- The US has been giving handouts and subsidies to oil companies for decades.
- But the government needs to cut off these handouts to the debt-fueled industry to help fight climate change and actually achieve justice.
- President-elect Joe Biden needs to step up and take a stand against the oil industry.
- Robert Weissman is president of Public Citizen.
- This is an opinion column. The thoughts expressed are those of the author.
- Visit Business Insider’s homepage for more stories.
Big Oil is on the ropes. The global pandemic has caused people to stop driving and flying, resulting in low prices for crude oil and gasoline, just as the cost of renewable energy becomes competitive.
If President-elect Joe Biden is prepared to keep his campaign promises to protect the climate, then he must use this moment to end subsidies, favors, and bailouts for the oil industry. The fossil fuel industry has for too long benefitted from these corporate handouts and too easily called the shots for the Trump administration.
The oil industry has been exposed
The past year has finally exposed the US oil and gas industry as a debt-fueled Ponzi scheme that loses money when oil prices are too low. Fossil fuel extraction, especially high-cost fracking, is declining due to the pandemic. In the long term, fossil fuels simply cannot compete with cheap renewable electricity that will power the electrification of transportation.
As evidence of the oil industry’s struggles, this month, ExxonMobil and Chevron both announced dramatic cuts in spending on new exploration and production. “We are an industry performing poorly relative to other investment opportunities,” said Chevron’s chief financial officer, according to the Wall Street Journal.
Most recently, Shell said it would write down the value of its assets by $4.5 billion as it warned of poor earnings.
Meanwhile, the pressure keeps ramping up on the fossil fuel industry. Just this month, New York state’s $226 billion pension fund said it would divest from fossil fuel stocks. A brand new investment firm led by a longtime technology hedge fund investor launched a proxy battle to nominate four members of Exxon’s 10-member board. And last month, Bank of America followed several major banks in cutting off the crucial flow of financing for Arctic oil drilling.
Nevertheless, Donald Trump’s oil-soaked administration has mounted a relentless rear-guard effort to save fossil fuels, providing the fossil fuel industry any climate-damaging regulatory rollback or favor they wanted. The Trump administration’s irresponsible rollbacks will send up to 1.8 gigatons of greenhouse gas emissions to the atmosphere by 2035.
Yet as the industry withers, the Trump administration has used the pandemic to enable a fossil fuel money grab. An analysis by BailoutWatch, Public Citizen, and Friends of the Earth reveals the fossil fuel industry received up to $15.2 billion in direct economic relief from federal efforts under Trump to sustain the economy through the pandemic.
That includes at least $5.5 billion, via tax law changes, to benefit 70 money-losing dirty energy companies – a number that’s likely to keep growing – $828 million in direct, subsidized loans, and up to $9.1 billion in forgivable loans to nearly 26,000 companies. Plus, the fossil fuel industry was able to issue nearly $100 billion in corporate debt, a temporary lifeline for the industry’s thanks to the Federal Reserve’s decision to prop up financial markets last spring.
Despite these handouts and safety nets, the industry has shown little interest in taking care of its workers. Oil corporations have laid off more than 100,000 people this year. Exxon is laying off workers to protect its dividend. Marathon Petroleum, which has disclosed $1.2 billion in tax breaks, is firing workers at its refineries.
It’s time for Biden to step up
President-elect Biden has a historic opportunity to reverse course and reign in the fossil fuel industry. He has pledged to rejoin the five-year-old Paris Agreement, spare public lands from oil drilling, boost fuel efficiency standards for autos and eliminate carbon emissions from the electricity sector by 2035. Crucially, Biden has stated he plans to cut off tax subsidies for the fossil fuel industry, which are worth about $20 billion per year.
Figuring out how to redirect bailouts to promote a just and low-carbon future will be a monumental challenge for Biden’s economic team. Future coronavirus relief packages must exclude further aid to the fossil fuel industry, but Congress also must fund retraining programs to give dislocated workers the opportunity to thrive in a low-carbon economy.
The Federal Reserve has belatedly joined the international network of regulators studying the impact of climate change on the financial system. But the central bank spent 2020 buying up debt issued by fossil fuel extractors – companies that threaten its mandate to promote financial stability.
The Fed and other bank regulators must go further to promote the essential shift toward a low-carbon economy. They should limit banks’ exposure to climate risks such as hurricanes and wildfires and stem banks’ ability to fund risky fossil fuel projects that contribute to the climate crisis.
The Fed should begin selling off the fossil fuel bonds already accumulated on its balance sheet, and should consider using the money to invest in green projects, as European officials are already doing. And Congress must scour the tax code to eliminate subsidies that prop up the fossil fuel economy.
The Trump years have been an exceedingly dark time for anyone who cares about the future of our planet. The Biden administration must seize the opportunity to end Big Oil’s grip on Washington.