Shell shows us why oil subsidies need to go

The big news today, shared by all the major players in news (mainstream and not), is that Shell doesn’t plan to drill in the Arctic anymore.  Many sources introduce the news as some landmark victory for environmental activism, mentioning the ardent efforts of “kayaktivists” and bridge-dangling environmentalists in keeping Shell out of the Arctic, despite being given the green light by President Obama to conduct their operations in the sensitive ecosystem.

"kayaktivists" protesting Shell's drilling in the Arctic. (click to enlarge)

“kayaktivists” protesting Shell’s drilling in the Arctic. (click to enlarge)

Today was not a victory for environmental activism. It was the result of a cost-benefit analysis. Shell looked at the dropping costs of petroleum from the Middle East (which is thanks in part to our hydraulic fracturing boom in the past five years), and the costs of regulations versus the potential profit, and decided that it just wasn’t profitable.

However, don’t take this as defeatism. Shell showed us something valuable today: they will forgo a drilling operation if it isn’t profitable enough. It doesn’t just have to be profitable, but a certain degree of profitable. That exposes an Achilles heel to big oil: if the profits aren’t there, the drilling won’t happen. When you’re selling a dwindling, costly product (oil) that is competing with limitless, relatively cheaply captured products (solar, wind, tidal, etc.), you’re not going to last long.

The only reason that the fossil fuel industry is still alive is because of our governmental life support in the form of subsidies to the companies that produce this obsolete product. Meanwhile, burgeoning and growing clean energy sources are getting next to nothing, and what little they are receiving is being attacked by oil interests and their allies as feckless government spending.

Wind energy would be far cheaper than fossil fuels if subsidies were redirected. (click to enlarge)

Wind energy would be far cheaper than fossil fuels if subsidies were redirected. (click to enlarge)

What keeps us from unplugging the life support to the fossil fuel industry is the short-term problems that arise: expensive gas and coal, nonexistent infrastructure for large-scale renewable use for communities and businesses, and huge impacts to low-income communities.

However, in the long-term, dialing back fossil fuel subsidies gradually and redirecting the monies to alternative energy production would effectively price out fossil fuels from the energy sector. As Shell has shown us, if the profits aren’t there, the drilling doesn’t happen, and we have the power to reduce fossil fuel profits quite dramatically while boosting the alternative energy market substantially.

Some argue (myself one of them) that even redirecting subsidies is not enough; additional taxes must be levied on dirty energy sources to recoup the costs of “externalities”: that is, hidden costs that are not reflected in the price of the product, such as the cost of more frequent hospital visits, asthma attacks, pollution, rising seas, etc. Remove the subsidies, redirect them to clean energy sources, and tax big oil and other fossil fuel interests to recoup the costs of their dangerous industry, and soon fossil fuels will go the way of their namesakes.

It doesn’t even need to be an overnight change: over ten or twenty years, incrementally redirect subsidies from oil and coal to clean energy, and gradually increase tax on fossil fuels over the same period. It gives the corporations time to transition into clean energy production, employees time to retrain to work with new energy resources, and ultimately puts us on track for a 100% clean energy-fueled economy.

Today’s news is not a grand victory for activists, but it is a small victory for a sustainable future.