Energy Independence

I have written in the past about "oil industry subsidies." Rather than using a hyperlink, I will just reproduce my 2011 blog entry text here:

Semantics are wondrous things.  Many politicians, including some Republicans, are now calling for the elimination of oil industry "subsidies" as one small way of closing our heinous budget deficit.  These subsidies supposedly total $4.4 billion per year (see: Oil Industry Subsidies.) This is a very small amelioration (less than 0.3%) considering that our budget deficits are now running around $1.6 trillion per year.

Now, I am old enough to remember what these oil-industry "subsidies" really are.  They used to be called "oil depletion allowances."  These allowances were meant to equate to "depreciation" in other industries.  In other words, as an oil company either purchased or leased the mineral rights to a piece of land ... and then extracted the oil, there was a reduced value to this land since the oil was being extracted.  Thus oil companies were allowed to "depreciate" this depleted oil deposit to allow them to then go and buy or lease other land to look for more oil. 

Can we thus call the ability of General Motors to depreciate the machinery (robots, machine tools, etc.) it uses to make cars an "auto-industry subsidy?"  If we did, all hell would break loose.  Now maybe the formulas used to calculate oil depletion allowances need to be reformulated given the new technology used in oil extraction.  But to eliminate these oil-industry "subsides" entirely is but another step in our tree huggers' attempt to emasculate the United States' energy-producing capabilities.  This is a little like playing Russian Roulette with five bullets in your six-shooter.

I pretty much said what needed to be said back in 2011, but now Jeanne Shaheen of New Hampshire is using this same demagoguery against Scott Brown in their Senate race up there. If we are ever going to achieve energy independence in this country, it will not be by eliminating this valid accounting process for oil exploration companies. Machinery wears out and is obsoleted ... and needs to be replaced. That is why depreciation is a valid accounting entry for manufacturing companies. Such is also the case for oil in the ground. Once it is gone then the high prices paid for this resource is lost unless it was allowed to be depreciated like any other income-producing asset. This is not a "subsidy" ... it is simply a logical accounting rule ... something that seems continually to be lost on liberals ... and naive voters

Why the media, accounting professionals and university professors don't come to defend this age-old accounting practice is beyond me.  Oh, yes ... I think I just answered my own question.