January 10, 2017

Janet Redman, janet [at] priceofoil [dot] org
David Turnbull, david [at] priceofoil [dot] org

Study: U.S. Oil Industry Heavily Dependent on Government Handouts
Almost Half of All U.S. Oil Production Subsidy Dependent

Almost half of the oil production in the United States will depend on taxpayer handouts to make it profitable, according to a new report by the Stockholm Environment Institute and EarthTrack. The study shows that at current prices of around $50 per barrel, 45 percent of discovered, but not yet developed, oil resources are only economically viable with federal and state production subsidies.

The study can be found here: An accompanying blog and infographic from Oil Change International and the Sierra Club putting the study in political context can be found here:

“The oil industry is scamming the American public, cheating us out of billions of dollars in order to prop up their failed business model,” said Janet Redman, U.S. Policy Director at Oil Change International. “After 100 years of public subsidies, oil companies are still dependent on government largesse to survive and prosper – and this study makes that crystal clear.”

According to Oil Change International calculations and data from the Center for Responsive Politics, the oil and gas industry spent more than $247 million on congressional campaigns and lobbying during the last election cycle alone, while receiving roughly $35 billion in public finance and federal subsidies. That amounts to a 14,000% return on investment.

“Subsidies are just another stop in a dirty energy cycle. Money flows into Congress as contributions and lobbying, and flows out as subsidies. Even when drilling for oil would have been profitable without subsidies, public money still flows to the industry. At that point, subsidies are basically a $6 billion deposit into corporate coffers,” Redman said. “Ironically, the higher the price of oil rises, the more profitable production becomes, and the more subsidies simply go to lining oil company pockets.

The oil made profitable by these subsidies will release the same amount of climate pollution as operating 100 new coal-fired power plants for the next 23 years, according to the EPA’s Greenhouse Gas Equivalencies Calculator.

“Dirty energy CEOs may get to retire – or take leadership positions in the Trump administration – before climate disruption hits home, but their decisions to develop more oil with the help of public subsidies will affect American communities and our economy with climate chaos for generations,” said Redman.

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Notes to editors:

  • Stockholm Environment Institute & EarthTrack, Effect of government subsidies for upstream oil infrastructure on US oil production and global CO2 emissions, January 2017. This study projected investor behavior by modeling the effect of twelve subsidies, valued at approximately $11.8 billion per year, on return-on-investment in new U.S. oil production using detailed field-level economic and production data. See:
  • Oil industry ‘return on investment’ calculated using data presented in the Center for Responsive Politics’ database, and the Oil Change International report, “Empty promises: G20 subsidies to oil, gas and coal production, United States Case Study”:
    • TOTAL amount spent by Oil and Gas on campaign contributions and lobbying in the 114th Congress: $247,248,632 ($247 million)
    • TOTAL 2013 & 2014 amount given to Oil and Gas in public finance and federal production and exploration subsidies: $34,913,976,137 ($35 billion)
    • Return on Investment = Net Gain / Total Investment * 100
    • ($35,000 mil – $247 mil) / $247 mil * 100 = 14,000
    • That’s a 14,000% return on political investment.