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May 17, 2011

 

Americans are fed up with high gas prices, and some U.S. senators are getting disgusted enough to act.  Appearing in front of an Exxon gas station last week, Charles Schumer and several other senators called for the elimination of tax deductions oil companies use in their business of finding, refining, and marketing the precious energy we use.  It is time we are outraged by blatant greed at the gas pump, they implored.  Some of us agree, but for different reasons.  Let's have the courage to name those who are getting the biggest cut from our gasoline dollars, and put a stop to it.

 

Understand where our money goes when we fill up at our corner station.  Oil company profit is one place: the after-tax profits earned by the most successful oil companies in America works out to about 8-9% of revenues.  That's 8 cents of every dollar we spend at the pump, and it's been much lower in years when prices are squeezed by too much supply.  Sometimes there are no profits, but rather huge costs, if mistakes that get nasty are made in exploration or transportation (e.g. Exxon Valdez and BP Gulf spills).

 

The senators standing in front of the gas station would have you think such profit is the biggest chunk of your purchase price -- but it isn't even close.  The taxes on gasoline at retail amount to a national average of 47 cents per gallon (including federal taxes of 18 cents, state and local taxes of 18 cents, and sales/other taxes at retail of more than 10 cents).  And before taxpayers have paid that princely sum (to people who haven't invested a penny to produce the product), the operating profits of the explorers are taxed at 34% -- which is always passed on to consumers in the form of higher prices.  States get into the act here too, taxing the retailers' profits after taxing the product at the pump.  And let's not forget the other costs that drive up the gallon price, such as drilling restrictions that force explorers 5 miles deep under the ocean, transportation regulations and taxes, refining regulations, licenses, leases, and myriads of others.

 

Pulling huge quantities of wealth out of the ground isn't easy.  Finding and refining oil takes knowledge of geology, drilling technology, finance, transportation logistics, and environmental science.  Pulling even larger amounts of wealth out of taxpayers, however, takes only two things: ignorance and envy.

 

You see, average Americans have no concept of what it takes to deliver a gallon of gasoline to their neighborhoods -- for 1/10 the price/oz. of the latte they buy on the same corner.  Most Americans aren't geologists.  And they don't like high prices.  So Americans routinely grumble about oil company profits, without any knowledge of the relative size of them or what risks it takes to earn them.  Yet it is clearly the government which benefits most from our purchases at the pump, without lifting a finger to make the product.

 

Ignorance and envy are something our senators are banking on when they rail against oil profits.  Our media culture loves to help them.  But if corporations are to be "accountable" for egregious profits, where is the senatorial and media outrage over other company profits?  Microsoft earns record profits of $18 billion, more than 30% of its revenues net of all taxes.  The latte-maker Starbucksearns 11% of revenue.  But there is no move from Mr. Schumer & Friends decrying the write-offs of Microsoft's development costs.  Why isn't Mr. Schumer standing in front of Best Buy railing against the taxpayer "subsidy" of Microsoft?  Do Microsoft's contributions to his campaign have any influence on his choice of targets?  Is Microsoft (or any company) more worthy of egregious gain than Exxon?

 

If the public weren't so ignorant and envious of such capitalist exercises as making gasoline, perhaps they might turn their attention toward the biggest cost in their lives and also the biggest reason gas prices are high: government.  If the government would spend less time punishing and restricting energy exploration and delivery, we might have more energy.  If the government, however, wants to raise the after-tax costs of producing energy, we will surely get less, driving prices higher still.

 

As government elites gain greater money and power from exploiting our ignorance, they posture again about taxpayers and pump prices.  But they really don't care about taxpayers and pump prices at all.  Nothing in their behavior over energy policy leads to that conclusion.  Rather than sticking up for taxpayers and consumers, the biggest pigs at the trough are looking for another way to stick it to taxpayers and consumers.  In classic Atlas Shrugged fashion, the know-nothings mooching off the productivity and ingenuity of capitalists take the public stage to throw sand in the gears of a vital American output engine.  The gouging continues.
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Cage my friend,

It is right wing, oil company backed publications like "American Thinker" which is actually keeping the public ignorant.

Please don't fall for the "benevolent oil company" propoganda that has been perfected especially after the disasterous spills in the Gulf of Mexico.

Oil company profits are OBSCENE and for the companies to be receiving tax payer money,  it would seem to rail against the popular right wing stance against government spending.

Support the oil companies but not grandma and her medicare?

Subsidize Exxon Mobil but not Headstart?

Inflate the profits for Big Oil, but cut out free health screenings for women?

This is one fight where the right wing hypocrisy shows through the clearest.

Is there some kind of embarrassment elimination reaction that comes from watching too much Fox News?

Originally Posted by CageTheElephant:

Yet it is clearly the government which benefits most from our purchases at the pump, without lifting a finger to make the product.

How about lifting a finger to build and maintain the roads we need to use that product?  That's kind of the point of gasoline taxes, if you weren't aware, and it's the most fair way to pay for road construction and maintenance since the amount people buy is strongly correlated to the amount they use the roads.

 

Edit: Heh, same point.  I didn't see the above reply before I posted.

The tax on gasoline is probably the closest thing to resembling the "fair tax".  The more you drive, the more you pay in taxes, seems fair right?  But what if RichMan drives 2 miles to work and PoorMan drives 30 miles to work, not so fair anymore is it?  Ditch the IRS, and all other tax codes, and start over with something new, simple, fresh, and fair.  Government is lying to you, corporation CEOs are lying to you, Politicians are lying to you, Rich people are lying to you, Poor people are lying to you.  Why not create an un-escapable fair tax that works at every level, with every liar, whether you are spending legal money, illegal money, stolen money, saved money, found money, assistance money, borrowed money, etc?  No loopholes, no exemptions, no waivers.  Anyone who says our current tax system is a good one but it just needs tweaking has lost their mind.  Abort it.

Originally Posted by rocky:

Cage my friend,

It is right wing, oil company backed publications like "American Thinker" which is actually keeping the public ignorant.

Please don't fall for the "benevolent oil company" propoganda that has been perfected especially after the disasterous spills in the Gulf of Mexico.

Oil company profits are OBSCENE and for the companies to be receiving tax payer money,  it would seem to rail against the popular right wing stance against government spending.

Support the oil companies but not grandma and her medicare?

Subsidize Exxon Mobil but not Headstart?

Inflate the profits for Big Oil, but cut out free health screenings for women?

This is one fight where the right wing hypocrisy shows through the clearest.

Is there some kind of embarrassment elimination reaction that comes from watching too much Fox News?

 

 

 

Isn't it about time you provided "fact" rocky? Your "opinions" have become routine...and stale.

rocky,

I have researched the old point about government money going to oil companies and it appears to be a falacy hatched in the leftist world.  They do in some cases recieve a tax break or credit for certain things they do, but they still pay taxes, and no oil company gets governmnet handouts to produce their product.  The governmnet as a whole takes in several million dollars per day in the form of taxes they collect on the sale of gasoline.  The supplier is taxed.  The seller is taxed, and the consumer pays the final tally helping to pay not only the final taxes put on the consumer, but helping to recoup the producer and seller's tax burden as well.

One reason you do not see the current administration acting to reduce the cost of fuel is because their take from $4 per gallon fuel is better than their take from $3 per gallon fule (by 25%).

 

When folks wise up and start burning less gas it will go back down.  The last time gas went to over four dollars a gallon, people didn't just run around in F-150's and huge SUV's.  When fuel got affordable again, out comes the guzzlers.  I for one do not want the oil companies to lose money.  If the obama administration were to take it over we would really be f@#ked.  Show me a canceled check from the government to an oil company.

thomaswayne,

You may not care how much you pay for gas, BUT you will and should care about the others who are doing so.  The farmers who need diesel to run their tractors to plant the food---the trains and truck who need the fuel to deliver the food----the fuel costs to run generators for electricity----oil products used in manufactering----these are all higher costs in the market that will get funneled back to the consumer...ie, you and me.

Lots of people love to condemn those who drive F-150s and SUV, but they are more than happy to see them as they pull in their driveway pulling their mowers to cut their grass, or haul away something for them, or move a heavy item from one place to another.  I certainly could not pull my trailer with Honda Prelude.

The car companies have also been really quick to increase the cost of these "economical" vehicles.  Compare the price of one of these with the alrger car and you will see that over the life of a vehicle you probably will not save much money.  Not to mention the associated costs of replacing a battery in a hybrid car, the damage to the environment that these large batteries are likely to make when it is time to destroy them, and the increase in your power bill each month to keep them charged.

The turth is that right now there are no easy answers. People should conserve as much as possible.  We need to continue to supplement with the grid with alternative green sources of energy, but also continue to extract domestic oil from our feilds, instead of buying it from a foreign government.  It is a fallacy to believe that we can convert our entire system over to these complex new power sources overnight.

Oh, and mostly lest not forget how the government will have to intervene on these new power sources and create new federal taxes since they are going to lose a huge amount of revenue with the reduction of petroleum dependency.

Good point teyates.  You can sell or park the car and ride that bike to McDonalds but you will still eventually pay more for that cheeseburger when you get there.  I can't really think of anything that cost money that would not be impacted by the cost of fuel.  If anyone out there can think of anything, please post it.

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