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Executive Summary

As the new home of CALPIRG's environmental work, Environment California can be contacted with any questions regarding this report. 

Subsidies, at their best, are a government tool to encourage business activity that is in the best interests of the public at large. California's treatment of the oil industry involves subsidies at their worst unnecessary for the success of the industry, damaging to the environment and public health, and wasteful of taxpayer dollars. This report documents these subsidies and explores related aspects of state energy policy.

• California's vast reserves of crude oil are important to the oil industry. Fifteen percent of U.S. oil production takes place on California land or in water off its shores, making California the third largest oil producer of any state in the country.

• Most of California's oil production is conducted by large corporations and major investors who have reaped the benefits of an immensely profitable business for decades. The top ten California oil producers for which earnings information is available gained worldwide net profits in 1996 totaling nearly $20 billion.

• The risks of investing in exploration and development are small relative to potential profits. Further, these risks are more than balanced by the diversification of the companies, most of which receive income from each of the various stages of the production and sale of oil products.

• The oil industry generates severely hazardous levels of pollution in the production and processing of crude oil. In the pumping and refining stages, emissions of major toxic gases are greater than from all industrial manufacturing sources combined.

• California taxpayers will give direct subsidies to oil and gas companies totaling $129 million in 1997.

• Because oil companies frequently evade responsibility for the pollution they create, California taxpayers further subsidize their activities indirectly by cleaning up after them.

• Rather than providing incentives for business activity in a sector which is not meeting its potential, these subsidies amount to nothing more than handouts to an already thriving industry.

• Eliminating California taxpayers' direct subsidies to the oil industry would have a negligible impact on oil industry investment in developing the state's resources. The money saved could be passed on as savings to taxpayers or used for productive investment. Forcing the oil industry to pay the full costs of cleaning up its pollution would greatly add to these savings and serve as a disincentive for further pollution.