[Closed] Tax cuts for oil companies....

A subsidy is when the government gives a company some money.

A tax cut is when a company pays less money to the government than they did before. They are still paying money to the government.

Yeah thanks for explaining that 🙄 My point was that the end result is still the same, a shift of revenue from the govt to the oil companies, with no guarantee that it's going to be used for the intended purpose. At least a direct subsidy could come with conditions attached, like saving jobs, investing in infrastructure etc.

The Shell CEO only took home 25million euros last year, probably does need a hand out.

The Shell CEO will probably take home 25M Euros with or without the North Sea.
If it looks unprofitable (or has low profitablity) then they may just decide to sack people as that seems to boost the share price. They already cut (or plan to) 250 from Aberdeen but compared to the 2-3000 they already cut in Nigeria (which is probably one of their most profitable locations) it could be much worse.

I guess for the short to medium term we need them more than they need us especially if we wish to retain a skilled workforce.

gobuchul - Member

It's not really the "expense" but the limitations of the technology.

It's really neither- it's largely that fossil fuel burners don't have to pay the true cost of the damage they cause and have caused, or the irreplacable resource they're using, so it's artificially cheap.

My point was that the end result is still the same, a shift of revenue from the govt to the oil companies, with no guarantee that it's going to be used for the intended purpose.

Well by that rather perverse logic, given that all other industries operating in the UK pay lower tax rate than Norths Sea production, they are all getting a bigger subsidy from the government than does the oil industry.

well it looks like we got a tax cut - with a snide dig at scottish independance thrown in.....

...and the potential for a lot of simplification around allowances which can only be a good thing too!

Yeah thanks for explaining that My point was that the end result is still the same, a shift of revenue from the govt to the oil companies, with no guarantee that it's going to be used for the intended purpose. At least a direct subsidy could come with conditions attached, like saving jobs, investing in infrastructure etc

For every £100 of 'profit' made on getting oil out of the ground (and a that point it's almost all profit) they pay £60 to £80 to the govenrment in tax, this is Ok because in the UK the government owns the mineral rights, so this 'tax' is just the oil companied buying the oil of the government (the remainder is the cost of getting it out of the ground and proffit). A tax cut in this case is just the government accepting a slightly lower price for the oil.

A subsidy would be what we had for the coal industry, where the govenrment was paying for the coal to be bought out of the ground.

Funny you should ask that - there are some nice studies that show provided you space the wind farms out enough (round Britain or round Europe, not just a few metres further apart) the wind does blow pretty much constantly.

No it doesn't. This graph shows wind generation for 9 European countries combined.

[img] [/img]

http://euanmearns.com/wind-blowing-nowhere/

No it doesn't. This graph shows wind generation for 9 European countries combined.

you forgot to mention the graph is for a short period coinciding with an unusually massive blocking high covering a massive area of europe, which don't happen very often. it's statistical nit-picking, or cherry picking even.

A subsidy would be what we had for the coal industry, where the govenrment was paying for the coal to be bought out of the ground.

It's still just semantics. The govt paid to take coal out of the ground because it was a nationalised industry. The same was true of oil before BP was privatised. The difference was that oil made a profit, coal didn't, and the govt had to make up the shortfall by way of subsidies. In the end it's still just a transfer of funds one way or the other, so if funds are transferred from govt to oil companies, as in this case, it's analogous to a subsidy.

Anyway, aside from bickering about semantics, the point is still that at a time when the oil industry should be scaling down and shifting it's focus away from selling it as a fuel, it would appear that it's government policy to ensure that they continue producing as much as possible and making as much profit as possible in direct contradiction to other government policies (and plain common sense) which require us to be emitting less CO2.

In what way do you imagine that funds are transferred from government to oil companies?

It's government policy to ensure that the UK has a secure energy supply. I imagine that there are folks in Kiev who wish they had a similar resource.

No it doesn't. This graph shows wind generation for 9 European countries combined.

you forgot to mention the graph is for a short period coinciding with an unusually massive blocking high covering a massive area of europe, which don't happen very often. it's statistical nit-picking, or cherry picking even.

It isn't nitpicking. It shows that even on a European scale wind can't be relied on and there needs to be near enough complete backup from predictable sources. So as well as paying for the windfarms we still need to pay for coal,gas, or nuclear plants. Building capacity twice.

As of right now the UK installed wind is supplying around 3% of current demand. We are importing more electricity (mainly nuclear) from France than we are getting from every UK windfarm combined.

http://www.gridwatch.templar.co.uk/

irc - Member

As of right now the UK installed wind is supplying around 3% of current demand. We are importing more electricity (mainly nuclear) from France than we are getting from every UK windfarm combined.

As of right now Scotland's biggest source of electricity is renewables, beating nuclear into a distant second and producing more than coal and gas combined. And we export electricity to the rest of the UK. The rest of the UK has failed to keep up; that doesn't mean it's impossible, we've proven it's not.

Oil companies are still making money. Its a lot of the well service companies that are being squeezed. All I can say is at least our economy is not as dependant on oil as Alberta's is. The job losses going on over there is horrific. Shops closing down all over the place.

Scotland has maasivly different population density to England as well as a different geography.

England has massively more coast, hill and empty space than it needs to match Scotland in renewables. The UK's biggest windfarm is just miles from Glasgow, in an area which has a population density higher than most of England. It's a red herring.

All I can say is at least our economy is not as dependant on oil as Alberta's is.

Shale oil has a high extraction cost, so will be very vulnerable to dips in oil prices. Personally I can't see this price dip lasting that long (so much so, I bought a load of cheap oil stocks last week). At some point it will go back up.

As of right now Scotland's biggest source of electricity is renewables, beating nuclear into a distant second and producing more than coal and gas combined. And we export electricity to the rest of the UK. The rest of the UK has failed to keep up; that doesn't mean it's impossible, we've proven it's not.

You are confusing installed capacity with actual output. The total UK wind output right now is about 1.8Gw Max demand in Scotland which is in weekday evenings is around 6Gw. So the whole UK wind output is meeting approx 1/3 of the demand in Scotland. Solar output is obviously zero right now. So the vast majority of demand is being met by coal, gas, and nuclear. As it always is when there is very little wind and it is dark.

An excellent piece of Scotland's crazy wind energy policy is

http://euanmearns.com/scotland-gagging-on-wind-power/

As I understand it the energy from renewables cannot be stored currently, example a wind turbine at night producing energy when there is low demand.

Are there any plans for large scale storage of renewable energy on the horizon?

Also without the nitrogen from fossil fuels we would not have fertilser and could not feed ourselves.

irc - Member

You are confusing installed capacity with actual output.

No, I am not. In 2014 renewables out-generated nuclear, 10.3 TWh to 7.8TWh (and just 5.6 for coal)

Also without the nitrogen from fossil fuels we would not have fertilser and could not feed ourselves.

You aren't a chemist then?

Haber Process

The Haber process uses Nitrogen and Hydrogen to produce Ammonia doesn't it?

As I understand it the energy from renewables cannot be stored currently, example a wind turbine at night producing energy when there is low demand.

Are there any plans for large scale storage of renewable energy on the horizon?

Hydroelectric schemes can store energy from renewables by pumping water back up during the night ready to be used again during peak demand.

Can I just note that on an individual basis each current offshore wind farm is a similar sized (or bigger than) each of the current UK nuclear plants with the probable exception of Heysham.

By Heysham do you mean Heysham 1, Heysham 2* or the two separate plants combined? They are two distinct and separate sites.

And besides which, you're very wrong. The only site which even comes close to matching a nuclear plant is the London Array at 630MW to 640MW design per reactor (all of our AGR's are twin reactor sites albeit working at reduced output in most cases) but even that gets dwarfed by Sizewell B which pumps out close to 1.2GW.

In fact, I'd be surprised if all offshore wind could match the combined Heysham sites.

*which is the exact same design as Torness

The Haber process uses Nitrogen and Hydrogen to produce Ammonia doesn't it?

Correct.

Where does the Nitrogen come from?

All the debates over whether wind can replace fossil fuels are silly. No one has ever suggested it could. It is however a key component in a future fossil fuel free energy infrastructure in combination with hydro, existing nuclear, next-gen nuclear and solar (on a small scale admittedly in this country). Yes in the short-medium term you'd need fossil fuels such as gas to be there to cover shortages when the wind isn't blowing etc but it's all do-able. If the billions that are spent on finding new ways of squeezing oil out of the earth's crust and tar sands were spent on things like research into more efficient storage mechanisms, smart grids, microgrids and energy efficiency then the problem would be solved. But no, in it's wisdom the govt decides to hand a tax cut to an already massively profitable industry whilst the developing renewables industry sees nowhere near the same level of investment.

There will always be peaks and troughs in both supply and demand.
Increased use of renewables will make supply even more erratic.
Changes in climate and increased uses for electricity will make demand more erratic.

So, why do we pay much the same for our electricity in the short term, rather than have a constantly varying price?
You could set your car to charge its battery when prices drop, whether that be because wind picks up, or demand drops etc.
When prices are exceptionally high, your home could draw power from your car battery to make your toast.

Change technology and behaviour patterns to fit around the peaks and troughs, and smooth them out.

It's still just semantics.

It's not though is it? If for some non-financial reason (climate change) we stopped oil extraction then the government would stop recieving money. When we stopped extracting coal they stopped having to pay out money.

A subsidy very definately implies the government is paying the oil companies, they're not, the oil companies are paying the government. All Osbourne has done is offer them our oil at a lower price than last year to keep things viable while the price is low.

Rough and incredibly over simplified example of whats happened:
$100 a barrel, $60 to HMRC, $20 cost to extract, $20 profit to the oil company.
$50 a barrel, $30 to HMRC, $20 to extract, no profit, platform closes, jobs lost, HMRC loses it's $30, and all the income tax, multipleier effects etc.

If the govrernment didn't cut the tax rate on oil, north sea oil would be uncompetative at the moment, what they're doing is modulating the tax to keep it as high as possible (thus keeping tax revenues as high as possible) without making it uneconomicaly viable (and getting zero).

Without the North Sea (and/or Fracking) places like Grangemouth and Teesside/Wilton will close, we're still trying to figure out what those people made redundant by pit closures are going to do for work, without colapsing another industry as well!

Where does the Nitrogen come from?

You need the hydrogen too (yes you can make it from water, but in the real world it comes from fossil fuels). You also need the energy to distill the nitrogen from the air.

If the billions that are spent on finding new ways of squeezing oil out of the earth's crust and tar sands were spent on things like research into more efficient storage mechanisms, smart grids, microgrids and energy efficiency then the problem would be solved. But no, in it's wisdom the govt decides to hand a tax cut to an already massively profitable industry whilst the developing renewables industry sees nowhere near the same level of investment.

The oil industry recieves no subsidy, they pay the government money.

If this tax cut didn't take place they'd pay less money, which means less money to [b]SUBSIDISE[/b] renewables (or pay for schools, hospitals, police).

Are there any plans for large scale storage of renewable energy on the horizon?

don't think anyones mentioned the supergrid concept of interconnecting generation across europe. I've worked on the Northconnect and Icelink HVDC interconnector projects, which are really interesting.

Northconnect aims to balance the electricity generation between Scotland and Norway, in the winter Norway suffer a shortfall of hydro power as the reservoirs freeze, but we have an excess of energy production from hydro and wind. In the summer it is vice versa, Norway has an excess of hydro production and we have a shortfall of wind and hydro. The HVDC interconnector allows these surpluses and shortfalls to be balanaced out by trading electricity as required either way.

Icelink is another interesting one - Iceland has a potentially massive geothermal energy resource, almost their entire electricity generation is from geothermal and they have the potential for a load more, so by using a gert big HVDC interconnector they can export this cheap renewable energy source to us. The National Grid are very interested in these interconnectors as the supply is predictable and it helps smooth everything out so to speak. Existing HVDC connectors to Europe have been superbly successful.

It shows that even on a European scale wind can't be relied on and there needs to be near enough complete backup from predictable sources.

I think the only people discussing the suggestion that wind alone needs to be relied on are you, the daily mail and that quack website you link to.

TINAS gets it !

Dazh is in some parallel universe , and only reads headline numbers.

using your logic the north sea oil industry will shut up shop.

But no, in it's wisdom the govt decides to hand a tax cut to an already massively profitable industry

One more time - North Sea oil is not massively profitable, and the oil industry in general makes quite modest returns on the enormous, incredibly risky investments that it makes.

no oil co investing = no tax revenue at all = no jobs = no income tax revenue and alot more signing on.

The above equation is wrong. The correct version is:

no oil co investing = [ reduced tax revenues + rapid loss of critical team that take years to rebuild + higher unemployment over the long term + less energy security + more UK engineers working abroad + loss of jobs in the direct supply chains. ]

footflaps - Member
Shale oil has a high extraction cost, so will be very vulnerable to dips in oil prices. Personally I can't see this price dip lasting that long (so much so, I bought a load of cheap oil stocks last week). At some point it will go back up.

North sea oil is a long way from cheap to extract!

same as the banks

This. Poor planning for a rainy day, greedy profit taking and high wages all round, then asking for help when the rain comes. Grrrr.

Equally, they are in the UK being shafted by OPEC it seems who are keeping the price low...edit: and shafted u extra and unique taxes.

using your logic the north sea oil industry will shut up shop.

And that's exactly what should happen over the long term. Like I said, if catastrophic climate change is to be prevented, oil, coal and gas needs to be left in the ground. Saying we can't afford it is false economy as it'll cost far more in future to deal with the consequences. I realise this isn't something the UK can do unilaterally but at some point the tide has to turn. I don't really see what the alternative is. The oil companies are not going to do if voluntarily.

profit taking and high wages all round, then asking for help when the rain comes. Grrrr.

Do you actually have any idea what level of profits oil companies have? In fact it's lower than other industries. The money needed for a hydrocarbon project is enormous, and the risks huge.

Ah yes , but your country needs the tax revenue as much as the energy.

The revenue stream is reversed on renewables 😉

So an oil company exec and an amazon/google/apple/Starbucks exec walk into the stw bar. Who gets lynched first?

Tax is about the revenue you can collect.

The revenue stream is reversed on renewables

renewables is a developing industry, there are only a few offshore wind farms built so far and minimal existing commercially viable wet renewables, government investment in eg nuclear development was crazy high, in fact we are still paying for it today, and was also very high when oil extraction was being developed.

fossil fuel subsidies are much higher than renewable subsidies, in fact we subsidise production of oil all over the world, not just in the UK.

people get so blinkered by oil! I think it's the effect of money on people 😉

By subsidise all over the world do you mean the export finance guarantee scheme ? Or are we giving money away to countries unreported ?

Also

"Those included tax breaks for North Sea exploration worth £528 million to Total (HQ France), £256 million to Statoil (Norway), £144 million to Centrica (UK) and £45 million to Chevron (USA) between 2009 and 2014."

You mean subsidise via tax breaks for exploration write off ? Ie encouraging investment in the sector instead of letting it die on its knees like the uk industry of yore, bit like tax breaks for buy to let land lords getting to write off expenses....oh i forgot the moral high ground on here forbids buy to let as well.....

As for your little dig. Yes i work in oil, how ever i dont work in the north sea/uk sector so crack on, my head office might move but i go to work on a jet liner so itll make little difference.

What about the tax breaks for people on high incomes who pretend they ride to work, how come richer people get more out of that scheme?

Because they pay more tax?
So the tax relief is subsequently more then someone paying standard rate.

Or am I being naive?

What about the tax breaks for people on high incomes who pretend they ride to work, how come richer people get more out of that scheme?

Probably because it would cost more to police properly (ie prove you cycled to work) than to just let them have a tax free bike. Personally it's just a tiny tax break it's in the noise.....

Personally it's just a tiny tax break it's in the noise.....