In 2021, public subsidies for fossil fuels almost doubled to $700 billion, keeping a dying industry not just afloat, but thriving through a worsening energy crisis. The $697.2 billion total describes explicit subsidies, including price reductions, government funding, and tax breaks. The subsidies were meant to help consumers afford ever-increasing oil prices, but ultimately benefited Big Oil most of all. In the first six months of 2022, oil giants (BP, Shell, ExxonMobil, Chevron, and Total) made adjusted profits of nearly $100 billion.

According to the International Monetary Fund in 2020, subsidies to Big Oil amounted to $5.9 trillion or $11 million a minute. Meanwhile, the costs of the climate crisis -- which overwhelmingly fall on lower-income communities -- continue to increase and according to Deloitte could amount to $178 trillion over the next 50 years globally.

“Significant increases in fossil fuel subsidies encourage wasteful consumption, while not necessarily reaching low-income households,” Mathias Cormann, secretary general of the Organization for Economic Cooperation and Development (OECD), told the Guardian. “We need to adopt measures which protect consumers [and] help keep us on track to carbon neutrality, as well as energy security and affordability.”

Why This Matters

Subsidies encourage companies to ramp up construction on new drills and extract more oil -- the exact opposite of what they should be doing to avoid the worst effects of climate change. This summer’s dangerous heatwaves in Europe, India, Pakistan, and the US have illustrated the wide range of impacts resulting from human-caused climate change and exacerbated by the world’s continued reliance on fossil fuels.

Researchers found that 40% of fossil fuels available for extraction from existing oil and coal fields must remain in the ground to keep warming below 2 degrees Celsius. But oil giants keep constructing new projects, many of which are estimated to emit one billion tons of carbon dioxide throughout their lifetimes, the equivalent of approximately 18 years of current global emissions.

These investments in new oil projects are also financially risky. A recent study that traces the ownership of over 43,000 oil and gas investments found that assets at risk of becoming stranded total $1.4 trillion.

Regarding the environmental and financial drawbacks to oil investments, UN Secretary-General António Guterres called fossil fuel exploration and production "delusional.”

The Future Of Oil Projects

Many global oil companies have been funneling their resources into offshore drilling, particularly off the coast of Canada’s Atlantic coast, despite its financial and environmental risks. Offshore projects generate fewer emissions than other forms of oil production. However, they would still increase global air pollution and are designed to pump oil for decades into the future, even as the world transitions away from fossil fuels.

In the US, red states have been punishing investment firms for even the most negligible commitments to climate action. West Virginia, Oklahoma, Indiana, and Louisiana all introduced or passed legislation this year disincentivizing businesses from working with companies or banks that have made public statements about transitioning away from fossil fuels. Texas Comptroller Glenn Hagar is urging the state to divest from firms that are “boycotting” the oil and gas industry, even though many of the firms on his list are merely paying lip service to environmental concerns.

Still, not all oil drilling projects avoid accountability. Last week, a federal appeals court blocked two offshore oil leases introduced in 2018 in the Gulf of Mexico, arguing that the US Department of the Interior failed to take stock of their environmental impacts. Despite these oil projects, which span 150 million acres of federal waters, still moving forward, the decision suggests that the federal government is looking more closely at big oil’s local and global impacts.