Regan Brown
Fossil fuel companies in the United States make billions in profits each year, with ExxonMobil and Chevron reporting earnings of $55.7 billion and $35.5 billion, respectively, in 2022. The oil and gas industry as a whole generated approximately $138 billion annually for US localities, states, tribes, and the federal government between 2015 and 2020. In 2023, the total revenue of the US oil and gas industry was $244.4 billion, a decrease from $330.8 billion in 2022. While the fossil fuel industry generates significant revenue, it also receives substantial subsidies from the US government, estimated at $649 billion in 2017. These subsidies have been in place for decades to promote cheap and abundant energy, but they have also contributed to climate change and extreme weather events. As the world transitions to cleaner energy sources, the revenue from the fossil fuel industry is expected to decline, impacting communities that rely heavily on this industry.
| Characteristics | Values |
|---|---|
| Revenue from fossil fuels in the US | $138 billion annually |
| Revenue from fossil fuels in Wyoming | >50% of total state revenue |
| Revenue from fossil fuels in New Mexico, North Dakota, and Alaska | >14% of total state revenue |
| US government subsidies for fossil fuels | $649 billion in 2017 |
| Global fossil fuel subsidies | $7 trillion |
| US fossil fuel industry profits in 2022 | $200 billion |
| US oil and gas industry revenue in 2023 | $244.4 billion |
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What You'll Learn
Fossil fuel subsidies in the US
Fossil fuel subsidies are financial incentives and tax breaks provided by governments to oil, gas, and coal industries. These subsidies lower production costs, distort energy markets, hinder renewable energy growth, and delay the transition to cleaner energy alternatives. In the United States, the fossil fuel industry benefits from an estimated $757 billion in subsidies annually, according to the International Monetary Fund. This includes $3 billion in explicit subsidies and $754 billion in implicit subsidies. Direct government subsidies alone account for $10 to $52 billion per year.
Explicit subsidies are direct payments from the government to reduce the costs of producing fossil fuels or to make them more affordable for consumers. Implicit subsidies, on the other hand, are the societal costs of burning fossil fuels, such as negative health impacts, environmental degradation, and social damage. Economists refer to these indirect costs as "externalities" rather than "subsidies". The total impact of these externalities is significant, with a global estimate of $5.3 trillion in 2015.
In the United States, fossil fuel subsidies are embedded within the tax code and administered by the Department of Energy (DOE) through initiatives like the Office of Advanced Fossil Energy R&D, the Loan Guarantee Program, and the National Energy Technology Lab. Federal funding is also provided in the form of project loans, grants, and guarantees from organizations like the Overseas Private Investment Corporation (OPIC) and the United States Export-Import Bank (EXIM). These sources of funding are meant to provide fiscal security for investments in emerging markets but often subsidize the expansion of the mature and profitable fossil fuel industry.
There have been recent attempts to reduce or reform fossil fuel subsidies in the United States. Legislation proposed in the 118th Congress (2023-2024) includes the End Oil and Gas Tax Subsidies Act of 2023 (R.1483), which aims to repeal fossil fuel tax breaks. Additionally, the Biden-Harris Administration's FY 2024 budget request includes eliminating 13 fossil fuel tax preferences and credits. These efforts reflect a growing recognition of the negative impacts of fossil fuel subsidies on the environment, public health, and the economy.
While removing fossil fuel subsidies is politically challenging, it is essential for mitigating climate change, improving government budgets, and promoting sustainable and equitable outcomes. However, it is important to consider potential indirect effects, such as price increases for consumers, including those with lower incomes. Overall, the United States' substantial fossil fuel subsidies contradict claims of free-market competition and hinder progress towards cleaner and more renewable energy sources.
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US oil and gas industry revenue
The US oil and gas industry is a key driver of the global economy, accounting for 4.8% of the US GDP. The US has been the top producer of crude oil since 2009, except for 2020 and 2021 when the COVID-19 pandemic caused a slump in demand and prices. In 2023, the US oil and gas industry's total revenue was $244.4 billion, a significant decrease from the previous year's peak of $330.8 billion. This decrease followed an oversupply in 2014, which caused output and revenue to fall as petroleum prices destabilized worldwide.
The US oil and gas industry's revenue is heavily influenced by the trajectory of its gross output, which experienced a drastic fall in 2015 after reaching a high point in 2014. The industry includes companies specializing in crude petroleum production, mining and extracting oil from shale or sands, and recovering hydrocarbon liquids. Some of the biggest players in the US market include Exxon, Chevron, and BP.
The US is one of the largest producers of oil globally, along with Saudi Arabia and Russia. These three countries produced approximately 40 million barrels of oil per day in 2022, contributing to 43% of the world's total production. The US has continued to increase its crude oil production, with monthly records being set in December 2023, averaging more than 13.3 million barrels per day.
The global oil and gas industry's profits jumped to $4 trillion in 2022, up from an average of $1.5 trillion in previous years. This increase in profits is attributed to rising oil prices, which have benefited major producers like ExxonMobil. The oil and gas sector is vital to the world economy, constituting about 3.8% of it. However, there are warnings that countries dependent on oil and gas revenues should prepare for a decrease in demand over the long term.
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US government fossil fuel funding
Fossil fuel subsidies have surged to a record $7 trillion as governments supported consumers and businesses during the global spike in energy prices caused by the Russia-Ukraine conflict and the economic recovery from the pandemic. The United States spent $649 billion on fossil fuel subsidies in 2017, making it the second-largest subsidiser globally.
The US government provides substantial funding for the fossil fuel industry through the Department of Energy (DOE). The DOE administers federal funding for fossil fuels through three initiatives: the Office of Advanced Fossil Energy R&D, the Loan Guarantee Program, and the National Energy Technology Lab. Annual appropriations and grants directed towards the fossil fuel industry can be considered direct subsidies, as they aim to maintain the competitiveness of the industry.
In addition to research and development projects, the fossil fuel industry receives federal funding in the form of project loans, grants, and guarantees from the Overseas Private Investment Corporation (OPIC) and the United States Export-Import Bank (EXIM). EXIM is the credit agency of the US government, providing credit to facilitate the export of American goods and services. Over the past 15 years, EXIM has lent or issued billions in grants to fossil fuel projects, including $14.8 billion in grants and loans for 78 projects in the petroleum sector from 2001 to 2018.
Despite commitments at COP26 and COP27 to phase out inefficient fossil fuel subsidies, the removal of subsidies can be challenging. Subsidies are intended to protect consumers by keeping prices low, but they have significant fiscal and environmental costs. Removing subsidies would reduce air pollution, generate revenue, and contribute to slowing climate change. However, it could also lead to social unrest and impact vulnerable households with higher energy prices.
The total revenue of the United States' oil and gas industry reached a peak of $330.8 billion in 2022, with a slight decrease to $244.4 billion in 2023. ExxonMobil and Chevron, two US-headquartered companies, reported earnings of $55.7 billion and $35.5 billion, respectively, in 2022.
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Fossil fuel profits in 2022
Fossil fuel companies in the United States have been criticized for their record-breaking profits in 2022, which came at the expense of people and the planet. While the exact figure for the profits of the entire US fossil fuel industry in 2022 is not publicly available, estimates and figures from individual companies indicate substantial earnings.
The top 10 fossil fuel companies generated a combined revenue of $2.24 trillion in 2022, which would place them among the top 10 GDP countries. The "big five" oil and gas companies—Exxon, Chevron, Shell, BP, and TotalEnergies—reported a total profit of nearly $200 billion in 2022. This figure represents a record-breaking amount, with each company reporting its most profitable year yet. For example, ExxonMobil and Chevron, two US-headquartered companies, reported earnings of $55.7 billion and $35.5 billion, respectively. BP, another major player, brought in a revenue of nearly $250 billion, resulting in a record net profit of $27.7 billion.
While these companies were earning substantial profits, people around the world suffered from the devastating impacts of climate change, which is largely driven by the fossil fuel industry. In 2022, the United States experienced 18 separate climate and weather-related disasters, including droughts, floods, severe storms, and wildfires, resulting in billions of dollars in losses. The flooding in Pakistan, which impacted 33 million people and caused up to $40 billion in damages, serves as another stark example of the human and economic toll of climate change.
The profits made by fossil fuel companies have been described as "monster profits" and criticized by notable figures such as US President Joe Biden and António Guterres, the UN secretary-general. Biden denounced the companies' prioritization of enriching shareholders through stock buybacks instead of helping alleviate rising gasoline costs for drivers. Guterres expressed incredulity at the enormous profits during a time when the world urgently needs to reduce planet-heating emissions to prevent climate breakdown.
The fossil fuel industry's profits and their negative impact on the planet have led to calls for accountability and a transition to renewable energy sources. However, despite the growing momentum for renewable energy, countries continue to invest heavily in fossil fuel infrastructure and extraction, and fossil fuel companies remain influential, lobbying for their interests and misleading the public about climate change.
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Fossil fuel's impact on the climate
Fossil fuels—coal, oil, and natural gas—are the largest contributor to global climate change. The burning of fossil fuels releases carbon dioxide (CO2) and nitrous oxide (N2O) into the Earth's atmosphere, causing the greenhouse effect. This effect traps the sun's heat, leading to global warming and climate change. The world is warming faster than ever before in recorded history, and this is causing severe consequences for the planet and all life on it.
In 2018, 89% of global CO2 emissions came from fossil fuels and industry. Oil releases a significant amount of carbon when burned—approximately a third of the world's total carbon emissions. Natural gas, often promoted as a cleaner alternative to coal and oil, still accounts for a fifth of the world's carbon emissions. Coal is the most polluting fossil fuel and is responsible for over 0.3C of the 1C increase in global average temperatures.
The combustion of fossil fuels for electricity and heat generation, industrial processes, and transportation is a major contributor to global emissions. The manufacturing and industrial sectors are also large emitters, as they burn fossil fuels to produce energy for various processes and products. In addition, the extraction and burning of fossil fuels for food production release greenhouse gases, and deforestation for agricultural purposes further contributes to emissions.
The impacts of climate change are already being felt globally, with extreme weather events, rising sea levels, biodiversity loss, species extinction, and food scarcity affecting millions of people. Climate change is also the single biggest health threat humanity faces, causing air pollution, disease, forced displacement, mental health issues, and worsening hunger and poverty. Fossil fuel subsidies, which surged to a record $7 trillion, only exacerbate these issues by encouraging continued consumption and delaying the transition to cleaner alternatives.
The fossil fuel industry's profits come at the expense of global health and safety. In 2022, the top five fossil fuel companies—ExxonMobil, Shell, BP, Chevron, and TotalEnergies—reported a total of nearly $200 billion in profits. During the same year, the United States experienced 18 separate climate and weather-related disasters, resulting in an estimated $165 billion in damages and 474 deaths. As the world struggles to mitigate climate change and curb global warming, the excessive profits of fossil fuel companies highlight the need for a transition to clean energy and transportation systems.
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Frequently asked questions
The total revenue of the United States' oil and gas industry in 2023 was 244.4 billion US dollars.
In 2022, the fossil fuel industry made a record-breaking profit of nearly $200 billion.
Between 2015 and 2020, fossil fuels generated roughly $138 billion each year for US localities, states, tribes, and the federal government.
Conservative estimates put US direct subsidies to the fossil fuel industry at roughly $20 billion per year, with 20% allocated to coal and 80% to natural gas and crude oil.
