Are Subsidies to Oil Companies Ever Justified?

Should We Ever Subsidize an Oil Company?

“Of course not!” might be the immediate reaction of most people. But doesn’t it depend on the objectives you are trying to achieve or the behaviors you wish to influence? Are there no cases in which it would be warranted? What if the end result was a reduction in our fossil fuel consumption?

I think most people would like to see us move away from fossil fuels. But fossil fuels are money-makers for the oil companies, and the cheapest option (strictly in terms of dollars at the pump) for consumers. So how do we wean off of fossil fuels?

Reducing Fossil Fuel Usage

There are really two options. By far the most efficient would be to raise taxes on fossil fuels. I am an American, but have lived in Europe before, and I am back here now. In my opinion Europeans have been far wiser about their policies on fossil fuels than we have been in the U.S. They made them expensive. Does that mean everyone then lives in poverty because they can’t afford gasoline? Far from it. People have adapted. They are attracted to fuel efficient vehicles. They live in smaller houses, closer to their jobs. They embrace mass transit. These are all behaviors that the U.S. has discouraged by keeping fossil fuel taxes low. So, we are energy gluttons, and we maintain this gluttonous habit by ensuring that both major political parties think twice before raising our gas taxes.

Higher fossil fuel taxes would help level the playing field for alternative fuels. Not only does this avoid the potential mistake of trying to forecast and subsidize particular technology winners, but it also discourages alternatives that have high fossil fuel inputs. This is important, because we are now subsidizing some “alternative” options that are essentially 90% recycled fossil fuel. Taxing fossil fuels would strongly penalize those alternatives with high fossil fuel inputs.

However, I think it is unlikely that our political leaders have the will to tackle the tax option. So then we are left with the alternative of subsidizing alternative energy and hoping that one or more sustainable options are developed as a result. We have tried this experiment with corn ethanol for 30 years now. It has been heavily subsidized since the late 1970’s, and today it is still not a viable option without mandates or subsidies. (I know that there are those who truly believe that grain ethanol could survive without the subsidies. I think what we would see is that the industry would collapse like a row of dominoes, which is why the subsidy remains in place).

Renewable Diesel

One option that I have always felt had serious potential as a sustainable option is renewable diesel. Not only is the EROEI of the biodiesel production process superior to that of grain ethanol, but a diesel engine is also much more efficient than a spark-ignition engine (which is where our ethanol supply ends up). And like ethanol, we also subsidize renewable diesel. And there aren't all that many objections to subsidizing biodiesel; that is until an oil company wants to make it.

Biodiesel, which is strictly defined as alkyl esters made from the transesterification of vegetable oils or animal fats, receives a $1/gallon production subsidy. Biodiesel is produced by reacting the vegetable oil or animal fat with (typically) methanol (which is usually produced from fossil fuels) and a strong caustic. The products are biodiesel and a glycerol by-product that can be difficult to dispose of (it is often simply incinerated). There is also a wastewater discharge, containing "free fatty acids that have a high biochemical oxygen demand, or BOD, that can remove oxygen from water bodies and harm aquatic life." None of the by-products, however, are classified as hazardous waste.

There are two other forms of renewable, or "green diesel" that aren't strictly defined as biodiesel. One is obtained via a gasification and subsequent Fischer-Tropsch reaction of biomass. Choren, for instance, uses this process to make their SunDiesel product. The other form involves thermal processes in which animal fats or vegetable oils are heated and sometimes reacted with hydrogen to transform the oils into a diesel product. Such processes for making diesel have been referred to as second-generation biofuel technology. And these second-generation technologies have one big advantage over the first-generation technologies: They can be blended up to 100% with conventional diesel in any weather. The cold weather limitations of alkyl ester biodiesel are well-known.

There was some uncertainty about whether new green diesel technologies met the definition of biodiesel and therefore qualified for the subsidy. So Missouri Representative Roy Blunt, to help a company in his district - Changing World Technologies (CWT) - inserted a provision to make sure that so-called thermal depolymerization processes also received the subsidy. In addition, he helped CWT secure a $5 million grant. While this is money that in hindsight was probably thrown down a black hole because of grossly exaggerated claims on the part of CWT (See my essay TDP: The Next Big Thing), it did set a precedent for expanding the biodiesel subsidy to include processes other than strict alkyl ester biodiesel. In general, I would think that funding second-generation technologies is as important as funding first-generation technologies.

The First-Generation Recipients Scream Foul

On April 16th, 2007 ConocoPhillips and Tyson Foods announced a collaborative effort to produce green diesel via one of the second-generation technologies. But the National Biodiesel Board, a lobby for the first-generation biodiesel producers, cried foul and issued an incredibly hypocritical news release, which I have dissected:

The Biodiesel Lobby Cries Foul

Their argument was that it was not fair to give an oil company - already making billions in profits - incentives for producing biofuels. They also complained that the White House was directly lobbied on this matter. This issue is discussed at:

ConocoPhillips, Tyson Lobbied White House on Tax Rule

The persistent theme of the article is that the credit was expanded on behalf of ConocoPhillips and Tyson Foods. But it appears to me that a clarification was requested before millions of dollars had been invested in this process. From the EPA's Regulation of Fuels and Fuel Additives: Renewable Fuel Standard Requirements for 2006 , issued December 30, 2005 we find the following definition of biodiesel:

Biodiesel means a diesel fuel substitute produced from nonpetroleum renewable resources that meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act. It includes biodiesel derived from animal wastes (including poultry fats and poultry wastes) and other waste materials, or biodiesel derived from municipal solid waste and sludges and oils derived from wastewater and the treatment of wastewater.

That definition is certainly not process-specific, but I can understand the desire to get clarification on the rules before the project was announced. The sticking point could be that someone could argue that "biodiesel" has traditionally been the term for the ester product. But the key phrase to me looks like "diesel fuel substitute produced from nonpetroleum renewable resources." After all, what are we actually trying to achieve with these subsidies? Isn't the point to encourage movement away from fossil fuels and toward biofuels? Shall we start picking technology winners by funding one renewable "diesel fuel substitute" while denying funding to another?

But some didn't see it that way at all. What they saw was that an oil company was going to get the same subsidy that biodiesel producers received, and they are quite happy to cut off their nose to spite their face:

Democrats Target Tax Break for ConocoPhillips, Tyson

April 20 (Bloomberg) -- Democrats in Congress plan to reverse an Internal Revenue Service ruling that allowed ConocoPhillips and Tyson Foods Inc. to benefit from a tax break for producing alternative energy.

If adopted, the legislation would threaten a joint venture announced this week by ConocoPhillips and Tyson to produce diesel fuel from animal fat. Lawmakers said that the tax credit was intended to benefit new technologies using animal carcasses and other food waste and that the companies pressured Bush administration officials to redefine it.

I almost hate to point out that this is new technology. This particular process came along much later than both traditional biodiesel manufacture and the CWT process that didn't actually work as advertised yet still got $5 million.

As Jim Mulva pointed out, the project is not profitable without the tax credit and would not go forward otherwise:

ConocoPhillips spokesman Bill Graham said today that remarks by company Chief Executive Officer Jim Mulva earlier in the week sum up the company's position on the tax cuts. Mulva said that ConocoPhillips and Tyson wouldn't proceed with the venture if they didn't qualify for the tax credit, worth $1 per gallon of renewable diesel produced.

"It's not profitable without the $1 tax credit," Mulva said April 16 at a news conference in Houston. "It's very important and significant in going forward at this point in time."

A Tyson spokesman also weighed in:

Gary Mickelson, a Tyson spokesman, said today that the company hadn't seen any legislation.

"Denying the tax credit will only serve to limit the expansion and availability of alternative fuels and also damage the ability of livestock farmers and ranchers to participate in the renewable energy business," Mickelson said in an e-mail, citing support for the IRS ruling by the National Cattlemen's Beef Association, National Pork Producers Council, National Chicken Council and Texas Cattle Feeders Association.

The article also pointed out the it wasn't only the biodiesel lobby that was unhappy:

It also angered the American Soybean Association, which fears refiners may begin shipping in less-expensive foreign palm oil to replace U.S. soy oil at the government's expense.

This is a ridiculous argument, because nothing is stopping conventional biodiesel producers from doing that right now. Of course this sort of protectionism is nothing new in the renewable energy field, as we do the same thing with corn ethanol. We subsidize it, and then penalize much more sustainable Brazilian ethanol with a $0.54/gallon tariff. Except in this case, we are going to discourage the development of an alternative within the U.S. because it will benefit a U.S. oil company.

An article in the Houston Chronicle discussed the economics in a bit more detail:

Jeff Webster, general manager of Tyson's Renewable Energy Division, noted that the cost of using animal fat as a feedstock is about $2 a gallon, or about $84 a barrel.

That compares with crude oil futures running above $63 a barrel on the New York Mercantile Exchange.

The $1-per-gallon tax credit, however, would bring the feedstock cost for animal fat down to about $1 a gallon, or $42 a barrel.

"In general, the feedstock cost is the big driver of your overall costs, as much as 75 percent of your cost structure," Webster said.

Asked about the effort to change the interpretation, ConocoPhillips spokesman Bill Graham noted: "With any repeal, you're changing the economics for the manufacturing of the renewable diesel.

"If it is repealed and maintained for other forms of alternative energy, then what you're doing is picking and choosing between alternative energies. And we don't think that's sound public policy."


Most objections that I have seen are generally along the lines of "Why on earth would I want my tax dollars going to a company making billions of dollars a year? They don't need any subsidies."

Of course that is correct. They don't need subsidies to continue business as usual. In fact, all that would happen if you removed the so-called indirect subsidies is that we would pay more for gasoline. There would be some demand destruction as a result, so perhaps there would be some impact to the oil companies, but for the most part it would be business as usual.

And there's the rub. If you want to take that position: "They don't need my tax money", then don't expect them to do things that you think they should do. As someone else wrote to me "It is in their best interest to move into biofuels." But you see, as far as they are concerned it is not. What is being asked here is for them to enter into a guaranteed money-losing commercial venture. That is a lot different than just funding R&D research, which is being done regardless.

You saw the API conference call transcript. The oil industry, rightly or wrongly, believes that their business will be oil for quite some time. So that leaves two possibilities.

First, what if they are wrong? Well, if they are wrong and they are discouraged from moving into next-generation fuels, then you and I will suffer. It will be peak with no parachute. We will have wasted quite an opportunity to nudge them in the direction of diversifying the fuel supply.

So, what if they are right and there is plenty of oil and gas? Well, they will continue to make oil and gas, consumers will continue to buy it, oil companies will continue to profit, and greenhouse gas emissions will continue to rise. And they will not change their behavior because the status quo is making money, and the shareholders are happy.

So the way I see it, we need to encourage a move away from fossil fuels even if we have to give oil companies the same incentives that we give everyone else. Who will be hurt if we don't is you and me.


This case is very frustrating to me. It highlights the problems that we are going to have in encouraging oil companies to move toward alternative energy. What is the purpose of these subsidies? Isn't it to make the alternatives competitive with fossil fuels? So then why should we expect oil companies to expand R&D on alternative fuels if they are going to sell these fuels at a loss? Remember, the current biodiesel producers aren't losing their $1/gallon tax credit. Farmer Marty Ross, mentioned in The Biodiesel Lobby Cries Foul, is still going to receive his $5.5 million a year in subsidies. Furthermore, he qualifies for various grants and low-interest loans to give him an additional benefit. But biodiesel producers want both a subsidy and a monopoly, and their position endangers us all by discouraging the development of next-generation alternatives.

Oil companies are still answerable to their shareholders. They can't be expected to invest big dollars into product development if they believe they are going to sell the product at a loss. These credits should be open to anyone willing to make the necessary investments. Would you rather see the money flow to the Middle East? Do you want the next generation of fuels to be coal-based, or derived from shale oil? Because this is what will happen if we make it more difficult for oil companies to become involved in alternative fuels. Ask yourself the following questions:

1. Will technologies like this reduce our dependence on foreign oil? Yes.
2. Will this encourage a renewable diesel technology that does not commercially exist? Yes
3. Will this help diversify our fuel supply? Yes.
4. Does this produce a fuel with superior performance characteristics? Yes

That would seem like a slam-dunk. Yet there is one more question to answer, and because of that answer some are willing to forego quite an opportunity to nudge oil companies in a sustainable direction:

5. Will an oil company benefit, just as any other company could benefit? Yes.

I have personally lobbied my company to become more involved in alternative energy, and this attempt to rescind the credit is very upsetting to me. I have skin in the game here, and I want to encourage my company to move into alternative fuels. But rescinding the credit will be a disincentive because I know what the economics look like for these biofuels.


Of course I do work for "an" oil company. I can't say which one, although it is relatively easy to figure out with Google. I tell you this because I don't want there to be any misunderstandings. However, I can't come right out and name my company, because I am not sanctioned to speak for them. Their position and my position don't always mesh, so it is important to keep my personal opinions separate from official company statements.

I was conflicted about whether to write this essay, because I don't want it to look like I am putting my self-interests ahead of good energy policy. And I wouldn't even touch this one, but I think this is a very important, precedent-setting issue that has major implications on the direction of our energy policy. I asked and received feedback from TOD editors and contributors, and the feedback that I did receive suggested that I should go ahead and post it.

In many ways, the taxpayer subsidizing the operation is equivalent to investors in any other business, i.e., they are putting up capital. On this basis, I would argue that the investor-taxpayers should also be granted an equity interest in the operation. (Shades of Hugo!)

Personally, I'm willing to see the whole biofuel industry die since I believe it is unsustainable and, further, that it will make little difference down the road but that's another story.

Sorry -mistaken post- deleted.

If you absolutely have to have a biofuels industry, why on earth would you subsidize a multinational corporation? You'd want to keep the benefits local, including the profits.

I can't quie agree about the biofuel industry dying - to the extent that oil from rapeseed is used for tractors, for example, it is pretty much the same as feeding horses or oxen, except the tractors are able to perform much more work for considerably less input. Unless you wish to be as romantic as some of the original Greens in Germany, and believe that agriculture using farm animals is a viable way to feed people.

Of course, this is not the goal of the biofuel industry as such - and to be honest, pressing something like rapeseed for oil to use in farming doesn't actually require a biofuel industry either.

"[...] except the tractors are able to perform much more work for considerably less input."

Input of what? Input of man-hours? Agreed. Input of fossil fuels? I'm not so sure. In terms of work done for fuel fed, both are probably pretty inefficient. A horse or ox does have the distinct advantage that much of its fuel can be obtained from marginal land. When not working they can get all of their fuel from marginal land.

Certainly, I'm very curious about the Food Energy Return On Food Energy Input (FEROFEI) with bio-diesel tractors compared to draft animal power sources. My guess is that it would depend on what you're doing and how you do it.

I've done some plowing and harrowing behind a team of horses and it is slow going, but not a bad way to spend a morning if the weather is nice as it usually is in spring and fall plowing seasons.

Input of fossil fuels? I'm not so sure. In terms of work done for fuel fed, both are probably pretty inefficient. A horse or ox does have the distinct advantage that much of its fuel can be obtained from marginal land. When not working they can get all of their fuel from marginal land.

In terms of photon->work oil from fossil fuels is least efficient. Photons->pv->...-> work can be better than photon->plant->seedoil->work. Photon->plant->animal->work the conversion of plant to animal energy is poor value.

Marginal land is still taxed. Somehow your animal powered vision has to fit the present economic system.

Rescind the subsidies. If the animal fat is worth $2/gal, use it as a food stock.

What's THAT cost to Medicare?

It seems to me that a proper (indeed a central) role for democratic Gov't is to act as an agent for the public (as opposed to private) interests.

For me the following things follow from this:

- If Gov't is to fund research activities then the product of that research should serve public interests i.e. the data should be released to the public domain or, at the least, the intellectual property rights, and the royalty revenues that flow from the commercialization of them by the private sector, should go to the state, not a private company, and used for the benifit of the general population i.e. to offset taxation.

- Likewise with Gov't investments in built infrastructure, the thing that is built should be public, not private, property.

Tax incentives on the production side are, in my opinion, just about the worst way for Gov't to seek to effect behavior change. I say this because:

- The ability of companies to "game" the tax system is huge. The goal of the company will always be to minimise tax paid , not necessarly to engage in the behaviour change the Gov't seeks to effect.

- Democracy is impossible without public oversight, and this in turn requires public access to information. Because tax records are confidential between the Gov't and the tax payer detailed public oversight of this activity becomes impossible. For this and other reasons if Gov't is to directly subsidise it should, in my opinion be done via grants or loans whose paperwork is fully public.

If the collective decision is to encourage bio-fuel consumption (hopefully at the expense of fossil fuels) then I'd suggest that the equitable way to do it is to rebate the consumer i.e. have the Gov't pay a rebate of X$ per gallon to the end user upon proof of purchase.

Let me be clear that I'm not advocating for such a rebate in this particular case, from what little I know about bio-fuels large scale development would, if possible at all, be a nightmare in terms of global heating, soil depletion, etc. as discussed at length here. I'm just saying that IF we DO want to encourage it using gov't fiscal methods this is how to go about it.

I take it as axiomatic that an objective of "business" is, whenever possible, to "externalize" i.e. "commonize" their costs and "privatize" their profits. I don't hold them as "evil" for acting this way, anymore than I hold a Lion as "evil" for eating some cute looking helpless prey species, they are each just "doing what they do", but we should all remember that we are, in fact, members of a prey species (lets not be helpless) when we hear business saying that they think a really good idea is being proposed...

“It seems to me that a proper (indeed a central) role for democratic Gov't is to act as an agent for the public (as opposed to private) interests.” Posted by John Milton

Except that well organized and funded private interests are much better at getting a democratic government to cater to their interests than is the generally apathetic, distracted and disorganized “public.” Any conversation within the halls of an elected government is constantly skewed and led off track by these private (usually corporate) interests. For any government to seriously address these problems, they have to be empowered to toss the lobbyists, admen and spin doctors off the table and focus on actual, workable solutions, without fearing a political backlash on the next election day. This is a large part of the reason that Cuba was able to survive the cutoff of Russian oil after the collapse of the Soviet Union relatively intact.

Trying to hang on to “our democracy” as we go farther post-peak is like trying to hang on to the private automobile, ultimately, neither are sustainable and both are part of the problem. Furthermore, it distracts us from addressing the actual situation and prevents our considering realistic solutions as these are deemed “politically impossible.”

Antoinetta III

Antoinetta III:

"Except that well organized and funded private interests are much better..."

Pretty much agree with that paragraph, sad but true esp. in N. America.

But when you say:

"Trying to hang on to “our democracy” as we go farther post-peak is like trying to hang on to the private automobile, ultimately, neither are sustainable and both are part of the problem."

Do you mean to suggest that only some non-democratic form of Gov't can function post - peak? If so then I'd need a good argument for that position, or have I misunderstood you?

I would suggest that the assumption is: what is called "our democracy" is not democratic.

Whoever people vote into power will continue to work more for the lobbying parties than for the people... perhaps the need is for a small (less complexity), democratic government that is truly independent of corporate lobbying and is easily held accountable.

As A. III noted: "...they have to be empowered to toss the lobbyists, admen and spin doctors off the table and focus on actual, workable solutions, without fearing a political backlash on the next election day."

That was how I read it, anyway...

"You can never solve a problem on the level on which it was created."
Albert Einstein

I agree that that is what she meant, and in any case, it is what I mean. We don't have a democracy. We have a corporate kleptocracy, and it is hard to imagine that peak oil stress is going to cause a flourishing of a "power to the people" movement. The stakes will rise, the resources will shrink, and the corporate interests will ultimately take over completely.

In fact I'd argue that it is the oil age bubble that has allowed what little democracy we have in the U.S. to remain in operation these last 100 years. So great has been the abundance of American agriculture and energy that even the greediest private interests haven't been able to take everything or drive the "public interest" out of government entirely.

In the future, a future of scarcity and economic losers, it is easy to forsee that things could get less democratic, less open to the interests of the common person, less isolated from corporate interests.

It's a paradox. If a system is elected and "democratic", how do you prevent a few-well organized and financed special interests from out-organizing and out-spending the more or less inattentive "general population" to ensure that government prioritizes their agenda before the long-term interests of the overall society.

If a government has the authority to toss said special interests off the table, it's not democratic. And when the special interests take control, it ceases to be democratic.

Antoinetta III

Ummm... o.k. I thought this would be "understood", but seems not.

You are not going to have a functional democracy if you have a 'more or less inattentive "general population"', by which I mean a population which does no more than vote at election time. (and yes I know many don't even do that).

That's sort of like calling yourself a cabinet maker because you bought an old hand plane at a garage sale.

This is actually understood much more widely in Europe and elsewhere than it is in North America.

Thanks for the article, Robert. I always come away better informed.

Rick D.

How about the "hidden subsidy" the US armed forces have provided the oil industry for the safe transport for oil tankers and more over the last few decades. Its free to the Oil companies. What about the drilling contracts the govt has with some. That too is a hidden subsidy. The effort in protecting oil has grown in the last ten years. There's a feedback loop for you.

The amount of money the US taxpayer is spending in efforts to protect oil for the oil industry is huge. What does,.. say.. something like, the fifth fleet, cost to run a day. This is just normal everyday stuff, not including Iraq etc.

Quid Clarius Astris
Ubi Bene ibi patria

The National Defense Council Foundation did a study, updated in 2006, which put the externalized costs (military and otherwise but not including US environmental impacts) of middle east oil consumed in the US as gasoline at $8.35 / gallon on top of the retail price visable at the pump.

Summary of study here:

How about the "hidden subsidy" the US armed forces have provided the oil industry for the safe transport for oil tankers and more over the last few decades.

A long standing, legitimate use of Naval forces is that of Escort. Always has been. Indeed, I have long been against the drawdown in US naval forces, from the near 600 ship peak to the now ~300 ship Navy for just this very purpose. While frigates are not the most glamorous of naval combatants, they and the diesel subs are important for escorting and keeping shipping lanes safe.

Its free to the Oil companies.

Do the oil companies pay taxes? Or even more importantly, to the oil company owners (shareholders, including a great number of retirement portfolios) pay taxes?

You're asking me if the oil companies pay Taxes. Don't you know. Do shareholders pay taxes on their profits. Again, don't you know how the markets work. Do you understand capital gains tax and when it occurs. What the current capital gains tax is.

Keeping the shipping lanes free. Excuse me, but who are we protecting the lanes from.

Providing escort is long standing tradition. Really, in times of peace. When did this start. Do we also escort ships bringing in goods from China. What flags are the oil tankers/ships flying. Are they flying US register flags, or from countries other than the US. If other countries why is the US providing cover for ships registered to other countries.

What other industries also receive safe passage for their vessels that come to the US.

Long standing tradition. Please give examples of this when not at war or a real hazard is in place. What is the hazard now.

What other countries benefit from our "cover" that do not contribute toward the expense. Do all the ships that get cover all port in the US for their oil to be offloaded or do numerous other countries also have ships that divert once out of certain waters and go to other countries.

Time of War for oil is one thing, and its for military purpose.

I would like to know all the other Escort ships being used besides those for oil also. Can you provide a list.

Quid Clarius Astris
Ubi Bene ibi patria

You are obviously unaware of the problems of piracy, which is an issue today as it has always been. In particular, the Indian Ocean and the waters of SE Asia. Additionally, off the African coast there have been issues with Islamic groups working through piracy. So that is one issue, or basket of issues.

The escorting of non-US flagged ships is not really a big deal - if the ship is coming into or going out of a US port (or one of our allies') then it matters to us, thus the legitimacy of using a US Naval escort.

Case in point would be west African waters, where western navies likely will have to maintain a presence for quite awhile. While many of the workers/companies may be from elsewhere (China, Korea, etc.) those nations don't have navies to do the job (or don't do them well), and while the Russian navy is capable they just don't care (I suppose they'd rather sell their own oil...). The Japanese navy is capable but is currently restricted (consitutionally) in their use, though the current PM would like to change that.

And while you may not believe it, there is a need to "show the flag" in contentious waters (e.g., Persian Gulf.) You probably do not believe that, but that is a discussion on foreign policy/philosophy that is probably beyond the scope of TOD and involves many fundamental beliefs which, were we to discuss them here, would end up being very long posts.

The other issue is the very, very long lead times wrt naval forces and their maintenance - you can't just turn on/off a fleet. We "mothball" ships but even that is time consuming process, and it is always expensive to bring a ship online. Not to mention the manpower/training issues. In other words, if you want an effective Naval force you need to maintain one, even in times of (relative) peace. In WWII we were fortunate to have had the world's largest industrial base and oil supply, so we could quickly crank out (relatively crude by today's standards) ships. Not so today.

You have not addressed the issue that amounts to a subsidy for the oil company. The US taxpayer is paying for this protection.

Piracy. What size ship do these pirates have. how do they board an oil tanker. Does the oil tanker not have protection on their ship. Piracy is not terrorism, and pirates would not blow up a ship because it didn't stop, because they know what that would get them.

The issue is WHO PAYS.

You also did not address the issues with how much corporate tax the Oil industry paid to the US last Year. The argument that the shareholders should bear the burden instead of the company is also a cop out.

You did not address what other industries also have protection for their ships. I guess that is because you couldn't find one.

The flag ship matters to "us", who is "US".

The argument that our navy would be be mothballed is also a strawman argument. IF not then you are telling me that the ONLY reason they exist is to protect oil ships.

The need to show the flag in Gulf waters. Yes a large discussion, but not one that says that the US taxpayer should pay for the oil company protection without fees. That the US consumer should pay for the subsidy for new drilling like we just did and are.

Quid Clarius Astris
Ubi Bene ibi patria

Does the oil tanker not have protection on their ship.

Not enough, apparently. Just last year, a UAE oil tanker was seized by pirates off Somalia. This list details multiple assaults on tankers and other bulk carrier ships in May 2006 alone, and this is a first-person accounting of time spent on a large oil tanker which notes "Even the really big tankers (such as ours) were not exempt."

So, contrary to your belief, piracy is a problem for commercial shipping.

Piracy is not terrorism, and pirates would not blow up a ship

No, but they would tie up the crew and leave the oil tanker to drift, risking a large oil spill and endangering other ships (including tankers) using the shipping lane.

You did not address what other industries also have protection for their ships.

Every other industry that uses ships. It's not like combatting piracy only helps ships that happen to be carrying oil.

The issue is WHO PAYS.

National militaries have been used for defending commerce against piracy since at least the Roman Empire. If you believe that is no longer a reasonable function for a country's navy to perform, the onus is on you to make that argument, and to suggest an alternative.

Or, at the very least, educate yourself a little bit before you start ranting.

That you believe something does not make it true.

Good post Robert but I would like to know why you think this is an issue. The case you describe is just one of a hog that feeds at the government trough squeeling because another hog wants some too. This happens all the time; Government sets energy policies and lobbyists fight for the money.

If you want another example of how funny this can be just do some research on the Energy Biosciences Institute soon to be established at UC Berkeley and Lawrence Berkeley National Laboratory with $500 million in funding from BP. This story is a local one for me and in the local papers they describe meetings where you had the most left-leaning group you can think of (professors) in one of the most left-leaning government-supported organizations (UC Berkely) in the most left-leaning industry (academia) in the most left-leaning locality in the US faced with accepting a huge sum of money from one of the biggest corporations in the world in an industry they believe is evil to research a renewable energy source. There were so many contradictions that the heads of a few of the professors almost exploded when they were trying to parse it all.


Left, left, left you say.
Let me guess, you're not. And I'll go out on a limb here and guess you are on the other end of the spectrum.

This post would indicate to me that the Left/non-Left filter that seems active here is important, probably first and foremost by far, to the extent that you didn't even mention the merits of the arguments that buttress the work they are doing. I mean you mention contradictions – how so ?
Exploding heads – why for ?

By your own admission you are local to the story. Sounds to me like you are sitting in the catbird seat !

Where IS that 'Theory of Everything' ?
Here it is !

I am pointing out the political leanings of those involved in this research to illustrate how strange the bedfellows can be when it comes to subsidies and grants. My point is that right & left, free-market & collectivist systems, business & non-profit all gets muddled when it comes to energy subsidies. I am as uncomfortable with it as the professors are.

I didn't mention the merits of the work the researchers are doing because people are already sick of hearing me sing the praises of ethanol.

I am not sick of hearing about research but I am sick of hearing research getting rewritten into production by someone who has demonstrated prior financial interest in ethanol, particularly in stock which said person pumped right here on TOD then dumped himself.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

Hey Greyzon; ethanol is crap. But let me tell you about my solar power stocks.....

Well, if they stopped selling fossil fuel to the extent they sell biodiesel, meaning that the taxpayers are subsidizing substitution, without the company still earning money on the sale of the 'substituted' fossil fuels, maybe.

But then, that argument doesn't work, because of course any company is happy to keep their current profitable business model functioning while collecting money from any source to help ensure their profitability in the future. And they will always oppose losing a profitable business before it runs dry.

I could go on further by pointing out that making auto driving less attractive by reducing various subsidies connected to road building, or making other energy efficient transportation such as rail more attractive, is the sort of thing that an oil company can be counted to oppose as government meddling in a free market.

Maybe Exxonmobil, with only a piddling 40 or so billion dollar profit could be induced to invest.1% percent of that profit (1/1000 of 40,000,000,000 equals a trivial 40,000,000 dollars) in their own biodiesel operations? Yes, I know, what a fantasy - where a company actually uses its own profit to develop new profitable businesses, instead of handing its retiring CEO 1% of the profit, something must be wrong in the corporate welfare state that is America - K Street is still the place where the welfare queens really know how to milk the taxpayer. Besides, a Lear jet (using tax payer funds to keep its home airport running) is much more practical than a Cadillac in this global age.

As you can guess, my cynicism at such suggestions is dwarfed by the reality that the amounts of money involved are close to petty cash for a major oil company - unless we raise fuel taxes enough to make it worth the oil companys' time to keep business as usual profitable.

I HATE Federal or State Subsidies and other unfunded future liabilities - they are uncontrollable and no-one has ANY real idea of total amount. Each of them are uncapped multi-Hundred Billion Dollar/ year taxpayer liabilities that add up to Trillions of Lost Tax Dollars over a 10-20 year period. I am talking wind, ethanol, oil, gas, solar, etc, etc. No-one has any idea of what really is competitive, because everyone is continuously lobbying for bigger and bigger subsidies in order to feather their own nest - which I fear result in our elected officials insisting getting its share too which continues to prolong our agony. This subsidy system is ROTTEN TO THE CORE.

We should obviously copy EU and add a 100% tax to all Oil and Gas while eliminating 100% of all subsidies. That will automatically result in a level playing field, while we start generating some positive government cash flow instead of borrow, borrow, borrow to 10 Trillion +++.

If we had a 100% tax, the public would notice because it was immeadiate, not phased in over years and years, and reduce consumption 25% to 50% over a quarter year or half year - then OIL & GAS prices would DROP possibly to correct 50% of the 'tax' making the net price 50% higher.....The other 50% would come from OPEC countries - in the form of a market price correction.

We need this tax. We need to blow up the subsidies.

I agree!

OK, I'm convinced. We should drop all subsidies and have a level playing field. If your business is not profitable, find another business.

It's called a false dichotomy. How about putting that money into public transit or educating people about the true cost of driving everywhere in our private autos?

I would suggest that, on the whole, support to small, agile, new entrants to the energy game is the optimum strategy.

Although existing players have the benefit of scale and systemic connections, they also have issues with destroying their own marketplaces. Solutions they find will have to mesh with their existing product lines to make it past the board to any large scale deployment. That's not to say they couldn't - more they wouldn't.

In particular what is needed is the support to allow small players to get big quick, separate from the vulture capitalists. That's advice, its access to markets, and its prevention of lockin.

Funding subsidy out of taxation on pollution is favourite to get things moving in the right direction with a double push. The other thing to take into account is that subsidy is more effective at getting swift action than is taxation. The (inadequate) domestic alternative energy grant system in the UK is regularly sold out within hours each month with people getting new systems. Taxing would never get that response.

When government and commerce mix it often is a strange 'brew'. One favorite example of mine is Genencor. This company was started in the US in 1982. In 2000, it received a grant from the U.S. Department of Energy's National Renewable Energy Laboratory (NREL)to bring down the cost of enzymes used in cellulose ethanol production. The research was spectacularly fruitful and dropped the price more than 30-fold. After this, Genencor, technology and all, was purchased by the Danish giant Danisco. Danisco, is known for, among other things, being the largest and most efficient producers of tax-payer subsidized sugar in Europe.

Hmmmm. US taxpayer money finances research for what is now a Danish company's product portfolio.

Don't get me wrong, I love Denmark and Europe but does this make any sense? What if the Saudi government bought them instead so they can sit on the product line? There was another company in this research, Novozymes, so this mitigates the risk somewhat but still.... Can someone please tell me if the methods are released as public data? I think this would be small consolation because the people who did the research are the true value here and they often stay with the company. Plus the company just patents things related to it so no one else can make use of the discoveries. This of course happens in reverse too I am sure. Like I said, strange brew.

Good article, thanks, I learned a few things.

So saying, I have a hard time thinking that biofuels should be subsidized, since they will in all likelihood never significantly replace fossil oil. (though I have long-term hopes for algal biodiesel).

It is a tragedy of democracy in a nation of spoiled, deluded boneheads, that there's no way to do the simple logical thing and tax the hell out of fossil fuels. I agree that leaves us scratching among far less-logical alternatives.

In effect, an indirect 'tax' on oil, at least from the point of view of the consumer, has been levied by the current administration's ham-handed and biblically-motivated middle east policy, and if Dubya decides Jesus wants him to bomb Iran before his term is out, I reckon he will. Then we'll see a more impressive tax.

Of course, it's not a tax which is available to produce revenues for spending by the US government, but it does do an efficient job of making a lot of lobbyists happy. Oil companies have not done badly, the military-industrial folks are doing well. If you posit a certain fungibility among the big corporations benefitted, and rather cynically assume that the 'leaders' don't really care much about the general public, then there could be a perverse logic to it. Expensive oil is what we need, and by screwing around starting wars in oil areas, expensive oil is what we get... plus big profits for Boeing, Halliburton, Exxon et all.... and indirectly, subsidies to the likes of ADM. If you take the cynicism a step further, I suppose there's even a valid, if cold, malthusan rationale for burning food crops in SUV's rather than feeding breeding global populations.

Mind you, I think this is incredibly F*kked-up. That the US government - both parties - will sooner authorize oil wars than an oil tax is craven; no wonder the USA has little credibility with the rest of the world. The nation's citizens wind up paying the 'tax' anyway, but its revenues go to those in other parts of the world who hold extant reserves, which is to say that rather than investing revenues in US infrastructure, the US dollar will be hollowed out until it collapses. As Dmitry Orlov says, nobody will shed a tear for the collapsed USA just as nobody shed a tear for the collapsed USSR.

The logic for offering direct subsidies for desirable outcomes seems to me to rarely work, and particularly in complex situations where the desired intent may be more easily subverted. Still, it's good to see people thinking out of the box.

Ah, I probably shouldn't post before the morning coffee. But OK, I'll offer an alternate proposal to cap off my rant. Bear with me, I'm making this up as I go.

Why is a carbon tax impossible to pass? Even one designed to be revenue-neutral? Because we spoiled US citizens don't like taxes! Lets bomb some furriners instead.

But hey, here's a plan: how about if we jump-start it by creating a multi-trillion dollar "patriot" rebate, where we just flat-out give away 5 or 10 grand to every US citizen for having the foresight to be American, every year! This will be funded by an exhorbitant carbon tax, but the BENEFITS start BEFORE the tax! That is, Americans get a couple of years of free windfall from the government before the tax kicks in. That would put it into the SUCCESSFUL model of "no money down", immediate rebates on new cars, zero-down financing, in other words just exactly what Americans will actually go for... agreeing to onerous terms in the future in exchange for free stuff NOW.

Once our patriotic citizens get 'hooked' on the new entitlement program of patriot rebates, there will be no way to repeal them. With a 2-year advance notice of a huge carbon tax a-comin', they can make whatever adjustments they might want in their lifestyle. Mostly none, but they'll lose bitching rights.

The funds can come from "Helicoptor Ben" running the printing presses, which is being done anyhow; and since we couldn't afford both the patriot rebates and large foreign wars, the large foreign wars would become less popular.

I can hardly wait for my first rebate check!

Today is supposed to be a "slow roll" day for independent truckers.

anyone notice it on the highways. Supposed to drive a the lowest legal speed, should have started a few hours ago.

Quid Clarius Astris
Ubi Bene ibi patria

First, tax the hell out of carbon content. Second, make the oil companies, either directly, or through higher prices, pay for all the military subsidies that are related to oil flow. Third, sponsor an international effort to have oil companies clean up their operations everywhere, including totally polluted places like Nigeria. Fourth, elect people, unlike Bush, who are not in the arms of the oil companies.

Elminate all subsidies for biofuels production; permit government funded R&D research. If the oil companies or anyone else can make biofuel pay after all subsidies are removed and we are paying the full external costs of oil, then more power to them.

It's tricky to argue that subsidies should be used to 'fine tune' a carbon tax or cap-and-trade. A much touted benefit of a cap is that it doesn't pick winners in advance but lets the market decide. This is clearly not the case if gasolene if taxed higher and say second generation biofuel gets tax relief; shouldn't the carbon neutrality alone be the deciding factor?

Same goes for capital grants, soft loans, public liability insurance and guarantees for nuclear plants. Ditto clean coal plants if they are ever built. Another example is transmission lines to remote wind farms.

I don't know the answer to this except that the subsidy must not be hidden. If we are paying twice for an energy product both as a consumer and a taxpayer then we should know this.

I guess it doesn't surprise me that it would come to all of this. Same thing with the ethanol lobby - they are making money hand over fist, and they will fight tooth and nail to maintain their little niche in the market.

Consider another case however - Palm Oil biodiesel. Countries in tropical climates can easily crank out tons of the stuff and undercut local suppliers. The problem is that they have to cut down rainforests in order to build the palm oil plantations, which many would describe as an undesirable outcome.

I suppose it all comes down to trying to figure out how to price externalities. Be it the CO2 in the air, or a military presence in Iraq. Or even for that matter rape-and-pillage mining and agricultural techniques.

As long as we are considering whether subsidies to oil companies are ever justified, why don't we also consider whether it wouldn't also sometimes be justified to strip oil companies of their corporate charter, nationalize them, and run them for the public interest as public utilities. Among many other problems this could potentially solve, it would certainly make it easier to steward the waning days of oil production in the long-term public interest, rather than recklessly squandering the waning oil for short-term private gain.

Be careful what you ask can get nationalized companies like of the largest in the world and totally bankrupt...the only company in the world that can lose billions in the oil business and have the worst balance sheet.

Kill incentive and you kill the oil business.

Tax the heck out of carbon, and all your biofuels disappear in a puff of smoke. Ethanol is nothing but fossil fuels converted to fuel with less BTUs/gal with gigantic transfer of wealth to a few refiners and corporate farmers. Talk about feeding at the trough.....

The biofuel industry would crash if oil prices went to 10 bucks a gallon....

Well what we have now is the United States of America owing more money than it could possibly ever repay. So whats adding the oil companies too. Its only paper money. The amount of debt now carried is so large that GDP can never catch up or some type of Mogambo jargo (MJ)

Quid Clarius Astris
Ubi Bene ibi patria

"Ethanol is nothing but fossil fuels converted to fuel with less BTUs/gal with gigantic transfer of wealth to a few refiners and corporate farmers. Talk about feeding at the trough....."

Au contraire mon ami.

Ethanol -whether one likes it or not- is quite literally one of the only domestic Peak Oil mitigation tools we have at our disposal and although corn ethanol may be fossil fuels by any other name, it's fossil fuels just the same and not oil.

In other words, the amount of 'petroleum' used for the production of ethanol or PIR as I call it (Petroleum Input Ratio) is quite low, ergo, in the soon-to-be-world of declining petroleum supply, the PIR of any mitigation strategy if not the PIR of all activity in general, will be of paramount concern.

When someone shows me an ethanol farm that runs on nothing but ethanol, I'll begin to agree with your viewpoint, Syntec. As it is, I don't think we've ever really had an honest accounting of the fuel / chemical / industrial inputs. Not to mention topsoil, water, and the vagaries of weather.

Ethanol -whether one likes it or not- is quite literally one of the only domestic Peak Oil mitigation tools we have at our disposal ...

There's electric. And the cellphone and laptop computer industries continue to drive innovation in battery technology.

The problem will solve itself.
But not in a nice way.

I hear what you're saying DY but ethanol isn't only made on farms =]

Note the announcement from Goteberg Energi highlighted below.

Electric as you know I'm all for. My laptop and cell phone and solar power batteries on the other hand -despite all being brand new- simply don't retain their charge anywhere near what they are supposed to.

BPHEVs are the only way forward IMHO.

I hear what you're saying DY but ethanol isn't only made on farms =]

Yes, I know. I've mentioned it on TOD myself, C2H4 + H2O ⇒ C2H5OH. With some input from RR (the price of ethylene), I calculated a price of around $1.50 / gallon.

And yeah, I'm with ya on the Pluggable Hybrids. I want one. Now.

The problem will solve itself.
But not in a nice way.

Kill incentive and you kill the oil business.

There comes a time when national security is not business. Medicare has an amazing administrative cost of 3% IIRC. I doubt thats something big oil could claim.

Sure there .. might be a disadvantage to nationalizing, there is also an upside. There is also a difference between killing off the greed, and the incentive. There in lies the rub.

No doubt the oil bidness would be damaged somewhat if you killed incentive, but that is not an argument for continued privatization. I don't think the Saudis are doing all that poorly with a nationalized oil bidness.

I am agnostic regarding keeping the oil in private hands. It just doesn't matter. Do we need incentives so that we can discover more oil sooner and produce oil in places that are currently off limits so that we can have more oil that can be used up even faster? In a world of peak oil, we need to find way to disincentize consumption which will logically lead to less production. Incentives in a world that will shortly be growth constrained just doesn't make sense.

The old economic models are obsolute simply because the growth paradigm is not and has not been sustainable for a very long time.

The oil companies will argue that they need large profits so that they can reinvest to provide more oil. Putting aside the fact that they do things like stock buybacks which have nothing to do with investment, the growth is going to cease regardless of the investments made. The sooner they realize this, the sooner they will use those profits to invest in alternatives. Or maybe they'll just blow it all in even bigger salaries, dividends, and buybacks.

" I don't think the Saudis are doing all that poorly with a nationalized oil bidness. "

The average Saudi is not repeating the benefits of oil Per capita income has plummeted since the 70s. The population is skyrocketing. The 10,000 members of the royal family live, well, like royalty, with yachts, homes all over the world, and riches beyond belief. The average man on the street works for 'the government' on a salary, with 25% unemployment rate of youth. The country is full of 'guest workers'. It is about to all collapse.

And what is the 'government' going to do about offshore driling in restricted areas? ANWR?...there are literally hundreds of small oil companies still exploring, re-drilling wells, and draining the last of old, old tired oil fields. The gov't can't be bothered with 10 bbl/day wells. Little folks can. YOu could sure screw up the entire industry by nationalization.

Just watch Venezuela collapse soon in the oil sector. Mexcio is...Iran is on the way down.

And if folks reallly think there is 'only 3%' overhead in Medicare, they better get some new eye glasses. The gov't has a 15 trillion dollar deficiet in Medicare in the next 30 years. There is so much waste and fraud in Medicare it is astounding. They throw money after money into programs that are NOT cost effective. The 'overhead' of the government is not even counted, and there are countless beancounters with time assigned to other projects working on this. The gov't keeps getting bigger and bigger each year, despite all these claims of 'increased efficiency'. Why? Millions and millions working for the gov't, with 5-10% more added each year. Heck, the gov't can't even run the VA Healthcare system right.

AS to ethanol, the stuff from corn is a joke. Takes as much FOSSIL fuel energy to make it, haul it, and get it delivered, then the diluted gas delivers less gas mileage. All it is is pork for the corporate farmers, and the handful of private farmers left, and all the folks looking for tax credits. Between depleting the Ogallala Aquifer (dropping six feet a year - dry in 20 years), depleting the last six inches of top soil in the Great Plains, and consuming as much fossil fuel energy (releasing all that CO2 into the atmosphere) as the equivalent BTU of 'ethanol', it is a joke. Energy Independence? hardly. Take half the corn crop, and you might displace 5% of imported oil. Might. Except you have used 5% more coal and natural gas in the process. Silly.

Just picked up the following from the comments out at Clusterfuck Nation:

“Hello Everyone,
Hats off to The Oil Drum for being bold enough to ask the timeless question:
"Should We Ever Subsidize an Oil Company?"
To which I respond: Do you mean that the $400 billion that America has spent on the Iraq war isn't enough of a subsidy for the oil industry?
I trust that the good people of The Oil Drum will find plenty of good reasons why those poor, litte, persecuted oil corporations should receive several billion dollars from our government.
We'd all hate to see ExxonMobil suffer. These oil corporations have worked so very hard to get us into this mess, if we give them enough money they will save us.
God bless ConocoPhillips!
"Of course I do work for "an" oil company. I can't say which one, although it is relatively easy to figure out with Google. I tell you this because I don't want there to be any misunderstandings. However, I can't come right out and name my company, because I am not sanctioned to speak for them. Their position and my position don't always mesh, so it is important to keep my personal opinions separate from official company statements.
"I was conflicted about whether to write this essay, because I don't want it to look like I am putting my self-interests ahead of good energy policy. And I wouldn't even touch this one, but I think this is a very important, precedent-setting issue that has major implications on the direction of our energy policy. I asked and received feedback from TOD editors and contributors, and the feedback that I did receive suggested that I should go ahead and post it."
Of course, The Oil Drum is an oil industry rag. Hard to imagine any sort of oil corporate lobbying not welcomed there.
Posted by: David Mathews | April 23, 2007 at 11:44 AM”

So we’re an “oil industry rag” I guess that’s why Big Oil is leading the way in promoting awareness of Peak Oil! (:

Antoinetta III

When I see the rantings of this individual, and silently mutter There but for the grace of God go I, am reminded that the forum at TOD is actually for discussion of the oil industry and energy, not religion, not politics, not conspiracy theories, though occasionally touching on the geopolitical chess game, which USistan is playing rather poorly these days. We also discuss the weather sometimes, such as the hurricanes that knocked the GoM offline in the fall of 2005.

The poster you quote has trolled TOD in the past and, more because of attitude than substance, has been asked to go away. He is apparently a fast-crash doomer or likes to pose as one; however he had a tendency to follow others around the forum insulting them...

And yes, the people who know and care about the oil industry sometimes also work for it. Duh.

The problem will solve itself.
But not in a nice way.

They're should be a significant tax on gasoline, at least a dollar to start with. The money should be spent to develop alternatives, mass transit, and designing communities. Not a penny should be given to the oil companies.

Why should giant bureaucratic companies who know about oil and gas and have lived off subsidies of one type of another for much of their existence be asked to develop new energy supplies, which they know nothing about, makes zero sense.

As you can see by many of the comments, RR, you are once again fighting the:

Oil Company = Evil

dictum of many readers of TOD (and of many environmental and green activists.)

The bigger question you are asking is: What should be the fiscal/tax policy of the federal government in social engineering a change of energy sources away from oil?

There has been for many years (really since the time of FDR) much debate about the use of the federal government in achieving social goals. Being a bit libertarian-ish myself I shun government involvement in economic choices, but the reality hitting us is that the changes (in oil and natural gas supply) may come so quickly that a national, government organized, economic plan in these matters may be called for.

As such, I'd second the notion mentioned above that the "subsidy", so called, should be at the gas pump. By raising taxes on petroleum gasoline, but not on biodiesel (and posting signs at the pump for all to read to make this explicit to the consumer), one could achieve a social change without having congressional-district specific subsidies to targeted corporations.

Some countries took most of the oil companies' profits. When it there was a need for the oil companies to fund new project, the government did not have it available.

Other countries subsidized consumer usage of gasoline and fuel products and there the rate of consumption was likely to rise faster than what happen in a more natural market economy.

It would have been better to subsidize energy projects than for the US to invade Iraq based on false information and deficient planning processes.

Hi InJapan,

Thanks for your comments and for asking a larger question.

re: "Being a bit libertarian-ish myself I shun government involvement in economic choices,..."

I have the impression that the majority (if not 100%) of the current transportation (roads and highways, bail-outs and subsidies, for eg., to GM - ?) infrastructure, along with many other aspects of infrastructure for oil use existing today, were funded by taxes and government programs. I do not have details about this, and I'd welcome any correction or additions to my impressions.

So, this means we are dealing with a set of conditions originally put in place via the "government involvement in economic choices", which you mention.

Yes? Or, do you have a different impression (and hopefully, a set of facts - ? I don't have specifics, though I wish I did.)

So, this, then, seems to me to mean that the sheer magnitude of this infrastructure is so much greater than anything individuals (or even communities) can deal with, in the sense of attempting to cope with the advent of "peak oil".

The fact of pre-existing, gov't.-sponsored "existing conditions", seems to complicate the principles somewhat.

What do you think?


AFAIK, the 'traditional' biodiesel players are up in arms because the loop-hole the Majors are trying to exploit (their words) will a) not result in the expansion of refining capacity b) not create jobs and c) drive up the costs of obtaining feedstocks i.e. big guy vs. little guy syndrome.

At first glance I tend to agree with the latter but as you've alluded to on prior occasion, the energy sandbox is a dangerous place to play.

As far as subsidies are concerned though, I am against them as you know and hard-pressed to support tax incentives for the most profitable companies of all time.

HOWEVER, in the context of Peak Oil, I have argued that subsidies are most definitely warranted if not for the simple reason that the market price signals needed to foster the transition to alternative liquid fuels, will not be received in the geologic timeframe allotted us.

An interesting dilemma indeed - one that won't be solved sans a national peak mitigation strategy that encompasses local, regional and national LTF production solutions of which the Majors will be needed to anchor.

Hi Syntec,


Re: "...a national peak mitigation strategy"

My Q in general: Can any subsidies (really) work at all without such a strategy?

Q for you: I'm curious if you've thought about what the elements of this strategy might be -? And if you could possibly share them. (If not now (OT?), then soon, somewhere.)
I've also wondered: Is it ethical to do any kind of discussion and action on alternatives absent a specific and linked conservation plan? (Kind of a different version of the same question. Except that it seems to me, as long as the necessity for conservation is hidden from the tax-paying public, this means the real problem is also hidden. And any possibility of helpful solutions.)

Broadly speaking would rather eat dirt than give more tax dollars to any multinational company, but RR is correct here. Given that most people are still at the "bio what?" stage, and that there is a crying lack of diversity in biofuel supplies, and that sheer volume of locally produced liquid fuel (of any type) may before too long be a real constraint on adaptation, then subsidising Big Oil to make biofuel makes some sense. Even solely for aim of increasing workforce & technical skillsbase, i think could be justified. The government could work to make sure it gets more back for the subsidy, say by requiring subsidt-receiving plants to take on more apprentices or designate biofuel to be retailed only by mom&pop businesses.

If the ultimate goal is full cost accounting of resource use (which it is, imho), then current biofuel producers will have a rough ride but many should survive. Until politicians & electorates can grow up enough to pursue that goal, why not let Big Oil continue to sponge some more off the State, in order to get more biofuel plant up & runnning?

Let me know when it costs more than the royalties that Republican incompetence/corruption (you decide) have let Big Oil dodge paying.

Robert Rapier,

As usual, excellent article and discussion, and opens up a cadre of interesting lines of thinking, and who knows, perhaps someday, possible policy alterations. Your discussion of this issue of course opens up more fundamental questions:

(a) What exactly should the relationship between a national government and it's oil companies be?

If we can open the question of whether oil companies should ever receive subsidies, can we open the question of whether oil (and energy companies in general) can ever be regulated differently or even nationalized? It is obvious that oil/gas/coal are more than "just commodities" due to their strategic importance (side issue: what metals and other commodities are also "strategic" to the degree that the government must be involved in assuring the production of these "strategic commodities by way of subsidy or incentive?) I am not for nationalization per se at this moment, but just because PEMEX does it badly does not mean that it is always unworkable.

(b) Does any bio fuel exhibit enough promise over all other options to make it the pick of what will be subsidized among all other possible options?
Syntex in a post above says (to paraphrase) that ethanol, right now, is the only real mitigation method using a principally domestic source that we have available. Is that because ethanol is superior to other options, or simply that it has been supported by subsidy and mandate much more than other options?

(c) If we accept bio fuel as the key "option", what of the others that are even more off the beaten path, bio-butanol, algae?

(d) Why do we in fact accept bio fuel as not just another option, but the key option to be supported, as we appear to have done in the U.S.? The Europeans and Japanese seem to see much more promise in photovoltaic solar to hydrogen than the U.S. does, a view that seems to be supported in the U.S. by the well known anti ethanol researchers
Patzik and Pimentel seem to agree with. Does hydrogen from solar, a potential no carbon/no fossil fuel energy source, deserve subsidy/research assistance to an even larger degree, given that it completely side steps the issue of fossil fuel input in production?

I inserted a break because it is important to switch over to the other side of the scale: What about incentive/subsidy for reduced consumption? There are many here who do not accept the continuation of the auto based culture as viable. Should we be subsidizing anything that makes fuel cheap, easy to get and reliable? It is known that my personal view is that the auto is part of existence and quality of life in America that it will continue for a long time into the future (the rest of our natural lives at least) but not all share my view.

I do feel that we have ways to increase efficiency of auto transport to a great degree, however. Should these be subsidized? Plug hybrid cars? Hydraulic hybrid cars? Which? Both? Should smaller commuter cars or electrics receive a strong subsidy, or at least the battery pack be insured by the government to remove the risk fear of battery failure (a big issue with plug hybrid and electrics)?

To paraphrase Robert’s argument, is it EVER right to subsidize the purchase of any car in a fuel constrained world of rising greenhouse gases?

These are issues that are coming before policy makers and by extension, voters.
The problem is that many of the policy makers are NOT in any way technically trained, and often not eve technically astute. The voters are often even less so.
The complexities are enormous (one had to feel somewhat comforted when Robert Rapier said, “This case is very frustrating to me.” So Robert is a real intellectual mortal at least somewhat like the rest of us after all :-)! But if Robert feels frustration, can you imagine the frustration of the public, not at all trained in energy issues (often not greatly interested in them, they just want to live their lives (which I know make them evil in the eyes of the JHK crowd, but it’s what most folks want to do, for pete's sake....)

I will close with this thought: This discussion once more points out the problem of the “energy source by 1000 conversions.” The more steps, the more complexities, the more opportunities to find steps that seem to require some “little push” by way of incentive, or subsidy, or research, or......”too many chefs spoil the broth...”
Major research goal: Reduce the steps.
Thank you for your attention.

Roger Conner Jr.
Remember, we are only one cubic mile from freedom

Hi Roger,

Good questions.

re: "Should we be subsidizing anything that makes fuel cheap, easy to get and reliable?"

Given the work of Stuart, Euan, FF, Bakhtiera, et al...(no need to remind you!)...there's some probability (and I've read many of your posts on the unknowns) we're facing a gargantuan problem in the near future. Agreed?

It looks like the workable "to-some-extent-renewables" are solar , wind and possible nuke power, though let's put the latter aside for a moment.

Does it make sense to do anything other than commit as many resources as possible to the "most renewable" energies, ones that can be maintained (we hope) once "the problem" is upon us in full force?

(Not asking this rhetorically.)

BTW this ConocoPhilips proposal has a precedent in Australia when BP was granted a biodiesel credit for hydrogenated tallow oil
It makes me wonder if Big Oil pass each other notes under the table when the schoolmarm (TOD) isn't watching.

Good question this: Are subsidies ever justified?

The oil and coal companies and their customers have been receiving huge subsidies for decades. It's just that they are not in the books.

When two or more people enter into a commercial arms-length transaction we assume that all of the costs are included. If they are not and a third party is impacted, either adversely or beneficially, either willingly or not, that impact is called an externaility.
Supposing Exxon-Mobil sells a tank of gas to somebody. Happens millions of times a day. That gas is burnt contributing to pollution and global warming. The people who suffer the effect of the pollution and global warming are paying a cost, in health and sometimes their homes (ask the Carteret islanders). That cost is an externality. I personally resent subsidizing Exxon Mobil and all the other big oil companies.

The value of the externality that is not recovered from Exxon is a subsidy. No wonder Exxon has fought global warming so vigorously. It must be wonderful getting all that subsidized cash!

What about direct cash subsidies to renewable fuels activities? They are a very clumsy way of partially levelling the playing field.

Far better than cash subsidies would be to try and impose the externality costs on Exxon (and all the others) by charging a carbon tax. this tax should be charged on all fossil fuels on a per ton CO2 basis. It will be easy to work out by grade of oil, coal and natural gas and easy to collect at the pithead or oil/gas well; or on import. If a finished product such as gasoline is imported, that has not been subject to the same tax in the exporting country it will taxed at port of entry.

I suggest a starting rate of USD $100 per ton CO2.

Government could even reduce income tax dollar for dollar and make itself popular at the same time!

Oil companies are as deserving of subsidies as anyone else. Subsidies are rife throughout the economy, distorting investment decisions, enriching one group to the detriment of others, and creating political factions to ensure their continuation. Why should an oil company be any different than any other entity?

I'm just surprised you actually think biodiesel has "serious potential as a sustainable option". What does "sustainable" actually mean to you?

Take the case of alkyl ester production. This is the major portion of biodiesel today. In 2006, total world production of vegetable oils was 114 million tonnes (USDA 2007). Converted to biodiesel, it would yield (on a B100 basis), about 1.65 million b/d diesel equivalent. Total world diesel demand is 22 million b/d. At most--using every drop of vegetable oil, which provides a major calorie source for many lower-income people--we could create a B8 blend globally. And this in the context of countries such as South Korea that are aiming for B20 blends.

Add to this your "renewable diesel" options. Do you really think there is enough animal fats, greases, municipal refuse, etc. to actually make any serious dent in world diesel demand from petroleum, and do you think these products actually qualify as "renewable"?

There are more carbon atoms in fossil fuel use today than bound up in all the biomass in the world. Please explain to me exactly--absent deus ex machina intervention--how any of these options are "sustainable"?

"There are more carbon atoms in fossil fuel use today than bound up in all the biomass in the world."

Per a prior article here on TOD, one of the better ones ever done on TOD by Khebab, the world uses approximately 1 cubic mile of oil per year.

Of course, you specified "fossil fuel" so we should add in the total of natural gas and coal.

Still, is it actually correct that "There are more carbon atoms in fossil fuel use today than bound up in all the biomass in the world."?

We need some other mathematical types to jump in but I would like (in fact need) to see the source on that one....I would be extremely shocked if it could possibly be true, or anywhere near true. But, I've been shocked before! :-)
(By the way, it's not the carbon in hydrocarbon fuels that produces the energy we use, it's the hydrogen....the carbon goes off into the air to become a greenhouse annoyance....)

Roger Conner Jr.
Remember, we are only one cubic mile from freedom

Strangely Wikipedia's Carbon Cycle article has dropped the flow diagram, but see the less imaginative Wood's Hole version

Note 1 petagram = 1 gigatonne ≈ 1 billion
metric tons. If I've read this right it's saying ff's add 6.5 gt of carbon-in-combination to the atmosphere but there are 10e4 gt left underground, 5 times as much as in the biosphere but a quarter of that in the oceans.

Gotta go watch 'Crude Impact' on the telly.

Long time lurker, first time poster.

I've always enjoyed reading your comments Robert. You definitely provide a perspective that I don't see anywhere else. I think you're missing an opportunity here however to broaden your scope. Specifically, you seem to be the primary force behind the "ethanol is evil" campaign. You seem to give undue credit to other sources, such as sugarcane ethanol and biodiesel. Truthfully, any biomass source can have an infinite EROEI if you are willing to adjust your thinking. And by adjusting your thinking to accept, you would automatically realize that oil companies should never get subsidies.

What is the adjustment you must make? Simply to realize that big industry should not be involved in biofuels...ever..period. It is the big industry mindset that makes corn ethanol not viable. I can (and do) make ethanol on my farm in Thailand, and I have used corn as a feedstock. I can grow corn organically if I accept a lower yield. I use wood for the distillation energy, and the corn meal can be used as a dessicant to get anhydrous ethanol should I desire. The point is, I can get ethanol with *0* fossil fuel inputs, from any feedstock, including corn. Anything over 0 is infinite. And corn is particularly good because it gives you a dessicant you can use for anhydrous.

What are the tradeoffs? Lower yield and lack of scalability. That is the reality of the future, no matter how you look at it. Trying to make biofuels a large industry is *THE SOURCE* of your problem. They never will be. The future of biofuels is farm scale production, by small people. All research should be devoted to this. All grants should be directed at this. I would love to try cellulostic ethanol, but I can't because nobody will give me a small batch of the high tech enzymes. I would have to commit to processing tons of the stuff per day.

Oil companies, and industry in general, have no business in biofuels. You shouldn't get any subsidies. Neither should anyone else with a production process over 1000 liters per day. Trying to make biofuels an industry, leads directly to your conflicts over EROEI.

Try this instead...a whole bunch of small farms, using labor intensive agricultural practices, and a distribution company that goes from farm to farm collecting the excess biofuels and selling them on. Quality control problems? Not really in practice. Farmers learn quick if you reject their products. And the biomass stays on the land. Waste streams are recycled, and minerals are redistributed back to the soil by mixing the biomass that did not become biofuels with compost and putting it back. The nitrogen cycle is complete.

That is the vision of the future, which everyone on this forum needs to accept IMHO. There is no future in big business. They are *THE SOURCE* of the crisis. Once you let that go, the rest simply falls into place.

A low energy life style, combined with distributed, small scale production, and you have a very workable model for the future. But no subsidies for any large scale production...especially oil companies.

Tom In Thailand

Hi tominth,

As you probably know, you will have a hard time convincing most here that ethanol is even a partial solution for mitigating peak oil. I'm glad to see someone post a fresh point of view. Keithster100 and my arguments are getting pretty tiresome for most regular readers I suspect. Please don't give up just because you are out gunned.

I found this tidbit where the CEO of Schlumberger bemoans the inability of oil companies to increase supply:

Then again, most here aren't actively engaged in solving the problem at hand now are they Practical?

Come to think of it, you and I have been around the block a few times too and yet while you and others continue to hold their head in the sand about what can't be done - those of us who recognize what CAN be accomplished, are out there doing it.

Goteborg Energi AB to build world's largest plant to convert biomass to syngas:

It's the middle name of the ELP maxim. Thank you for providing a nice example.

( as in previous economic upheavals, those who do not live on the land will suffer the most )

The problem will solve itself.
But not in a nice way.

Good post.

A couple points..

I agree that ~Much~ of the future of energy production can and probably must shift towards diversification and smaller-scale production, whether it's a farmer making Biogas, Ethanol, Methane or Biodiesel, a Housing community sharing the costs/earnings of a 100kw(?) wind turbine in a coop arrangement, or many, many homeowners putting a couple KW of PV on their rooftops and learning how to manage their energy-budget, as utility electric rates rise, and grids occasionally tumble.. We will certainly have to find ways to live with LESS POWER available to us. I don't think most people at this site would argue that point.

I didn't see, however, what your argument was against 'big business', just that you were against it. I have a lot of problems with the way the corporation charters and Gov't policies allow for imbalanced benefits to fall to the giants of industry. I look to the congress, usually in vain, to show the renewed interest in AntiTrust and AntiMonopoly litigation.. but instead of holding my breath, I'm blowing on a test-model of a savonius turbine for my own homestead. The assumption that a corporation's only concern is profit, is 'shareholder value', is certainly a fast road with a blind cliff at the end of it.

I do, however, think there can be a place for big businesses, and I'd argue there has to be, with the world as interconnected as it is. It has to be a fairly big business that is making Computers, Ships, Wind Turbines, Railroads, Solar Panels.. But we have to be vigilant and active politically so that they don't have the unchecked power they've enjoyed lately. Of course the point of this site is to say that none of us will have as much power to throw around, and so I suspect that the more 'self-generation' of Liquid Fuels and Kilowatts that the populace and micro business develops, and also the less 'cheap fuel' that any large energy businesses can count on to sell to us addicts- all may very well translate to common citizens also having a bit more 'hand' again in the political process.. at least a more realistic ratio than today, where we are in a tug of war with a power source our wee muscles can't beat. At the very least, we now have technologies available to us that will let us get by without many of the energy dependencies we have been hooked to. The dollars that have been 'voting' for exxon, coal-fired electrons, or heating oil can be increasingly freed up to support more 'viable' future industries.

So what (specifically) would be wrong with a current business (Calling it a BIG business is just begging for resentment in the response) qualifying for the same government incentives to transition us towards better energy sources as, say, a startup company that wants to develop the same fuels? It's been well argued here that the Subsidy ought not be for the specific technology or fuel-type, but for the kind of improvement that it represents.. (maybe lower Carbon Content' or 'verifiably sustainable', etc etc)

Maybe the better question should be, What are the requirements or benchmarks that should define a subsidy, so that anybody who wants to will be turning their ships, big or small, in the directions that 'we' have realised we ought to be turning our society? Should Conoco-Phillips qualify for an incentive (that is available to all comers) to turn a % of their business towards tidal or windpower? Do bigger business have some inherent advantage that's unfair in such a process, so that the subsidy available to them should be ammended somehow to correct for such an unfairness?

There is still a looming issue of how much 'Industrial Scaled Anything' can be detrimental and hazardous, so I hope we are careful with how we implement even the greenest of alternatives. But like those who say we won't keep the coal-plants and reactors from sprouting up at this point, we sure won't be keeping the scads of windfarms from happening. The economics are already favorable, and the power is being demanded. The best hedge at the personal level is to grow your own, so much as you are able so you don't support the monster-scale buildout any more than you have to.

Bob Fiske

Hi Tom - Welcome to TOD

Your comments are well thought out and although you correctly recognize that biofuels (like the ethanol you produce) can and will be integral components of our transition away from petroleum usage post-peak, your assertion -that the future reality of biofuel production is to be relegated to small-scale projects- is (I hate to say) incorrect on 3 counts.

First, the biofuel sector has already grown to a very large, well capitalized industrial initiative underwritten by world governments.

Second, the sheer volume of biofuels needed to mitigate Peak Decline ensures that biofuel ventures of all types (small, large, giant) will continue to propagate at an advanced pace.

Third, the Majors have already undertaken both the public and private transition away from being oil companies to becoming energy companies with increasingly large biofuel portfolios.

Now that's not to say that your vision isn't valid, just that in the larger context, small-scale local production can only go so far to address our problem.

Is that a euphemism for subsidized? (Is there a better word for euphemism?)

Is there enough water to let biofuels mitigate this decline? Maybe we can somehow synthesize water from natural gas..


We need a five-year freeze on biofuels, before they wreck the planet.

By George Monbiot. Published in the Guardian 27th March 2007.


When I read these articles I could weep.

This is perhaps a European problem, not an American one.

But there is no doubt biodiesel in particular could (contribute significantly to) destroy(ing) the planet.

Recycling animal fats is OK, maybe growing soybeans in Europe and America, but the reality is biodiesel is going to destroy our planet as surely as anything.

About 2/9ths (ie 2 billion out of 9 billion) tonnes of emitted carbon on the planet come from land use changes, agriculture etc.

The leading climate destabiliser right now (besides coal-fired power stations) is rainforest deforestation.

Most of the world's rainforests have less than 30 years before they will be entirely destroyed.

Clearly there is the biodiversity loss (consider the world's leading insecticide came from trees in the Amazon-- pyrethrins).

But the impact on the world CO2 cycle is potentially huge. The Congo Rainforest alone holds 60 times as much CO2 as the UK produces in a year. And the UK is the world's 6th or 7th largest greenhouse gas producer.

(it turns out temperate forests aren't a great carbon sink. For the last 100 years or so, places like New England have been reforesting, sucking up CO2. *but* a mature temperate forest emits CO2. So most of the natural, forest based, CO2 absorption comes from tropical rainforests)

The European biodiesel requirement is driving demand for palm oil, and that is driving the Malaysians and Indonesians to cut rainforest on Borneo, and build palm oil plantations.

The whole thing is an unsustainable environmental disaster, and a classic example (like corn ethanol) of clean politics and dirty environment.

I sometimes think the human race doesn't deserve to survive the next 100 years.


It occurs to me, and I may well be wrong, but I hope not.. that our very ability to strip rainforests may disappear without the LTF's that get those trucks and chainsaws in there.. so Maybe, Maybe, peak oil will mean that our 'reach' will be cut far enough back to get the Jungles off the hook.

It all depends on what projects and industries will be able to afford to buy diesel and gas to make their operations run.

Dizzyingly Hopeful..
Bob Fiske

Son of TOD: 'Where oh where has Robert gone? '

TOD: " Oh my son the master has gone to the mountain to meditate in great and majestic silence, but in wisdom he leaves us his thoughts as multifarious as the droppings that fall from the soaring gull.

Son of TOD: 'Oh shit'.

TOD: 'Exactly my son.'

My goodness gracious Toddy Woddlers arn't we polite and GULLable. Robert has fed you a load of tripe and you either eat it or at best poke at it a bit.

First he sets the stage with his petulant 'I will not be talked to in such a manner' Then announces he will return but only to speak and not answer to the merit of his speech.

Now with this article he sets up a tar man. From the question of 'Should We Ever Subsidize an Oil Company' he moves to the statement There are really two options. and then goes on to promote Bio diesel, with a 50% price subsidy. He does not go into the Carbon dioxide reduction question and the question of land use are a couple of missing aspects of this promotion and runs down alternate energy as being subsidized while being essentially 90% recycled fossil fuel. Duh,does he mean ethanol? Once involved with this tar man it is difficult to step outside it's sticky grasp.

(Darn I have to go but wish to post this before everyone goes off to buy a diesel, or is that my wife, calls)

My immediate thoughts are ...I can't find an electric plug-in vehicle at a reasonable about using those massive subsidy's to get the Japanese over here, again, to produce one and how about getting into a transitory nuclear supplied electric train and all that jazz economy Bye now dont take any tar babes into your energy bed.


From the question of 'Should We Ever Subsidize an Oil Company' he moves to the statement There are really two options. and then goes on to promote Bio diesel, with a 50% price subsidy.

You demonstrate exactly why I decided to drop out of the threads here. You grossly misrepresent what I said with this straw man, and then whack away at it while throwing in a few insults for good measure. Even though the people who pull this kind of crap are a minority, I learned that if I wade into these threads I can expect that kind of behavior out of at least someone on a daily basis. And I can live without that. The editors here know that they are free to use anything I post at my blog, but I won’t – at least for the present – bother to address the gripes. Sometimes an essay from me will be posted, and if you want to talk about it, have at it. If not, don't. But don't misrepresent me.

For the record, and since I did bother to respond to you, “two options” was not in answer to whether we should subsidize. The two options comment was in response to “how do we wean off of fossil fuels?” We can either make them more expensive, in which case the government can have some control of the price rise. Or, the price can rise naturally as supplies deplete, meaning the oil companies benefit. Or, you can try to encourage various alternatives – which is the least efficient method. My position has always been to raise taxes and let all options compete on equal footing. This would also encourage conservation, and it would encourage electric transport – another favorite of mine. But, this is not what our government wishes to do. So then the question becomes, “If you are going to subsidize biofuels – and I do believe that renewable diesel actually will be sustainable long term (see Choren’s model, for example) – then the government does not need to be in the business of attempting to pick technology winners. Either the subsidy should be available for anyone willing to do what has to be done to produce the fuel, or the subsidies should not exist at all.

Some people can’t get past the words “subsidy” and “oil company.” As someone pointed out above, it completely short-circuited Dave Mathews’ brain. But again, if you are not interested in having oil companies change behavior, by all means deny them the same biofuels subsidies that the government offers everyone else. It’s not the oil companies that will suffer as a result.

My position has always been to raise taxes and let all options compete on equal footing. This would also encourage conservation, and it would encourage electric transport – another favorite of mine.

I agree with Robert.


Pretty hard on the poor that agreement of yours. (I've never heard of a progressive fuel tax, have you?)

Hate to sound cold, but the poor outnumber the rich, and that includes car ownership. The sooner the poor (and rising up from there) are reduced in their car usage the better for the overall situation.

Its why if we are going to tax out the poor on upward, there needs to be an electric rail transportation solution built in tandem to the steady pricing out of those socio-economic circles.

Its why I would argue that all tax proceeds for fuel should be directly channeled to rail initiatives.

A progressive tax is antithetical to the goal of the tax in the first place. Which is to FORCE a reduction in fuel usage. Given that the poor A) outnumber the rich in car ownership, and B) are inflexible enough to handle a rising price, they make THE prime target to focus the initial wave of this forced demand destruction.

Like I said, it may sound cold, but a little pain now would save a lot of pain later when no matter what the government does, natural fuel depletion will force the poor out and instead of a growing electric transport system for them to move to, they will have nothing to move to.

I think Telumehtar that you are not a cold person and I agree that the poor drive many cars, but to make changes on the back of those that do not share in the great wealth of your country would more than sound cold, it would be heartless.

Those including their heirs, who have benefited by the destruction of your formerly excellent rail transportation system should take up that burden. There is great wealth in your country, it is held by those that have been involved in the general destruction of the commons while reaping that great wealth.

Those including their heirs, who have benefited by the destruction of your formerly excellent rail transportation system should take up that burden.

What perhaps morally "should" happen is not always what is actually possible.

Taxing the rich simply will not happen, and more over taxing the rich will still have a detrimental effect on those below their socio-economic circle. The rich employ the poor, and if there is an attempt to focus fire taxation on the rich, the rich will simply cut the poor, and middle class extravagances out of their payrolls. You forget we are a nation of people whose jobs are centered around providing luxuries for each other.

Furthermore I have a fundamental disagreement with your stance that it is morally ok to punish the rich, or worse their heirs for the simple fact that they are rich. I know its a popular view amongst many of the more liberal minded, but robbery is robbery, whether its government sanctioned or not.

Instead a fair and equitable but steadily growing rate is what should be applied, and let each person handle the problem as per their means allow them to. The rich person will have to pay a 1 dollar tax just as much as a poor person would. If anything by taxing fuel in this way, the rich will still pay more per person than the poor due to the fact that rich will try and be capable of maintaining their extravagances longer.

Furthermore a steadily increasing year over year gas tax whose proceeds are directed to mass transit rail projects will have a snow balling effect. As more poor move away from cars and onto transit, they will be funding transit with their ticket prices (which should be considerably more affordable than owning, insuring, maintaining, and fueling a car) while at the same the higher socio-economic circles continue to pay more and more each year to build out an ever more encompassing rail transit system. Furthermore by applying this direct tax on fuel, the poor will also have industry funding their ride as industry will still need to purchase and use fuel for various projects.

There is also the other more physical problem surrounding the growth of mass transit. For better or worse, the highest concentration of poor are in the cities proper. It will be easier to provide high occupancy rail transit to this demographic first and then grow it outwards from a core.

By trying to tax out the middle and upper classes first with some other tax inititive that doesn't penalize fuel usage, while providing rail solutions and tax breaks to poor will be the suicide of this system. The poor won't use the rail because they will still be able to use their cars, while the middle class, and perhaps the upper middle class will be hard pressed(harder pressed perhaps given the housing situation?) to make ends meet and very shortly join the ranks of the poor, only instead of being concentrated in cities they will be dispersed throughout a broken suburbia.

Sorry, while it will be a heavier burden on the backs of the poor, the taxation of fuel usage places a burden heavy or light on ALL peoples. Granted, the dominoes will start to fall with the poor first which is why it becomes even more imperative to have rail transit built out quickly(perhaps even pre-emptively) in the city so that the highest concentration of poor can be served by the alternative quickly. Hopefully if paced right a contraction of suburbia and return of the middle class into closer proximity to the city, in conjunction with an expanding web of transit rail leading outside the city proper can coincide to catch the falling dominoes of the middle class as the gas taxation becomes too much for them next.

Hi Telumehtar

Furthermore I have a fundamental disagreement with your stance that it is morally ok to punish the rich, or worse their heirs for the simple fact that they are rich. I know its a popular view amongst many of the more liberal minded, but robbery is robbery, whether its government sanctioned or not.

You have been rich in expressing your views. Working within your set of percepts I would agree with many them as a pragmatic approach to our common problems of global degradation and peak energy.

Actually those 'common problems' are becoming be all that is left of the commons. Maybe we will soon have a plethora of 'dot commons problems' multi millionaires.

My view: In the beginning the world was once a commons that encompassed all. We have been taking from that commons ever since. When individuals set themselves apart from the common wealth of the world, a wealth which belongs to all the species in it, they go against: economy: the careful management of material resources. In this view theft has been occurring from the beginning with only periodic and partial returns of wealth to proper ownership. We are at an age where even the commons of the human genome is up for grabs,not much left to steal is there? Time to redistribute the wealth? or in our case more likely to have it redistributed by the force of the natural workings of the world. New Orleans resident during hurricane Katrina:"Oh bugger, I'm being repossessed."

In the beginning the world was once a commons that encompassed all. We have been taking from that commons ever since. When individuals set themselves apart from the common wealth of the world, a wealth which belongs to all the species in it

I think this is where the split in our view occurs. I don't view the world as a commons meant to be shared by all species, rather the world is just trove meant to be consumed by those species capable of out competing all others. Certainly modern evolutionary theory seems to jive with this, as not only humans, but all animals find a niche and outcompete any other organisms for a given niche of resources.

The problem humans have is that we are SO good at pushing out competition that in our haste to dominate we've outcompeted the very foundation which allows us to be dominant. By stripping so many resources and out competing so many other animals, we have left ourselves vulnerable to a fall. This behavior is not unique to humans either. The yeast in the petri dish, the deer on an island with no predators, etc etc. The main difference for humans in this equation is that rather than an isolated petri dish or an island, our "arena" of experiment is the globe.

It is my opinion that humans should eventually continue to expand and consume more resources(primarily in space), but before we tackle that problem we've got slow down and perhaps even reverse course a bit and rebuild/replace our foundational support systems, that we've stripped down.

Unlike many on this board I don't think the game is lost quite yet. We are teetering real close, but we are not over the edge just yet. I fully realize, given the probabilites, that collapse is probably the more likely scenario, but unlike many on these boards I do believe mankind has some exceptional qualities. The question is now, will those qualities allow us to escape the fate of the yeast or the deer?

Hi Robert,

Thanks for your article, which I need to re-read.
Meanwhile, some Qs:

re: "But, this is not what our government wishes to do."

This seems to be to be the crux- (or at least one) - of the problem.

The US gov., so far, does not do (is not taking the steps to enact) what you see as the best option, namely,

re: "My position has always been to raise taxes and let all options compete on equal footing. This would also encourage conservation, and it would encourage electric transport – another favorite of mine."

1) What plan do the OCs themselves see as the best, in light of this impending, urgent, life-altering problem ("peak")?
Do OCs agree with you on the benefits of taxation? If not, why not?

2) So, then...we have the situation where the OCs are lobbying - (yes? no?) - for/against - the plan you see as most fair and most workable - ? (yes?)

2a) How much money do OCs spend on lobbying against the plan you see as best? (I might also say, lobbying against - directly or indirectly.)

2b) How much money(time/effort) do various OCs spend on PR aimed at the public in order to divert attention from the impending decline ("peak")?

3) So, given - (let me take it as a given, please correct me if I'm mistaken) - OCs do *not* support increasing tax,
is it not the case that the current situation ("No tax"/"No Robert's-Best-Choice Plan") is *also* what the OCs want?

In other words, it's not only the USGov that is (emphasis *so far*) not implementing your best case plan, it is the US Gov, *as the result of* (by some measure of contribution) concrete, specific and expensive actions undertaken by the OCs themselves?

Actions aimed at influencing not only individual members of USGov/Congress (I assume that's how lobbying works - ?), but the US Public in general? (With ads and such).

(I keep putting in questions, in case you'd like to differ or disagree with any of the points.)

4) So, it seems to me, the OCs end up vying for funds to address a problem they

A) Do not directly admit to
B) Actively work to make more obscure - ?

5) This leads me to wonder:

A) What the relative amounts of money are in each category (PR, lobbying, subsidies, taxation)...

B) Which categories might grow larger time goes on?

C) More fundamentally, if the urgent and overriding problem of global decline (impending shortfalls) can be successfully addressed without the OCs themselves (individuals therein) proposing both unilateral and cooperative actions?

Aniya, given that I have responded to the misrepresentations of CrystalRadio, the least I can do is respond to your genuine questions. But this will be my last post in this thread before going back into lurk mode.

Do OCs agree with you on the benefits of taxation? If not, why not?

I have always thought that they would not support higher taxes, but I have been consistently told that they are actually agnostic about it. That is what the API stated, and it is what people within my own organization have said in private. Now, they may not be giving a straight story here, but that is the story I am hearing. In my opinion, they would be prone to be against taxation because it will reduce demand. But that isn’t what they are saying publicly (or privately to me).

So, then...we have the situation where the OCs are lobbying - (yes? no?) - for/against - the plan you see as most fair and most workable - ? (yes?)

Lobbying neither for nor against as far as I can determine.

How much money(time/effort) do various OCs spend on PR aimed at the public in order to divert attention from the impending decline ("peak")?

But you saw the API transcript. They don’t believe that there is an impending decline. And I do know that they aren’t just saying that. This is what they truly believe. This is the disconnect in my mind. How can people whose jobs involve extracting oil and gas have this viewpoint? That’s why I ask “Could I be wrong?” And contrary to those who think self-doubt is bad, the last thing we need here are zealots. We need to be willing to critically assess the data, not to dogmatically stick to a position. So, what I would really like to ask the API would be “What is the source of the data that leads you to this belief?” If they started pointing to shale oil and methane hydrates, then I can completely discount those sorts of things.

In other words, it's not only the USGov that is (emphasis *so far*) not implementing your best case plan, it is the US Gov, *as the result of* (by some measure of contribution) concrete, specific and expensive actions undertaken by the OCs themselves?

Not the OCs. The citizens who complain about higher gas prices. The last thing legislators want to do is answer the charge “You raised our taxes” when election time rolls around. So they are against raising gas taxes because they are trying to make sure they survive politically. On the other hand, I did catch a couple of visits yesterday from the U.S. Senate via the Site Meter on my blog. So maybe this will be some food for thought with the people who write the laws.

I hope that more or less answered your questions.

Hi Robert,

I appreciate your work and your honesty in struggling with the implications of what we face.

And thanks for answering my questions!

I don't know if you're still reading, and also am unsure as to the best- (most "safe" - i.e., fun, respectful, productive, etc.)- way to continue a conversation I'd like to have.

I see your position as crucial, because it's a microcosm - perhaps a very special microcosm (is my view) - of what each of us faces (in different ways). You have a lot of knowledge, and you are closer to people who have even greater (one presumes).

Yet, everyone (on earth) is - or feels he/she to be - constrained in terms of positive action, for various reasons. To me, this means it really matters that people who *can* act in a positive fashion, do so. (And I believe this is also what you want.)

Having said that, I actually have a very different take on Red Cavaney's answer to your first question than you seem to come away with.

Of course, I didn't hear his tone of voice, I only read the transcript. Sometimes (often?) tone and emotional back-and-forth is really what people are communicating to each other.

Nevertheless, I did not at all interpret what he was saying as equivalent to what you say here:

"They don’t believe that there is an impending decline. And I do know that they aren’t just saying that. This is what they truly believe."

He said there would be an undulating plateau and then a gradual decline.

Okay, well, to me - that says he is cognizant of impending decline. To me, this is a very striking point of commonality between people whose work I respect (Campbell, Deffeyes, Stuart, FF, Euan, yourself!, et al) - and whatever seeming obfuscation the API is promoting.

I went into more detail in a reply under your original article. I'm not sure you saw it - it's here:

I do not agree they "really believe" this. The basics - finiteness, (along with impending decline, the need to do "something", etc.) - Red himself seems to understand.

In my original reply, I tried to make the point that he actually did not come out and say anything that negates "peak oil".

He said a "swoosh" was not the way to look at it. Okay, so what is, Red? What percent is a "gradual decline" and what percent decline constitutes a "swoosh"? (See what I mean?)

To me, this would be the next question to take up with Red and with the API, in general.

If Red had said the literal words your interpretation states, then we could quote and re-quote him on his negation. However, this is actually, if you look closely, not what he said.

To me, this is significant and revealing.

I don't know that it's productive to try to guess or imagine what people "really believe" or don't. I've certain (painfully) realized that people often back themselves into corners (sometimes called lying), when they don't feel safe to tell the truth. The truth is not easy to get at. "It is the truth that liberates, not your efforts to be free." (Krishnamurti). Still, compassion and intent have a lot to do with the ability to really communicate, and let truth have a space.

I see what Red Cavaney is saying as a step towards the truth.

I'd welcome your comments on anything I've said here, and I would like to continue this conversation in some form.

Would this be possible, and if so, what do you suggest? (What would be best for you?)

You are right you went from 'should there be subsidization' to 'there should be subsidization' by immediately eliminating your so called 'first choice' of taxation. No option at all.

Now to the point, you say:

Reducing Fossil Fuel Usage
There are really two options.

Robert, there are many more ways of reducing fossil fuel usage in between the ridiculous extreme of giving oil companies bucks or that other ridiculous extreme of perhaps having terrorists blow up oil wells and infrastructure. (though at least the latter has the merit of likely doing the job, which I don't think many on or off this site believe yours would do.) Every hear of rationing? Wouldn't work you say, government wouldn't stand for it? Much easier to pander to Big Oil interests isn't it. Rationing was done during the second world war and it worked to redirect the energy to where it was needed. I would think fighting Global Heating worth at least as much effort as was made in WWII. That's just one option I am sure there are as many others as people on this site.

I am sorry you can't take a bit of ribbing; all I can say to that is: take a course. If you wish, you might try this short introductory course to 'Learn to be Humble' at:

Or you might get memmel to have a Dutch Uncle chat with you.


is my reaction to his jibe about me. I found his comment apt and humourous to boot.

You are right you went from 'should there be subsidization' to 'there should be subsidization' by immediately eliminating your so called 'first choice' of taxation. No option at all.

Again with the misrepresentations. I notice you just registered last week. You aren’t Dave Mathews are you? He was notorious for that before his banning.

What I said was this:

1. Should we have subsidies? No.
2. Do we have subsidies? Yes.
3. Given that this is the system that we have in place, shall we deny funding for one renewable diesel technology while allowing it for others? Exploring this question was the gist of the essay. I am sorry that you misunderstood the point so badly and thought the point was an argument that subsidies are good policy.

Every hear of rationing?

Please inform yourself as to my actual position before bestowing your wisdom on me.

I am sorry you can't take a bit of ribbing; all I can say to that is: take a course. If you wish, you might try this short introductory course to 'Learn to be Humble' at:

It never ceases to amaze me that anonymous posters feel the need to tell me how I need to deal with “a bit of ribbing.” Tell you what. When you post under your real name, deal with the kind of crap I have dealt with – crap that my friends and family also get to read – then your advice will have meaning. Until them, stow it.

Now, I have no intention of continuing this conversation. It is pointless to argue with people who are intent on misrepresenting you.

One option that I have always felt had serious potential as a sustainable option is renewable diesel.

This I feel is the whole point of your article, that linked to subsidy. I don't really care how you wrap it, Stinking fish is stinking fish. I also don't care for the flack you throw up to cover an untenable position by moaning that you are misrepresented, as well, as far as this Mathews you mention, I am sure you know from the editors of TOD that I am not he. More red herring on the trail.

I think privacy should be respected and do not ask you to reveal your masters name . If you have reveled your personal name that is your prerogative. If you wish anonymity I suggest unless you already have done so to use a pen name. I do not seek fame nor notoriety, if you do that is your concern.
BTW The phrase 'Learn to be Humble' should have read Dare instead of Learn but the powers in Valhalla have denied me permission to edit possibly thinking I might delete this post.

This I feel is the whole point of your article, that linked to subsidy.

Then this is your personal reading comprehension issue, because that was not the point of the article. And I can’t be expected to address glaring issues of comprehension on a regular basis.

I also don't care for the flack you throw up to cover an untenable position…

Pointing out that this “untenable position” is a straw man of your making is not throwing up flack. It is attempting to explain to you where you have misunderstood my position. You have chosen to ignore my attempted clarifications. Again, this is why I no longer bother. I have to deal with at least one person like you every day, and that takes too much time.

If you have reveled your personal name that is your prerogative.

I fully respect people’s need for privacy. On other boards, I have posted anonymously myself. But when I did, I didn’t feel the urge to lecture those who weren’t posting anonymously on how they should deal with trolls. If someone attacks “CrystalRadio” with a diatribe, what have they done? Nothing. Because who is “CrystalRadio?” Just a pseudonym on a message board. I am not just a pseudonym on a message board, so do not attempt to lecture me on “dealing with ribbing” until you are in the same position.

'Reducing Fossil Fuel Usage

There are really two options

Robert please ...there are more than two options, I am sorry if you do not like this 'fact' and prefer to dismiss it as 'misrepresentation' but there it is up and bouncing about and seemingly getting up your nose in the process. You wish to limit the discussion to these two options and then kill one leaving only the subsidization of your 'now' favorite, bio-diesel. Your article is specious.

If someone as you say attacks Crystal Radio then they are an ass. If on the other hand they attack the ideas I hold through Crystal Radio, that is another and a very valid thing. I come here to set forth ideas to not only be agreed with but to be challenged. I am not my ideas and therefore they are mutable.

If you would look to the editors of this site, most do not parade their private lives or parts about, if you choose to do so then that is YOUR responsibility. You seem to think that once you post a 'Real name' you have done the same as a child does saying 'tick tock double lock' can't tag me...Sorry, the issues are important. Would you PLEASE PLEASE get a pseudonym so we not only can have serious discussion and differences of opinion but have them without worrying or being threatened that we will destroy someone's life. Maybe we can even have a little fun as well.


I think that the US should follow the Western European model. Let's shut down 75% of the US land area from being inhabitated by any human, move every citizen to the remaining area of 25%, and then Americans will embrace mass transit. Our per capita energy useage would then be about the same as Europe. Shorter airline flights and trips to visit family, etc. Since we would be using less fuel, we could double its price through taxes and pay for national healthcare. We could set up 75% of the US as a national park, off limits to any human to protect the environment. The US would become a Utopia that would be envied by the rest of the world.

Hi (again) Robert,

Thanks for your article.

I may not have placed my questions appropriately, since I responded to your response to someone else.

I mean them to be sincere, though, and I'd welcome any thoughts you may have.