The Cost of a Gallon of Gas
By Christopher MooreI have a pure policy piece today. It’s about energy, so I think it is fair game for ilovephysics.com.
Republicans are using rising gas prices to foist an election year gimmick on us, and Democrats are pulling out the “Big Oil” bogeyman to scare us into voting for them. Both camps are full of … methane.
From the Libertarian Party:
A group of Senate Republicans are proposing to give every American taxpayer a $100 rebate check to offset the cost of high gas prices … Republicans are hoping this election-year gimmick will translate into success in November. Giving out a $100 gas rebate check is largely symbolic and will hardly provide any relief to America’s motorists. With the average gasoline price at $2.90 a gallon, many motorists will spend close to a $100 in little over a week.
Senate Democrats think the way out of high gas prices is to accuse the oil companies of price gouging. Democrats are taking this position even though the last price gouging investigation conducted after Hurricane Katrina yielded no evidence of retailers inflating the price of gasoline.
I certainly wouldn’t mind a $100 check in the mail, but obviously $100 doesn’t fix the problem (if you want to call it a problem.) That takes care of about 1 week of average two-car-family driving. And blaming oil companies doesn’t help either. Nor does it make sense. Here’s a few questions who’s answers may shed some light as to why:
How much profit does the average oil company make on an average gallon of gas right now? The answer will surprise you — $0.09.
How much do you pay in taxes on the average gallon of gas? You probably won’t be surprised by this one — $0.50.
So if the oil companies, out of the goodness of their hearts, decided to go non-profit then the cost of an average gallon of gas would drop from $2.92 down to $2.83. You’d save an average of $54 per year. And millions of retirees and pensioners who’s fixed incomes depend on their investments in oil companies would be eating dog food. But we forget that corporations are comprised of individual stockholders when there is an election. Oil company profits don’t look that big anymore, and price gouging doesn’t seem to be the problem.
But what about tax gouging? Drop $0.50 from the price and you’re down to $2.42. You just saved an average of $300 per year. So if gouging is going on, then who’s the biggest gouger? ExxonMobil Corp. reported $10 billion in net income in the third quarter, the largest ever by a U.S. energy company. So a back of the envelope estimate would yield a government profit of about $50 billion over the same period. And the government didn’t have to drill for a single barrel of oil! So how can a politician rail against Big Oil profits when their own votes in congress and state legislatures lead to windfall profits for the federal and state treasuries at the expense of yours and my paycheck.
Oil company executives are no saints. They push for government subsidies citing “National Interest”. They’ve bilked us (via our congressmen) for years. So I have little sympathy when it’s their turn for a spanking. But high gas prices aren’t caused by greedy price gougers. They’re caused by government taxes, regulations, and foreign policy. They’re caused by the fact that a room full of 10 geologists asked the question: “how much oil is left?” will result in 11 different answers.
Anyway, Greens should be excited about high gas prices. Democrats who favor alternative energy solutions should hope for even higher gas costs. About $0.50 more per gallon of gas, and hydrogen will start to be competitive.
UPDATE: It’s hard to believe it took a Democrat to suggest it, but Sen. Bob Menendez, D-N.J., has called for a 60-day suspension of the 18.4 cent federal gasoline tax and the 24-cent a gallon diesel tax. Finally someone proposing something that makes sense. Thank you Sen. Menendez.
ANOTHER UPDATE: The term “Tax Gouging” is growing legs in the blogshpere. Hammer of Truth weights in, see Neil Cavuto rip into Senator Durbin at Flashpoint here, and the Banty Rooster gives their take.
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BRAVO!!!!
if only the masses could read and believe such level headed and thought out topic such as this.
You’ve done yourself proud.
tom
Comment by tom — Monday -- June 12th, 2006 @ 1:07 am