Oil subsidies

The Herald reports:

President is calling anew on Congress to end tax subsidies for the and gas industry, saying America needs to develop alternative sources of energy in the face of rising petrol prices.

Obama said in his weekly radio and internet address that he expected Congress to consider in the next few weeks halting US$4 billion ($4.85 billion) in tax subsidies, something he hasn’t been able to get through Congress throughout his presidency. …

Industry officials and many Republicans in Congress have argued that cutting the tax breaks would lead to higher petrol prices, raising costs on oil companies and affecting their investments in exploration and production.

Obama is on the right side of this one. Just as I am against subsidies for bio-fuels (especially as they caused mass starvation with crops being converted to bio-fuels from grain), I am against subsidies for oil.

We should not shelter people from higher petrol prices. That is a market signal that supply is becoming more difficult, and will encourage investment in other technologies, plus encourage greater use of other forms of transport.

As for investments in exploration and production, you do not need subsidies for that. As petrol prices increase, then exploration of new reserves becomes economically viable.

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