Subsidizing the Oil Industry Destroys Innovation

In 2004 and 2005 the Congress passed $7.6 billion in tax breaks for the Oil Industry, which had no effect on lowering oil prices or finding new sources of oil. Congress has recently rescinded $14 billion in tax breaks. This is causing a great deal of disconcertion with those who inaccurately call themselves “Free Market Advocates.”

Oil Execs are calling this a tax hike. Rush Dimbulb argued, possibly with a straight face while hiding behind his microphone, that there is no alternative to oil; therefore, we should let the tax breaks stand.

Revoking tax-breaks is not raising taxes. Tax breaks are subsidies, not incentives. Excusing Exxon from having to contribute its fair share to the country enabling its exorbitant price-gouging is meddling with the free market. Compared to Exxon’s $40 Billion in profits last year, the company has dedicated a mere $100 Million over 10 years to Stanford University to “find energy sources not yet being considered.”

Exxon isn’t a big evil corporation for refusing to invest in alternative energies. It’s simply sound business. Just like when the phone company fought government pressure to open its network to the Internet. A profitable company has a responsibility to its stockholders to maximize its profits. Why would they do anything to open the playing field to their competition?

Dimbulb and the Oil Execs are arguing strongly against the free market in this debate. So long as tax breaks can keep Oil prices artificially lower than the alternatives, we won’t innovate. Government subsidies only forestall the inevitable. The market will make a correction eventually, and we’ll all be the worse off for it. Just like the market is currently correcting the mortgage industry for the Fed’s overcompensating interest rates.

When the price of oil finally does adjust, it’s going to hurt a whole lot worse.