Call Me Crazy...
... but given record oil industry profits and our alleged national goal of relying less on oil, record subsidies to oil companies doesn't seem like a very good deal. Unlike some, I don't begrudge the Exxon-Mobils of the world their recent sky-high profits -- it's a pretty straightforward consequence of the difference between average costs and marginal costs -- but they ought to earn their money the old-fashioned way and not depend on endless handouts from the federal purse.
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Small government = huge handouts to companies with record profits.
At least they hate gays and invade countries with no WMD and no connection to aQ!
February 14, 2006 10:48 AM | Reply | Permalink
If the purpose of the subsidies really was to provide incentive to explore new areas (though that may just be administration spin), it would be a bit disengenuous to take the subsides away when the pumping starts. Will we reimburse the dry holes that were drilled to find this oil instead?
Incidentially, that would probably be a better plan to encourage exploration. Finding more oil is a problem not unlike discovering new drugs. There's a large chance of failure, but a big payoff for each success. It's probably better to reduce the penalty for failure via subsidies, rather than increase the reward for success. In which case, the royalties could be used to create a fund to which companies could request funds to defray costs of exploration, whether or not they are successful.
February 14, 2006 10:49 AM | Reply | Permalink
"but they ought to earn their money the old-fashioned way"
Huh? That is "the old-fashioned way." There's no other. How else did the Exxon-Mobils of the world get to where they are today? Endless handouts from the federal purse...
February 14, 2006 10:51 AM | Reply | Permalink
Agreed 100%. If they want to make tons of cash, fine. I'll just drive less and that'll be that. But for the love of Mike, don't make me subsidize it! $7B over five years. And after we fought tooth and nail against $40B in cuts to Medicare over 5 years. AND after another round of tax cuts. Oh, and after reading the article, I have to say that "royalty relief" is one of the most amazing Newspeak phrases I've heard. I think even Lakoff would be blown away. -- Bruno and The Professor: Dynamic Talk Radio
February 14, 2006 1:18 PM | Reply | Permalink
That "royalty relief" quip cuts two ways. In the U.K. the monarchy, who once owned the place, are taxed. Meanwhile the U.S. plots a somewhat different course.
February 14, 2006 9:14 PM | Reply | Permalink
when the price of oil is very high is the perfect time to end exploration subsidies. These should only exist if the price of oil is low. When oil is priced high, the cost of risk is decreased for oil companies. Otherwise risky activities become attractive. That's why difficualt-to-develop fields like the North Sea and the North Slope of Alaska weren;t developped until the oil shocks of the 70s. Suddenly the enormous capital expenditure (and risk) was worth it. ANd once you've spent the money, it's sunk costs anyway.
February 15, 2006 6:29 PM | Reply | Permalink