Subsidies don’t work

A good story in the New York Times about how subsidies to domestic oil and gas producers are a waste of taxpayer dollars:

Analysts said the meager impact of royalty incentives was not surprising: for oil and gas companies deciding whether to drill in deep water, the potential money involved in royalty incentives is small compared with the money at stake in changes of market prices.

Eliminating royalties on oil or gas will save a company 12 to 16 percent on some of its production. But those savings are minuscule compared with the nearly fourfold increase in oil prices from $15 a barrel in 1999 to more than $70 this summer.

CEI has long opposed federal subsidies to oil and gas companies. As it’s Christmas, we’ll use Dave Barry to illustrate why:

You will also be thrilled, as a taxpayer, to learn that the Farm Security Act provides new subsidies for producers of lentils and chickpeas. And not a moment too soon. This nation has become far too dependent on imported lentils and chickpeas. Try to picture the horror of living in a world in which foreigners, in foreign countries, suddenly cut off our lentil and chickpea supply. Imagine how you would feel if you had to look your small child in the eye and say, “I’m sorry, little Billy or Suzy as the case may be, but there will be no lentils or chickpeas tonight, and all because we taxpayers were too shortsighted to fork over millions of dollars in support for domestic lentil and chickpea producers, who thus were forced to compete in the market like everybody else, and . . . HEY, COME BACK HERE!”

Subsidies reward those who are powerful enough to extort, erm, extract them from government. in some cases, such as fishing subsidies, they are seriously damaging. We’re better off without them.

Hat-tips: Env-econ and Greg Mankiw, two sources always worth reading even if we don’t always agree with them…