Happy Birthday, Big Oil; 100 Years Of Oil Subsidizing

Image from The Society Pages

Image from The Society Pages

March 1st was noted for being the introduction of the sequester. But, a quiet anniversary also fell on that day. It was the day that the first oil subsidies went into effect 100 years ago. Happy Birthday, Big Oil, you don’t look a day over 95, honest!

The Revenue Act of 1913 added a 5% off the top deduction from the gross costs involved in coal and oil production. It went into effect on March 1st, 1913. And so began the oil addiction for the United States.

What is often times forgotten in the discussion about oil and the automobile is that before this tax deduction went into effect, cars ran primarily on ethanol methanol with some gasoline, kerosene and other sources, a situation which changed with the passage of prohibition in 1919. With alcohol cut off, and oil now subsidized in such a way to make it cheaper than other options, the dominance of oil was all but guaranteed.

Today, these oil subsidies account for hundreds of billions out of the federal budget. Coal and oil subsidies make up a huge portion of the deficit each year.

While some point to wind energy, or solar subsidies as equivalent, the fact remains that no other solution aside from the coal and oil option, has operated with such a long, and substantial subsidized existence. Originally introduced in order to encourage mineral development after the breakup of Standard Oil in 1911, this subsidy has only grown over the century. Now it has grown to the point that fossil fuel companies are using these subsidies to pay off politicians and groups to further their agenda. They are addicts, seeking only the next hit of easy money.

The US has created a system whereby there is no incentive to innovate in energy systems. Existing systems have such an advantage, it is nearly impossible to transition to an alternative. How can wind, geothermal, or solar compete with 100 years of subsidized existance which has wormed its way into the very heart of society itself. Countries which do not have this substantial investment in mineral exploitation energy, such as Germany have had a far easier time transitioning from fossil fuel to alternative sources of energy.

If big oil is truly a capitalistic system, isn’t it about time we cut off the money supply? Or are the “free marketers” like the Koch brothers truly afraid of true capitalism, that they could not survive without the government gravy train that they have been on for a long, long time?


Nathaniel Downes is the son of a former state representative of New Hampshire, now living in Seattle Washington.

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