Who's Subsidizing Whom?

The federal government has subsidized oil, gas, and coal for over a century. How much? That depends on how you count. The Treasury puts direct tax breaks at a few billion a year. Independent analysts who include cheap access to public land and regulatory exemptions put it closer to thirty-five billion. And if you factor in the health costs of pollution — paid for by Medicare, Medicaid, and you — some estimates run into the hundreds of billions. You can argue about which number is right. But here’s what’s harder to argue with: the oil and gas industry earned over two hundred and fifty billion dollars in profits between 2021 and 2023. In a single good year, they earn far more than the government gives them — by any measure. These subsidies have been in place for over a hundred years. The industry that receives them has never been more profitable. Whether they still make sense is a question worth asking. Learn More There are three ways to measure fossil fuel subsidies — and they produce very different numbers: Tier 1 — Direct tax expenditures (narrow): The U.S. Treasury’s Office of Tax Analysis puts fossil fuel tax expenditures at about $2.6 billion in fiscal year 2025. The annual average from 1994-2025 has been about $1.6 billion. This is the most conservative measure. (National Center for Energy Analytics) Tier 2 — Broader direct subsidies: Oil Change International (September 2025) estimates $34.8 billion/year when you include tax breaks, below-market access to public land, regulatory loopholes, and direct spending. This figure has more than doubled since 2017. The One Big Beautiful Bill Act (OBBBA, signed July 2025) added roughly $4 billion/year in new fossil fuel subsidies. (Oil Change International; Yale E360) Tier 3 — Implicit subsidies (health and environmental costs): The IMF estimates U.S. fossil fuel subsidies at over $760 billion annually when including unpriced externalities — air pollution health costs, climate damages, and other costs the public pays rather than the industry. (IMF) Industry profits for context: The oil and gas industry earned over $250 billion in profits from 2021-2023. In 2022 alone, U.S. oil companies reaped $301 billion — roughly seven times their pre-COVID average. (NPR) Over a century of subsidies: Federal support for fossil fuels dates to at least 1918 (tax deductions for intangible drilling costs). Cumulative federal tax expenditures for fossil fuels from 1918-2025 total approximately $549 billion — nearly three times what renewables have received in total. (Center for American Progress) The industry counterargument: The National Center for Energy Analytics argues the narrow Treasury figure ($2.6 billion) is the accurate measure, and that broader estimates conflate standard business tax deductions with "subsidies." They also note that removing all direct fossil fuel subsidies "would have no meaningful impact on the profitability of the traditional energy industry." (NCEA) Related Civic Minute segments: Gas Taxes: Where Does the Money Go? (CM-32), What Energy Independence Actually Means (CM-38), Where Does the Money Go? (CM-43)