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oil subsidies etc

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Posted

im so confused, can you clarify?
Lately ive been hearing so many things about the government subsidizing the oil companies and that we should/ should not subsidize them. However, Im so confused! cheap gas is good right? Some others say it isn't good, and no matter what research i do, i cant figure out why having cheap gas is bad, how it prevents us from exploring other fuels? How does expensive gas make research cheaper? Wouldn't it make it more expensive? 

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Posted

Lately ive been hearing so many things about the government subsidizing the oil companies and that we should/ should not subsidize them. However, Im so confused! cheap gas is good right? Some others say it isn't good, and no matter what research i do, i cant figure out why having cheap gas is bad, how it prevents us from exploring other fuels? How does expensive gas make research cheaper? Wouldn't it make it more expensive? 

Government subsidies are great for when a product becomes too expensive on the open market for the average individual to purchase. For example, without government subsidies in the farming industry, a carton of milk at the super market might actually cost $12 but since the government stepped in and paid $9 of that on your behalf, you only have to pay the final $3. Without government subsidies in the farming industry, no one would be able to afford milk because it costs a farmer $11 to make one carton and so they must sell it for $12 to make a small profit. The milk industry would either collapse and vanish completely or they would be forced to innovate/research new technologies or alternative products. Instead, the government keeps them alive and keeps them lazy.

It's getting to that point in the oil sector. It's expensive to produce gasoline and so prices have to be high to reflect the price of production. Gasoline on the open market may get so expensive in the near future that the average person may not be able to afford it. That's where government subsidies can step in to make gasoline more affordable for the average user.

How does this prevent research into new technologies? Well, because when governments step in and hand these oil companies money, that means these oil companies no longer need to worry about the market place. They can sit back and collect the paycheck. On the other hand, if governments do not step in and the price of gas is too much for consumers to handle, then these oil companies have to rush new technologies to either refine oil at a cheaper price or develop alternative fuel sources. They risk their entire industry collapsing if they do not innovate.

Nothing is free in this world though. Money used by governments in government subsidies come from taxed dollars, trade surplus, and the such. When the government subsidizes an industry, it means they are paying for us on our behalf. Money can be used elsewhere like building roads and schools rather than giving it to oil companies.

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Posted

wait... so basically, the subsidies are the money the government is paying so that the gas isnt so expensive for us? 

But... wait, ok, wait, the subsidy money is our tax money as well, isnt it? So were technically paying the full price of gas anyways, just at different times...?

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Posted

This has got to be a troll.

A very obvious one at that. Not even I am this bad.

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Posted

wait... so basically, the subsidies are the money the government is paying so that the gas isnt so expensive for us? 

But... wait, ok, wait, the subsidy money is our tax money as well, isnt it? So were technically paying the full price of gas anyways, just at different times...?

Yup, government subsidies come from government money and government money comes from taxes they collect.

So, when a government subsidizes oil, it means the government is paying part of the cost for oil on your behalf. This will make oil cheaper for you to purchase (but not really since you paid for it in taxes before hand). This will also make oil companies lazy because there's no more incentive to innovate and explore alternative energy due to guaranteed/steady revenue from the government.

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Posted

wait... so basically, the subsidies are the money the government is paying so that the gas isnt so expensive for us? 

But... wait, ok, wait, the subsidy money is our tax money as well, isnt it? So were technically paying the full price of gas anyways, just at different times...?

Sort of, it's somewhat like chipping in to buy pizza with friends. Usually each person doesn't get equal amount of slices but one might get 3 slices while another gets 1. They both chip in the same price even though one ate more than the other. It's cheaper for them to split the bill and pizza instead of buying a whole pizza on their own.

Do you or someone you know use the same amount of gas as say President Obama? How about your mom and someone else? They all pay taxes depending on their income (except Obama). Someone with a million dollar income should have higher taxes than someone with a $23,000 income. Who do you think will put more money in the pot of subsidies?

So unless you one from a well off family or don't use gas at all you are most likely paying less than what you should on gas

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Posted

so... from what i understand.... its better to eliminate oil subsidies, right? Becuase then... even though the price would rise, oil companies would be forced to look for differenst methods and newer resources....? 

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Posted

so... from what i understand.... its better to eliminate oil subsidies, right? Becuase then... even though the price would rise, oil companies would be forced to look for differenst methods and newer resources....? 

Yes and no.

1. Oil is essential to modern world. The only way to not use oil is revert back to the day and age of using horses, and buggies. oil companies may be researching more renewable energy but in no way would they market it until they got on their last legs. It would be stupid of them to sell a product that is cheaper than oil because they get less revenue. They also know that no matter how bad the economy is oil is still needed, what will run the cars? Natural gas is needed for power plants to supply energy to the people, delivery trucks require gas to deliver food, and good to different areas. the only time oil companies would feel pressured to release a cheaper alternative is when

A. oil is running out (decrease of supply) B. Everyone is using horses to get around (or solar, electric cars)/not using natural gas for electric (decrease of demand)

2. The only people researching greener/cheaper fuel are small companies. 2 things will either happen if oil is jacked up: more companies will pop up researching for alternative fuel or companies researching will go out of business because the people can't afford to keep researching with escalating prices. Oil companies could try to put the potential successful ones out of business to stomp out any competition

3. With escalating oil prices, every other economy's prices will go up also. In Europe it's like $12 a gallon. That's 3-4 times greater than what is paid in the USA. Food packages will get smaller and prices will get higher.

You can figure out what happens after food prices go out

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Posted

so... from what i understand.... its better to eliminate oil subsidies, right? Becuase then... even though the price would rise, oil companies would be forced to look for differenst methods and newer resources....? 

There's no definite answer and it really depends. Subsidizes alone have positives and negatives but there are also additional tools the US government could use to offset negatives such as not taxes oil companies for all of their research and development projects.

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