Profit-rich oil and gas companies no longer need these subsidies, yet they continue to receive them. Today, oil and gas companies receive more than $4 billion in subsidies through the federal tax code.
Why were the subsidies created?
It was important at one time for oil and gas companies to have incentives to produce energy. Many of these subsidies were instituted to help the industry nearly a century ago. These tax breaks are no longer needed, as oil and gas companies annually generate billions of dollars in profits.
What is a subsidy?
To drill on federal land, oil companies pay a fee, or royalty, to the federal government to support the tax base. However, in the Gulf of Mexico, oil companies drill in federally owned waters without paying royalties to the taxpayers.
Would eliminating subsidies affect gas prices?
Gas prices are not affected by the oil subsidies. Gas prices are primarily a result of the price of oil set on the international market. The subsidies enjoyed by the oil and gas companies are a small fraction of their profits and the price of gas.
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