Obama: Let’s End Subsidies for Fossil Fuels

Posted by Kristy Kershaw on September 23, 2009 at 12:22 pm

(image: spotlightnews.net)

The Associated Press reported this morning on Barack Obama’s intention to end government subsidies for fossil fuels.  At the G-20 economic summit in Pittsburgh Thursday, Obama will propose a gradual elimination of subsidies that encourage the use of fossil fuels and contribute to global warming.

While the timeframe of elimination is yet to be determined, Obama is hoping support of the proposal will be multilateral. Many countries provide tax breaks and incentives for coal and oil producers, so getting as many countries as possible on board is key.

The Organization for Economic Cooperation and Development reported last week that the removal of fuel subsidies “could reduce greenhouse gas emissions by more than 10 percent in 2050.” They propose that the funds diverted from the subsidies could be used for a variety of other more efficient purposes.

Among the proposal’s detractors are fossil fuel industries, which argue the plan would hurt energy security, said the Independent Petroleum Association of America. The IPAA believes the proposal “would be a direct hit on small independent businesses right away, the ones that are really providing America with its energy.”

For heating oil and other energy consumers, the elimination of such subsidies would likely make the United States less dependent on oil, and could therefore decrease prices for diesel fuel and heating oil over the long run.  As is the case with the cap and trade plan under the pending climate bill, however, fewer subsidies will mean financial losses for oil companies, which will raise wholesale prices to compensate for the losses.  As a result, short- and medium-term heating oil and gasoline costs to consumers will likely rise.