Subsidies Help Oil Industry Profit More Than Ever
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.
Channel 4: BP triples profits after spike in oil and gas prices, August 2, 2022.
NBC: Greta Thunberg Criticizes Fossil Fuel Subsidies As 'A Disgrace' At House Hearing, April 22, 2021.
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.”
CNBC: Can leaders create an effective deal whilst subsidising fossil fuels?, November 12, 2021.
UN: How to reform fossil fuel subsidies, in a fair way, October 27, 2021.
IISD: Cutting Emissions Through Fossil Fuel Subsidy Reform and Taxation, April 22, 2022.
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.
DW: Time is running out | WMO warns 1.5 degree threshold could be topped by 2026, May 18, 2022.
BBC: Past seven years hottest on record, EU satellite data shows, January 10, 2022.
Grantham Imperial: Dr Friederike Otto speaks to CNN's Connect the World about the extreme heat, 18 July 2022, July 19, 2022.
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.
EuroNews: UN Secretary-General says the climate crisis is placing half of humanity in 'the danger zone,' June 14, 2022.
Grantham Imperial: Dr Friederike Otto speaks to BBC World News about the heatwaves, 18 July 2022, July 19, 2022.
DW: Floods, drought and the consequences of extreme weather, July 16, 2022.
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.
OurEden: Why Goverments Still Fund Fossil Fuels, May 24, 2022.
Oil Change International: Fossil fuel subsidies | G20 spends billions to push us closer to climate disaster, August 17, 2016.
Oversight Committee: The Role of Fossil Fuel Subsidies in Preventing Action on the Climate Crisis, April 22, 2021.