Albion Monitor /News

Billions Spend in Oil Subsidies

Industry profits receive preferential tax treatment

SAN FRANCISCO -- The oil industry is soaking up billions of dollars in tax breaks, government funding, and indirect subsidies that pay for oil related environmental damage.

Even as they reap these benefits, they are spending millions on slick lobbying campaigns and political contributions to put the brakes on California's growing electric and clean vehicle industry.

These are the conclusions of two reports released last month by the Union of Concerned Scientists (UCS) and the California Public Interest Research Group (CalPIRG).

The UCS study, "Money Down the Pipeline: Uncovering the Hidden Subsidies to the Oil Industry" concludes that the oil industry profits from preferential treatment in tax laws and government support. While the non-oil industries are taxed at a rate of 18 percent, the oil industry is taxed at a mere 11 percent. This reduced rate equates to $2 billion in federal corporate income tax benefits per year. They also benefit from low state and local sales tax rates on gasoline, an indirect subsidy exceeding $4 billion a year. Direct government funding of oil and motor vehicle infrastructure and services tops off at $45 billion a year. And taxpayers, not the oil industry, are left to pay the cleanup bill for oil-related health and environmental damage, which could be as high at $232 billion annually.

"The current system creates an energy policy by default through lower income tax rates for oil companies, government handouts, and hidden environmental costs," said Roland Hwang, author of the UCS report. "These subsidies fuel our unhealthy appetite for oil."

Pete Wilson received almost a million dollars from oil and auto lobbyists

CalPIRG's study reviewed Secretary of State records for industry contributions to state elected officials, lobbying the governor, and key statewide initiatives. From 1991 to 1995, oil companies spent $27.5 million and the auto industry spent $5.4 million in lobbying and campaign donations.

The study shows that Pete Wilson received almost a million dollars from these two industries in the same time period. Wilson holds the key to the future of zero-emission vehicles and has steadfastly supported the ZEV program. However, his need for donations to his presidential campaign could throw a monkey wrench into the emerging clean vehicle industry in California.

"The oil industry is spending millions each year fighting clean air laws, especially the electric vehicle requirement," said Ed Maschke, executive director of CalPIRG. "This spending not only eats away at the potential for cleaner air, increased employment and a promising new technology, but also the very heart of our democracy. We are committed to stopping this corporate attempt at buying influence which destroys our chance for clean air."

Mobil Oil refuses to acknowledge that subsidies exist

CalPIRG will launch a campaign finance reform initiative next month to stop such abuses. The initiative will be on the November 1996 ballot.

The Sierra Club noted that the oil industry received as much as $400 million to supply reformulated gasoline in California, courtesy of a special state tax credit instituted by Gov. Wilson. This is in addition to millions of dollars in California tax subsidies the oil industry collects for modernizing and expanding their refineries.

"The oil industry has had a free ride for too long, secretly ringing up a huge bill that the taxpayers have to pay. The oil industry may be the most subsidized industry on earth -- it's certainly the most polluting," declared V. John White of Sierra Club California.

The groups, speaking on a knoll overlooking the Mobil Oil refinery in Torrance, assailed a Mobil Oil vice president's recent attack on "subsidies" for electric vehicles. VP Bob McCool's press statement failed to even acknowledge the existence of subsidies to the oil industry.

"It's time for the oil industry to 'come clean' and abandon their multi-million dollar campaign against electric and alternative fuel vehicles," added Michelle Robinson of UCS. "Governor Wilson should base his support for California's electric vehicle requirements on its merits not the size of special interest wallets."

Albion Monitor October 9, 1995 (

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