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It's Official: Oil Subsidies Don't Keep Gas Prices Down

Oil CEOs are in Washington, D.C. today, defending the $4 billion they get in government subsidies. Thing is, that cash doesn't make gas any cheaper.

Today in the Senate, Majority leader Harry Reid is kicking off an assault on the roughly $4 billion per year of subsidies granted to the oil industry. Rather then redirect that money to programs that will actually cut our oil demand, immediately save American families money, and more efficiently ease gas prices (as we suggested), Reid is putting that $4 billion back in our national coffers, and daring Republicans to vote against reducing the deficit.


Fans of oil subsidies (and their conservative media echo chamber) have been arguing that they help keep gas prices down. Plenty of economists, journalists, policy wonks, and bloggers have been making the case that that is simply wrong. But yesterday, the impartial, non-partisan Congressional Research Service presented their research on the subject to Senator Reid. The CRS memo (PDF) further affirms the idea that subsidies don't have much of anything to do with gas prices. After evaluating all five of the major subsidies and tax breaks granted to the oil industry, the CSR determines:

Even if the changes in taxes did impact domestic, or overseas exploration and development activity, that does not necessarily imply that less oil would be available in the U.S. market. More might be imported, with little or no effect on gasoline prices.

Political unrest, expectations effects on financial markets, macroeconomic growth trends, the value of the dollar and a host other factors have contributed to fluctuations in the price of oil and gasoline. Any effect due to changes in the tax treatment of the oil industry would be hard to separate from the changes due to other factors, given the size of the relative magnitudes.

Whoever argues that subsidies to oil giants helps keep gas prices down is lying. All they do is go right to the coffers of the most profitable companies in the world, and to the pockets of their CEOs.

Photo on Wikimedia Commons

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