the US. Hypothetically, if an armed conflict shut down Aramco production then US oil and gas companies would actually make more profit.

I do agree that allowing oil and gas companies to avoid paying the full costs of environmental damage is effectively a form of hidden subsidy.

It’s all connected. The conflict in Ukraine means my heating bill in NY goes up 40% this winter.

Passing this Act wouldn't make your heating bill any lower.

> The conflict in Ukraine means my heating bill in NY goes up 40% this winter.

Why? The US is the largest producer of natural gas in the world, and by quite a large margin[1].

Europe tied themselves to Russian natural gas, heeding no warnings in the process, and now find themselves cut off due to conflict. Oh, if only this could have been predicted and avoided in advance...

It makes sense for Europeans to experience ludicrous natural gas bills, but not someone in NY. Further, the US should not make citizens suffer in order to prop up European nations that couldn't have cared any less about their own security until it was too late.

[1] https://yearbook.enerdata.net/natural-gas/world-natural-gas-...

> It makes sense for Europeans to experience ludicrous natural gas bills, but not someone in NY.

It's a globally traded commodity. If someone in NY won't pay 40% more, someone in Europe will. Just like you work for who gives you the most compelling offer, so too does natural gas go to who presents the most compelling offer.

> the US should not make citizens suffer in order to prop up European nations

Given that the US is where most of the natural gas is produced, per your comment, the US will realize a huge windfall by shipping its product to Europe at a high markup. The citizens of the US will be emboldened by it. They may have to pay more for heat, but stand to gain even more than that. Europe loses either way.

> The citizens of the US will be emboldened by it. They may have to pay more for heat, but stand to gain even more than that.

I have to disagree here. The citizens of the US gain nothing from the US permitting natural gas companies to export to Europe instead of filling local demand first. These are private companies anyway... so not sure how this logic holds up.

> It's a globally traded commodity.

Sure it is... however a nation can and will prohibit exports when local demand exceeds available reserves. Natural gas is a strategic asset after all, and we're already dangerously dancing with inflation/recession - it wouldn't make sense to accelerate that path just because Europe needs gas after a series of terrible, completely avoidable choices.

> however a nation can and will prohibit exports when local demand exceeds available reserves.

Sure. There is no doubt a tipping point. Seeing 100% exports wouldn't work. But the nation of the US is made up of its citizens, so only when the citizens start to feel that tipping point has nearing or has occurred will they take measures to prohibit such exports.

Clearly we're not there. There is still more upside than downside.

I think in theory you would be right, but practically Joe Biden isn't going to ask regular citizens if he should allow export of Natural Gas to European nations.

Majority of citizens just accept the half-truth that Putin's War caused high gas (both natural and petroleum) for everyone, and that there's nothing that can be done except end the war.

Europe needs to suffer for their poor decisions. Enough of the US swooping in and solving European mistakes... then getting villainized for being the world's safety net.

> but practically Joe Biden isn't going to ask regular citizens if he should allow export of Natural Gas to European nations.

No, that isn't practical. Which is why government is set up in reverse: The citizens tell Biden what they want. The citizens are the boss, after all. It stands to reason that the message comes down from the boss. Except that isn't practical either, so middlemen are employed to combine and distill the information they receive from the boss into a more digestible form that can be presented in a practical manner to the worker.

Those middlemen are chosen by the citizens through a long and arduous process to ensure that they are trustworthy enough to accurately convey the desired message to the worker on the ground. Yes, theoretically an unscrupulous middleman could spread false information, but through hundreds of years of using this system the citizens have shown to have a strong degree of confidence in the effectiveness of the selection process.

Not only do they have confidence, but they also find utility. It would be downright silly to go to all of the trouble of selecting the most trustworthy middleman and hire him, at a decent rate of pay I might add, only to never use his services. The citizens recognize the value they get by hiring these people to pass their orders to the workers.

You personally may have no use for said middlemen as you management style sees you sit back and forever wait for Biden to knock on your door, but citizens (plural) is inherently about more than you.

> Which is why government is set up in reverse: The citizens tell Biden what they want. The citizens are the boss, after all

Again, that's some great theory, and it's how it's supposed to work, but it doesn't. If it did, the government wouldn't be busy misdirecting reasons why the prices are ludicrous - ie, they have to sell a fake narrative to the general population, and most of the population won't question authority.

This is, in principal, why things like the electoral college exist - the framers knew the general population was busy living their own lives and either wouldn't pay enough attention or would deliberately be misled for political gain.

So while yes the government eventually answers to the people, and in theory election outcomes will be based on what people want - the problem is when the people are deliberately misled and then vote based off half-truths and lies, which is what's going on here.

High natural and petroleum gas prices are the Administration's own doing - the result of explicit domestic and foreign policy decisions the executive and team have made... but they've done a great job convincing casual voters they had nothing to do with it. That's where the way government is supposed to work starts to fall apart.

> High natural and petroleum gas prices are the Administration's own doing

The citizens may have made a mistake in their direction for government, I can accept that. To squarely blame to workers on the ground following orders for those mistakes is strange, though. That's like blaming the developers at Google who work on chat code for the constant churn in chat applications.

Maybe those developers at Google really did tell management, rightly or wrongly, that the codebases were terrible and that Yet Another Rewrite™ was the only way out. But even if that's the case the bosses should have the wherewithal to see through what is reality and what is not, and if the claim is valid to ensure that it didn't happen in the first place.

Bosses are going to screw up, of course. No human is infallible. But they are to blame when they do. They're the boss exactly because they are in charge and responsible for seeing through the good and the bad. The worker merely serves the boss.

Governance is hard because most people don’t really have any idea about what’s going on, and listen to proxies who may or may not know anything at all.

A rational person might say “A global pandemic and lockdown turned the supply and demand curves upside down.” and “A tyrant is holding a continent hostage by turning off fuel supplies to a major market.”, and perhaps conclude that instability, uncertainty and risk affect prices.

Or… you can listen to a windbag rant about the closure of a pipeline that doesn’t exist, and meanwhile see gasoline prices fall 30% as production imbalances improve, and still conclude that a politician chose to commit political suicide for lolz.

That would be true if all things remain equal and the world didn’t consist of independent agents. The world is not that way.

You shut off the gas, and the counterparty says “Ok, enjoy our new 150% tariff on software, vehicles and soy”.

We’re shipping LNG to Europe, and limited pipeline capacity in the northeast is a constraint.

Ensuring stability in the Middle East is a subsidy for fossil fuel consumers. It hurts the oil producers, which are the companies targeted by this bill. The war in Ukraine is a good example of this as it's contributing to their record profits.

Middle East stability is a long term policygoal. The United States made Saudi Arabia one of the highest priority allies to avoid a repeat of 1973.

On a long term scale, keeping the pumps going is good for the petroleum industry, as sustained high prices justify the capital expense for alternatives. Once you buy an electric car, you don’t really give a hoot about gasoline.

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