Fueling Global Warming

March 17, 2005

Federal subsidies to the oil industry in The United States.

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Executive summary: 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.

Num. pages: 140

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