The price of oil has utterly collapsed. Oil and gas companies are, once more, in Washington begging for bailout funds.
It’s easy to argue that the oil companies should be left to die. An alternative is this: now that they are revealed as weak, dependent on bailouts, now is precisely the time to convert them from opponents to allies.
Perhaps Congress should approve significant funding for many of these firms - but only to use these funds to accelerate into the post-fossil fuel economy, and to start writing accounts that include external costs. Specifically, we recommend that
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The government issue large, government-backed bonds for these firms
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Require companies to start accounting all externals
The economic collapse sparked by COVID has combined with the slump in oil prices - and lower demand for oil (fewer flights, and less driving) to imperil the oil-and-gas companies. But now is absolutely the moment to rethink our relationship with energy.
We have to build a new economy due to the disruption of COVID. All sectors of the economy and individuals are pondering what will be different in the aftermath: consumer habits, preferences. There is broad acceptance on the part of the public that things will be different; emotionally, people are also looking for a positive vision to look forward to.
But before we get there, it will be expensive, Just to get the country through it, the US government has already put multiple trillions of dollars into circulation.
We cannot avoid rethinking the trillions of dollars that we unwittingly use to subsidize oil and gas firms - from wars and armies, bizarre levels of corruption, environmental devastation and the health consequences. The IMF projects that these costs already drain at least five trillion dollars a year worldwide; the share borne by US consumers and taxpayers is at least one trillion dollars a year. Rethinking fossil fuel revenues and their vast hidden costs can - and should be - used to accelerate into a more efficient post-COVID, post-fossil-fuel economy.
Here’s what those costs look like, worldwide:
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Direct subsidies to fossil fuel companies, and their customers, like airlines, add up to $200 billion a year worldwide. Costs are borne by taxpayers.
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About $500 billion goes to armies and wars to defend oil and gas fields - costs borne disproportionately by US taxpayers.
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$200 billion for excess corruption. Other costs come from political instability and ill-judged choices.
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The health consequences of extracting, transporting and using fossil fuels. Their impact is seen most vividly in Wuhan, where COVID originated, and where thousands of people suffered and died. The Chinese government clamped down hard. Industries closed, traffic died down - and the air cleared. It cleared so fast and so well that it’s likely that as many as 70,000 lives were saved from the air cleanliness - far more than died from COVID. This scales worldwide - health damage from fossil fuels totals adds about $3 trillion a year. Costs are borne by health systems, patients, tax payers and insurers. Instances in the US include increased asthma and lung disease - a worsened seedbed for COVID - and radiation hazards for people exposed to fracking wastes.
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Direct environmental damage adds tens of billions a year - from mega-disasters like Deepwater Horizon to the nationwide sheen of oil on roads.
Mitigation of climate damage will add further trillions of dollars in costs.
It’s time that accounting rules require that the painful external costs created by these companies be properly and publicly accounted for. The costs are carried in society - let’s put them on the ledgers. Were it not for taxpayers picking up the tab, endlessly, on these externals, it’d be clear that oil and gas companies are, at best, not profitable and, at worse, not economically viable.
Propping up oil or gas companies as they are now does worse than entrench them, it imprisons them in their past. It’s the opposite of an investment in the future - it’s just throwing money at out-of-date industries. The bad consequences include putting the US further behind in technology and efficiency, and further in debt, and less able to deal with the challenges before us, including climate change.
In contrast, committing these firms to converting from a fossil fuel past to a clean energy future puts them, and the US, on a path of investing in new infrastructures, and a more vibrant future economy, with a cleaner environment.
Instead of spending vast sums on propping up the aging and destructive fossil fuel industries, let’s move it into building the more productive economy we want and need. Trillions of dollars, a healthier economy, and healthier citizens: it’s enough.
Dr. John Ryan and Dr. Karen Liu, Deepfutures consulting - which specializes in evaluating the transformations from new technologies.