Rajan Wilcox
Fossil fuels are an important source of energy for the United States, which depends on them for 85% of its energy supply. The US has been the world's biggest producer of oil and gas for several years, and its gas production has surged 50% in the past decade. This heavy reliance on fossil fuels is costly, with American consumers and businesses spending an estimated $700 billion to $1 trillion annually on coal, oil, and natural gas. This expenditure is expected to increase, with projections indicating that the US could spend over $23 trillion on fossil fuels between 2010 and 2030. The state of California, for example, is expected to spend $2,911 billion on fossil fuels between 2010 and 2030. Additionally, Washington state spends $21.2 billion each year on fossil fuels, translating to around $3,200 per resident. The high cost of fossil fuels in the US is not limited to direct expenditures but also includes the secondary impacts, such as global warming, air pollution, and fossil fuel-related disasters, which impose billions of dollars in additional expenses on the economy.
| Characteristics | Values |
|---|---|
| Fossil fuel expenditure in 2006 | $921 billion |
| Fossil fuel expenditure as a percentage of America's gross domestic product in 2006 | 7% |
| Fossil fuel expenditure in 2008 | $1 trillion |
| Fossil fuel expenditure in 2022 | $700 billion to $1 trillion |
| Percentage of fossil fuel expenditure spent on oil | 70% |
| Fossil fuel expenditure between 2010 and 2030 | $23 trillion to $30 trillion |
| Fossil fuel expenditure in California between 2010 and 2030 | $2,911 billion |
| Fossil fuel expenditure in Washington | $21.2 billion |
| Fossil fuel expenditure in Oregon | $2,800 |
| Fossil fuel subsidies | $700 billion |
| Oil and gas production under the Biden administration | 12.9 million barrels of crude oil per day |
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What You'll Learn
Fossil fuel subsidies and spending
Fossil fuels cost the United States billions of dollars each year, with spending projected to total as much as $30 trillion between 2010 and 2030. In 2006, American consumers and businesses spent <$921 billion on fossil fuels, and by 2008, expenditures likely exceeded $1 trillion for the first time. Each year, over 70% of this money is spent on oil. This spending has significant economic and environmental implications, with fossil fuel combustion being the leading contributor to global warming and air pollution, resulting in incalculable costs and impacts on public health.
To address these concerns, policymakers have started adopting strategies to promote energy efficiency and renewable energy sources. However, powerful interests invested in the status quo have resisted these changes. Additionally, the fossil fuel industry continues to receive substantial government funding and subsidies, which are intended to protect consumers by keeping prices low. These subsidies have sizable fiscal consequences, hindering economic growth and contributing to pollution and climate change. According to the International Energy Agency (IEA), phasing out fossil fuel subsidies would benefit energy markets, mitigate climate change, and improve government budgets.
The United States federal government provides funding to the fossil fuel industry through various initiatives administered by the Department of Energy (DOE). These include 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 industry can be considered direct subsidies. Efforts to improve the economics and cleanliness of coal, despite the declining cost of natural gas and renewable energy, have been a particular focus of federal funding.
Furthermore, the fossil fuel industry receives project loans, grants, and guarantees from organizations like the Overseas Private Investment Corporation (OPIC) and the United States Export-Import Bank (EXIM). While these funding sources are intended to support investments in emerging markets, they often subsidize the expansion of the mature and profitable fossil fuel industry. Additionally, tax breaks for oil and gas exploration have been in place for a long time, further subsidizing the industry. According to the OECD, in 2023, coal subsidies amounted to $27.7 billion, oil to $400 billion, and gas to $343 billion.
The consensus among economists is that the rich benefit the most from fossil fuel subsidies, but removing them may negatively impact the poor through indirect price increases. However, the International Monetary Fund (IMF) warns that subsidies can make countries more vulnerable to variations in international energy prices. The removal of fossil fuel subsidies has been a topic of discussion at COP26 and COP27, with countries agreeing to accelerate efforts to phase out inefficient subsidies.
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Oil, gas, and coal usage
The US is the world's biggest producer of oil and gas, with a surge in gas production of 50% in the past decade. In 2023, a fifth of all oil drilled was American. Every hour, around 1 million barrels of oil and 2 million tons of gas are extracted from fields across the country. The US is also the world's biggest exporter of natural gas, producing 12.9 million barrels of crude oil per day in 2024, up from 11 million barrels per day in 2020.
The costs of this dependence on fossil fuels are significant. American consumers and businesses spend roughly $700 billion to $1 trillion each year on coal, oil, and natural gas. The secondary impacts of fossil fuel use, such as global warming, air pollution, and fossil fuel-related disasters, inflict further billions of dollars of expenses on the economy. Between 2010 and 2030, the US is expected to spend an estimated $23 trillion on fossil fuels, with annual expenditures of more than $1 trillion becoming the "new normal" by the mid-2020s. By 2030, the US is projected to spend approximately $360 billion more per year on fossil fuels than it did in 2006.
At the state level, the impact of fossil fuel spending varies. In Washington, residents spend around $3,200 per year on fossil fuels, while in Oregon, the figure is around $2,800. These expenditures have a significant opportunity cost, as they could otherwise be invested in education and job creation within the state. Additionally, two-thirds to three-quarters of the price of fossil fuels pays for raw resources, but since Oregon and Washington do not produce fossil fuels, this money leaves the state.
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Environmental and health impacts
Fossil fuels have been an important source of energy for human civilizations for thousands of years. However, the environmental and health impacts of their use are significant and far-reaching.
The combustion of fossil fuels releases harmful pollutants into the atmosphere, including nitrogen oxides, sulfur dioxide, particulate matter, carbon monoxide, and mercury. These pollutants contribute to air pollution, which has been linked to a range of health issues, particularly in vulnerable populations such as children, the elderly, and those with pre-existing respiratory conditions. The health effects of air pollution include acute respiratory illness, aggravated asthma, chronic bronchitis, decreased lung function, and in some cases, premature death. The World Health Organization (WHO) estimates that more than 40% of environmentally-related diseases and 88% of the burden of climate change are borne by children under 5, despite this age group constituting only 10% of the global population.
In addition to air pollution, fossil fuels are a major contributor to water pollution. Oil spills and fracking fluids can contaminate water sources, with each fracking well using between 1.5 million and 16 million gallons of water and producing toxic wastewater. The burning of fossil fuels also leads to ocean acidification, as the ocean absorbs a quarter of the carbon dioxide emitted, changing its chemistry.
The climate change caused by fossil fuel combustion is contributing to more frequent and severe extreme weather events, including wildfires, hurricanes, wind storms, flooding, and droughts. These events have led to economic costs, with the cost of extreme weather in the United States between 2016 and 2020 estimated at $606.9 billion. Sea level rise due to oceanic and atmospheric warming is causing more frequent flooding and saltwater intrusion, impacting the 40% of the US population living along the coasts.
The environmental and health impacts of fossil fuels also disproportionately harm communities of color and low-income communities. For example, in "Cancer Alley," a predominantly Black and low-income area of Louisiana, the cancer risk is nearly 50 times the national average due to the high concentration of chemical plants and oil refineries.
The economic costs of fossil fuels are also significant. American consumers and businesses spend roughly $700 billion to $1 trillion each year on fossil fuels, and the annual cost of the health impacts of fossil fuel-generated electricity in the United States is estimated to be up to $886.5 billion.
The United States is highly dependent on fossil fuels, with 85% of its energy supply derived from these sources. However, the country is at an energy crossroads, with growing demand and dwindling supply. The transition to a clean energy future will require bold steps, but it has the potential to reduce environmental and economic costs and improve the quality of life for Americans.
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Energy crossroad and clean energy future
America is at an energy crossroads. The country is overly reliant on fossil fuels such as coal, natural gas, and oil, which are contributing to global warming and causing environmental and economic costs. In 2006, American consumers and businesses spent $921 billion on fossil fuels, and in 2008, national expenditures on fossil fuels likely exceeded $1 trillion for the first time. Each year, more than 70% of this money is spent on oil. Between 2010 and 2030, California alone will spend up to $2,911 billion on fossil fuels.
The United States needs to break its dependence on fossil fuels to reduce the economic and environmental costs associated with their use. The country is currently at a crossroads, with the potential to embrace a clean energy future and choose a road to renewable energy that is essential for addressing the climate crisis. The Inflation Reduction Act aims to reduce America's dependence on fossil fuels and their impact on inflation, and it is estimated that by 2030, it could lower a typical American household's energy spending by over $300 annually.
The renewable energy revolution calls for a shift in how energy is used, owned, produced, and distributed. It requires an increase in smaller-scale consumers who are also producers, such as homes with rooftop solar panels and wind turbines owned by farmers or community cooperatives. This would lead to more distributed and decentralized power generation, providing access to energy for those in need and benefiting local development, job creation, and resilience.
While the transformation towards renewable energy is underway, with many cities, municipalities, local governments, and communities having already achieved 100% renewable energy, the pace of change is dangerously slow. Rich, developed countries like the United States need to move to 100% renewable energy by 2030 to have a chance of keeping warming below dangerous levels. However, the country has been slow to recognize the importance of clean energy, and its energy strategies are primarily driven by economic and national security concerns rather than climate crisis considerations.
China, on the other hand, has been aggressively investing in clean energy technology, recognizing its importance for national security and business opportunities. Chinese companies are building electric vehicle and battery factories worldwide, and the country is demanding that the European Union allow its electric cars into the European market. The United States risks losing its geopolitical and economic ground to China in the race to define the future of energy.
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Fossil fuel lobbies and politics
Fossil fuels cost the United States billions of dollars each year, and nationwide spending could total as much as $30 trillion between 2010 and 2030. The United States depends on fossil fuels for 85% of its energy supply. In 2006, American consumers and businesses spent $921 billion on fossil fuels, and in 2008, national expenditures likely exceeded $1 trillion. Each year, more than 70% of this money is spent on oil.
The fossil fuel lobby has been accused of using its influence to block or dilute legislation addressing global climate change. Climate change denial has been linked to the fossil fuel lobby, ultraconservative think tanks, and alternative media. Oil companies have been accused of conducting a widespread and systematic climate change denial campaign to spread misinformation. The fossil fuel industry has also been criticized for not being charged for the health and environmental damages caused by the burning of fossil fuels.
The fossil fuel lobby has significant influence in Washington, D.C., and has secured key political appointments in the administrations of former Presidents George W. Bush and Donald Trump. President George W. Bush was a former oil industry senior executive, and President Trump's first Secretary of State, Rex Tillerson, was the CEO of ExxonMobil, one of the largest oil companies.
The fossil fuel industry spends a lot of money on lobbying and political campaigns, employing hundreds of lobbyists to obstruct and delay government action on climate change. In 2022, the fossil fuel industry spent approximately $125.05 million to influence the government. Oil and gas companies contributed over $25 million to political campaigns in 2004, with 80% of that money going to Republican candidates.
Lobbying can also be a powerful tool for grassroots movements to engage with their representatives on issues that matter. For example, after lobbying by environmental groups and renewable energy companies, the California state government approved a ballot addition that will allow voters to decide on a $10 billion bond to enact the Safe Drinking Water, Wildfire Prevention, Drought Preparedness, and Clean Air Bond Act of 2024.
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Frequently asked questions
American consumers and businesses spend roughly $700 billion to $1 trillion each year on fossil fuels.
Washington spends $21.2 billion each year on fossil fuels. In Oregon, residents spend around $2,800 per year on fossil fuels.
For every dollar that an American household spends each year, about 10 cents is likely to go toward the purchase of energy, with most of that money spent on fossil fuels.
Between 2010 and 2030, America is expected to spend $23 trillion on fossil fuels. This could total as much as $30 trillion if fossil fuel prices increase.
America is the world's biggest fossil fuel state, producing more oil and gas than any other country in history.
