Fueling Global Warming

Despite increasing concerns over climate change and other environmental consequences of our heavy reliance on oil, the U.S. government continues to subsidize the fuel. Subsidies to oil are provided to producers, transporters, and consumers in varied and often subtle ways. These subsidies not only cost taxpayers billions of dollars per year, but they often exacerbate environmental damage. They can also reduce oil prices, suppressing market signals to governments, oil consumers, and oil producers to begin shifting to alternatives. This study examines federal subsidies to oil in detail, including policies directly targeted to the oil sector and a pro-rated share of more generally-targeted provisions. By highlighting and quantifying this support, we demonstrate that subsidies continue to play a substantial role in the U.S. economy and identify logical areas for reforms that can save taxpayer money, reduce environmental damages, and help the country to meet carbon reduction targets. Our analysis includes a broad array of subsidy areas, including tax breaks, research and development support, subsidized credit programs, defense of oil supplies, below-market sale of public oil resources, subsidized oil transport, and private sector liabilities that are shifted onto the public. We have also analyzed federal levies on oil and deducted these from our subsidy values as appropriate to obtain our net subsidy estimate. Where available data did not permit specific subsidies to be quantified, we have described them qualitatively.