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Sunday, October 21, 2012

In Language Anyone Should Be Able to Understand -- From the Congressional Budget Office

Link here to the Energy Tribune.
... CBO data, we find that the tax preferences for wind energy total $1,540 per barrel of oil equivalent per day.
At $1,540 per barrel of oil equivalent per day, the wind sector is getting subsidies that are about 12 times as great as the amount of tax preferences provided to the oil and gas sector.
Here are the numbers: In 2011, domestic oil and gas production totaled 19.736 million barrels of oil equivalent per day. Last year, according to the CBO, the tax preferences extended to the fossil-fuel sector totaled $2.5 billion.Therefore, a bit of simple math shows that the tax preferences for the oil and gas sector cost taxpayers about $127 per barrel of oil equivalent per day.
Readers on high blood pressure medication should probably not visit the linked article. 

5 comments:

  1. That may not be comparing apples to apples. Correct me if I'm wrong, but the tax incentives for oil & gas exploration is considered an expense against sales, translating into a reduction on a company's taxable income, whereas the tax incentives for wind is a TAX CREDIT, which is a dollar for dollar tax reduction. Therefore, the $2.8 Billion for O&G is a reduction of total taxes paid by the O&G industry. Whereas the wind industry investor is receiving a dollar reduction in taxes on another investment for every dollar invested in wind, while the wind industry has enough expenses to where it is paying a very low marginal tax rate since there is very little to no net profits to tax.

    Someone really smart could probably put what I am trying to say in a much simpler and cleaner way, but basically there is NO POSSIBLE WAY there is a $127/bbl tax subsidy for oil.

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    1. I agree completely. The government is making money off the oil and gas industry; the government is losing money on wind investments.

      Another way to look at it, I suppose, if the oil and gas industry were to go away, would tax receipts for US government go up or down? If the wind industry were to go away, would tax receipts for US government go up or down?

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  2. Well said Bruce, well said!

    I wish Romney would have taken his comparison of the $2.8 Billion O&G tax incentives with the $90 Billion of alternative energy tax incentives further out and provide what the equivalent incentive for O&G would have been.

    Here are some projections. If alternative energy produces 5% (very generous) of the US energy, then by dividing the $90 Billion by .05 produces a better context of how much alternative energy receives. That would mean all other energy would receive $1.8 TRILLION in incentives. Since alternative energy produces almost 2%, the real number for comparison would be $4.5 Trillion.

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    Replies
    1. I agree: the difficulty guys like Mr Romney have in putting concepts/reality into soundbites that the average folks can understand is a huge challenge.

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  3. This is pretty funny. Mr Bryce seems to have invented a completely meaningless metric for oil co subsidy.

    He seems to compare tax deduction in b$/year to crude production in bbl/day to arrive at 127$ per barrel (equivalent) "subsidy".

    The point of the article (if there is one) is lost on the reader. And the article in no way reflects on the cbo.

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