Gas tax follies continue
posted at 8:27 am on April 29, 2008 by Ed Morrissey
Truckers rolled into Washington DC to protest the price of a fill-up, while Barack Obama continued to oppose both Hillary Clinton and John McCain on a gas-tax “holiday”. Obama’s opposition to the gas-tax holiday has allowed Hillary to argue that Obama is an out-of-touch elitist who doesn’t understand the needs of the common American. Yet her own plan would merely replace that tax with another, more onerous tax, neither of which addresses the root problem of high gas prices (via Memeorandum):
As angry truckers encircled the Capitol in a horn-blaring caravan and consumers across the country agonized over $60 fill-ups, the issue of high fuel prices flared on the campaign trail on Monday, sharply dividing the two Democratic candidates.
Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for the summer travel season. But Senator Barack Obama, Mrs. Clinton’s Democratic rival, spoke out firmly against the proposal, saying it would save consumers little and do nothing to curtail oil consumption and imports.
While Mr. Obama’s view is shared by environmentalists and many independent energy analysts, his position allowed Mrs. Clinton to draw a contrast with her opponent in appealing to the hard-hit middle-class families and older Americans who have proven to be the bedrock of her support. She has accused Mr. Obama of being out of touch with ordinary Americans who are struggling to meet their mortgages and gas up their cars and trucks.
Mrs. Clinton said at a rally on Monday morning in Graham, N.C., that she would introduce legislation to impose a windfall-profits tax on oil companies and use the revenue to suspend the gasoline tax temporarily.
Windfall-profits tax? The oil industry has a pre-tax profit margin less than half of that of the computer industry. They made $40 billion in profits on ~$220 billion in sales, which isn’t exactly a runaway model for investors. The company for which I worked did better than ExxonMobil’s 18.6% margin in three of the last four years I worked there. Microsoft performed more than twice as well. “Windfall profits” needs a lot more definition than just gross numbers — especially to the massive amounts of investors in oil companies, including most if not all retirement accounts which rely on growth.
Hillary’s plan is nothing more than a sleight of hand. She wants to replace one tax with another, and pretend it won’t impact consumers at the pumps. The windfall-profits tax hits consumers in two ways: it forces the oil companies to pass that cost along to the consumers by raising the prices, and it cuts into investments in new oil fields and increased production. The money has to come from somewhere, and it won’t just fall out of the sky. Does anyone in their right mind really believe that hiking the tax burden on oil companies will result in lower prices?
Obama has one part of this right — the tax holiday will be essentially meaningless. It will save drivers a pittance, perhaps as much as $30 for a family, and somewhat more for truckers. It also solves nothing. If Obama opposed Hillary’s windfall-profits tax, he might even make sense … but he has his own plans for hiking taxes on oil companies. He won’t even bother with the tax holiday that would give momentary relief before distorting the market with his own schemes.
In any market, price reductions come from three mechanisms:
- Increased supply
- Cost reductions on production
- Lower demand
Both Hillary and Obama offer nothing that will lower prices, and in fact they propose throwing gasoline on the fire. In order to lower prices, we need to do some of all of the three above. Increasing supply makes the most long-term sense. We need to start tapping into our domestic supply on a large-scale basis, which would protect Americans from the market manipulations of foreign governments. We also need to eliminate regional mixtures and have all refineries producing the same product, and we need more refineries on line so we can stop importing 20% of the product at the pump from overseas.
Until then, a gas-tax holiday is nothing more than a pander, and the tax policies of the Democrats portend disaster for Americans looking for common sense relief at the pumps.
Blowback
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Common sense relief at the pumps may have meant not invading a defenseless nation with the 3rd biggest oil reserve in the world. Now we have to fight every 2 bit “freedom fighter”, (read mujahadeen) the arab world will have to throw at us. Good call on that one there Gilligan!
Watchman on April 29, 2008 at 8:30 AM
Wait a minute – what happened to “No blood for oil!”?
corona on April 29, 2008 at 8:32 AM
I’m with these angry bitter truckers !!! Bet they cling to God and have guns too ! They’ll bring US to our knees pretty quickly and just bet they’ll get the attention of our bloviating congress men/women and senators.
DRILL NOW !!!
stenwin77 on April 29, 2008 at 8:35 AM
Watchman seems a little confused. 9/11 happened before the Iraq invasion of 2003. So did the USS Cole, Khobar Towers, the embassy bombings, and WTC I in 1993. So the two-bit mujs had been throwing themselves at us for quite a while.
The original invasion of Iraq came after the “defenseless” nation brutally invaded Kuwait, in case that was your reference. But nice rewrite of history, nonetheless.
Ed Morrissey on April 29, 2008 at 8:36 AM
Ugh, more whining about gas prices. Give me a break. Has anyone bothered to check if people are responding to this “crisis” by, I dunno, driving less? My guess would be no.
Leonidas Hoplite on April 29, 2008 at 8:37 AM
Who were not selling to us, and who were under an “oil-for-food” program as part of UN sanctions, which became extremely corrupt.
Of course, we could pull out right now – and let all that oil fall in to the hands of those 2-bit “freedom fighters”.
Bigfoot on April 29, 2008 at 8:42 AM
I thought the trucker demonstration was pointless, and in fact damaging to their cause. Evidently they weren’t hurting enough to not be able to waste diesel fuel on a stupid stunt.
James on April 29, 2008 at 8:46 AM
I’m having a hard time trying to understand why everyone is now bombarding Congress and Bush with tons of emails, letters, and phone calls saying in so many kind words that enough is enough and that someone now needs to go after the big oil companies and tell them their B.S. excuses for high fuel prices is not going to fly anymore.
And if that jerk Limbaugh says that everyone should just work harder and make more money to pay for high gas prices just one more time, I am going to turn the jerk off and urge everyone else to stop listening to him as well!
I am already working hard, thank you very much!
pilamaye on April 29, 2008 at 8:50 AM
Right! You do that! You tell people like the truckers, the taxi cab drivers, the parcel delivery drivers, pretty much everyone who relies on driving for their jobs that they need to drive less.
Let me know when you get out of the hospital.
pilamaye on April 29, 2008 at 8:52 AM
Remember when the farmers converged on DC? Everybody was impressed that they could afford such big fancy machines. I suspect the truckers will face the same fate.
The tax holiday is meaningless but since this is an election year the politicians will pander away.
highhopes on April 29, 2008 at 8:54 AM
Eh? I haven’t heard him say this…and it sounds like you’re better off listening to easy listening at this point. It’s less stressful than politics and real life.
But it just so happens that what you’ve ‘quoted’ is pretty much the truth anyway. Since you can’t do anything about gas prices anyway (neither can Congress…dirty little secret) your only choice is to change your lifestyle or make more money. Sorry…that’s just reality.
And I disagree that a gas tax holiday would be pointless. At least it would show Americans exactly how much taxes they are paying at the pump.
Asher on April 29, 2008 at 8:56 AM
Is driving less really an option for most Americans? Most cities don’t even have adequate transportation infrastructure, let alone the towns and other areas where most Americans live.
amkun on April 29, 2008 at 8:59 AM
Pretty simple fix….drill and refine….fill up. What no one ever addresses is the infrastructure. The millions of vehicles in the U.S. all run on gas or a mixture of gas & additives and they will for at least another 100 years for the simple reason that no matter what “alternative” you propose, there is no infrastructure to support it and to replace or retrofit every Exxon or Mobil station in the country is gonna take a long long time….like a 100 years, so stop the bullsh&t and drill and refine….
Tim Zank on April 29, 2008 at 9:02 AM
The speculators who have infested the commodities market have driven up our oil costs while contributing nothing to the oil-to-consumer process.
Here’s an analogy: Let’s say I come over to your house and breathlessly warn you that a fire is rapidly approaching your house (even though I know it’s not true). Fortunately for you, I just so happen to have bought a firehose (that I paid $10 for at The Firehose Store). I will sell you (or lease you) the firehose for $100. After a convincing sales pitch, you believe me and say “Wow, $100 is kinda steep, but I need to save my house! OK, I’ll take the hose.” The fire never comes, and I just profited $90 off of feeding you a load of crap. I created my own lies-based wealth, and I added nothing of value to your life’s equation.
Was that a normal case of “supply and demand”? No! Demand was artificially, and knowingly so, inflated by the speculator in order to make a profit. That, my friends, is what is happening right now with this commodities market speculation, especially with food and oil. Speculators pump their money into the commodities market by buying low, they convince the producers that conditions suck in order to get the prodcuers to jack their prices up, then they sell high and profit off the mess they created.
Speculators helped creat the real estate mess by driving the price of homes up to irrational levels, and the correction came, hurting a bunch of people in the process (after most speculators cashed in first, though). Not content with having damaged the real estate sector, they’re now setting their sights on inflicting pain and suffering on the food and energy sectors.
This isn’t supply-and-demand. It’s a perversion of capitalism. Capitalism rocks, but in my view, what’s happening with these speculator leeches isn’t true capitalism.
crushliberalism on April 29, 2008 at 9:08 AM
Yes. It’s all about lifestyle choices.
No, most cities and towns have transportation systems that are used almost exclusively by poor people.
highhopes on April 29, 2008 at 9:08 AM
Ed, you may like this:
from instapundit
funky chicken on April 29, 2008 at 9:09 AM
Wow. I certainly hope some of the comments I’m seeing here today are not a microcosm of conservative thought.
True, but so is John McCain’s plan. Until Johnny Mac reverses himself on ANWR and his dangerous carbon tax scheme, there is little difference between the two.
As for the trucker, good for them. Unlike know-nothing politicians, they understand what the solution is. Time to do a little monopoly busting like in the days or T.R., only this time the monopoly is Big Environmentalism.
Buy Danish on April 29, 2008 at 9:10 AM
Here’s a different angle on the tax holiday:
If we stop collecting taxes on gas for a couple of weeks in the summer without finding another revenue source and without cutting spending accordingly (neither of which is in the cards, as far as I know) then we’ve got to borrow more money from people like the Chinese, the Japanese and the Saudis (’cause they’re the ones with the cash). All this is done so we can make a product made of 53% foreign components more affordable.
To put it more bluntly, the conservative candidate for President is proposing that we borrow money from the Chinese so we can subsidize a product made by the Saudis. Does that strike you as reasonable?
factoid on April 29, 2008 at 9:10 AM
Really? My husband drives 90 miles a day round trip to work and we live in a metro area with no public transportation.
Maybe you could help us plan his commute, because clearly we are too stupid to do it ourselves and have made the wrong “lifestyle choice”.
Thanks in advance!
Buy Danish on April 29, 2008 at 9:13 AM
S
AMEN
And of course most Americans can drive less. People can carpool to work…yeah you can’t dash out and pick up something at the store on the way home, or you might be stuck there longer than necessary waiting for a coworker to finish a project, which is why more people don’t do it yet.
We have started to plan outings around getting the most errands done in one trip, etc.
funky chicken on April 29, 2008 at 9:16 AM
Great, can you get the oil companies on board with your plan? They have made record profits the last few years with the artificially high prices for their products. In the past businesses would use lots of those profits to invest in increased infrastructure so they could stay on top of their sector for years to come. I don’t see the oil companies doing that with their money. It’s a terrible business model, and I maintain that they are sitting back waiting for our government or for the Sauds to build their refineries for them.
The Sauds have proposed such a thing, and it got good press and soft fuzzies from the Bush administration too. At least the Sauds seem to care about keeping gasoline and oil products flowing. Sad that the US oil companies don’t appear to share that goal.
funky chicken on April 29, 2008 at 9:21 AM
Buy Danish–carpool, park and ride, etc. Once the prices go high enough we will become willing to be inconvenienced by having to share rides.
And people will telecommute more, and move closer to where they work, etc.
But there is no oil shortage, and thus no real reason for the prices to be as high as they are right now. Except for speculators and idiocy on the part of oil companies and environmental wackos who think we should all be living like savages…except for them, of course.
funky chicken on April 29, 2008 at 9:24 AM
Nope, but the tax and spend policies of the other two are even worse.
Rather than lifting the gas tax, I would like to see lifting restrictions on drilling and refinery building.
rbj on April 29, 2008 at 9:28 AM
We drive less…walk the kids home from school now, group errands together so we only have to make one trip. It’s a start. If it gets bad I’ll go to carpooling.
tlynch001 on April 29, 2008 at 9:31 AM
In all due respect, you don’t know what you’re talking about. Believe me, if carpooling was the answer we’d be doing it.
Buy Danish on April 29, 2008 at 9:33 AM
Hey! I have an idea! Maybe the truckers could truckpool! That’s it. Problem solved.
Buy Danish on April 29, 2008 at 9:34 AM
I don’t know where you guys live, but take L.A. for example, with at least three different financial centers, and dozens of different manufacturing centers (City of Industy, Carson, San Fernando, City of Commerce, dozens of spread out areas), where do you live or more accurate, do you work? You have to commute, carpool, so you have to find a neighbor that has the same schedule driving to the same area? No, most major centers do not have the infra-structure to handle mass transit, many of our major cities were not set up that way.
We have plenty of oil, it just happens to be in the ground…drill and refine that is the answer, we should have done it 30 plus years ago when Carter made a mess of the situation.
right2bright on April 29, 2008 at 9:39 AM
This is one of those issues that conservatives need to be beat over the head with. Free enterprise, market pressures, rah rah rah, zip boom bah, it is all just ‘natural’.
If you think that Fast Eddie isn’t paying attention you are nuts. I’m no grand conspiracy nut, just a guy who doesn’t trust every fella who is handing me a collection plate.
Limerick on April 29, 2008 at 9:39 AM
Tim Zank on April 29, 2008 at 9:42 AM
FunkyC, it’s the whacko tree-hugging enviros that have pretty much stopped any and all refinery building, drilling(especially offshore) and the building of nuclear power plants. It was the enviros complaining, and maybe rightly so, about acid rain that created the “rust belt”.
Tom
marinetbryant on April 29, 2008 at 9:43 AM
I submit that price reductions can also come from lower overal government taxation on the producer and/or the product produced.
Red Pill on April 29, 2008 at 9:45 AM
Sorry people, cheap gas is not a right. Drive a more fuel efficient car. Carpool. Take the bus/train. Park and ride. If ‘truckers’ et al are ‘suffering’ then I’m sure they’ll be passing their costs onto others.
Drill in ANWR and everywhere else there is oil. Open up more natural gas reserves within the US so more people have a choice between gas heat or oil heat. Build refineries. Build coal fired plants. Build nuclear plants.
There are no near-term solutions so get used to it.
Leonidas Hoplite on April 29, 2008 at 9:45 AM
We need refineries, and to stop relying on enemies to provide us with oil. How about some nuclear power plants to recharge electric cars? This is not a complicated problem. You can either pander to the politics of energy or force politicians to do something about it.
Independence from foreign energy sources is the answer.
Hening on April 29, 2008 at 9:47 AM
Bingo
Aggie85 on April 29, 2008 at 9:47 AM
And by scapegoating the oil industry with a “windfall profits tax,” Madame Hillary perpetuates the high cost of gasoline since the tax is passed on to the consumer. Ergo, she creates an infinite target for consumers’ plight.
The problem is not a lack of oil as a resource, as has been repeatedly pointed out. It is the fact that drilling and the building of up-to-date refineries have been hamstrung by soft-headed idiocy.
onlineanalyst on April 29, 2008 at 9:49 AM
Hedge fund investors are driving up the prices. Dimwit dems on congress refusing to allow drilling in ANWR, Montanna, the Dakotas and the Gulf are driving up prices.
The dimwit dems making it so expensive to create new refineries, the oil companies refuse to build them drive up the prices.
Certain people soaking up the profits in the middle east are driving up the prices and laughing at us.
And our president does ZERO. A couple of Presidential candidate idiots propose a lame tax holiday, which is really another way of them saying “Well, Golllllly! I am just too stupid to figure out a real solution to this problem!!”
There is a real solution. I’ll give you a hint. It orbits an ability defined by the word LEADERSHIP and it’s backed up with somethin else…..
dogsoldier on April 29, 2008 at 9:51 AM
I wonder what the accounting definition of windfall proifts is. Is it making 10 cents on the dollar instead of 8?
Leonidas Hoplite on April 29, 2008 at 9:52 AM
Sort of like environmental lawyers, who generate red tape and contribute nothing.
onlineanalyst on April 29, 2008 at 9:52 AM
Maybe that’s why time after time, Congressional investigations into oil profits fail to show any wrongful or anti-competitive practices. Once you get beyond the bashing and pandering, there’s no there there.
(And before we tax oil profits, let’s tax Hollywood’s.)
petefrt on April 29, 2008 at 9:54 AM
No one calls the Captain “Gilligan” and gets away with it. That’s blasphemy around these parts!
Well said. Thank you.
Mujahadeen will follow the path of least resistance in their never-ending jihad against us. If it’s easier for them to fight us in Iraq than here in the US, that is where they will fight, and that is where we continue to win.
Lord help us if they decide the path of least resistance is getting to Mexico and crossing our southern border.
Watchman, how long have you been stranded on that mental island?
Red Pill on April 29, 2008 at 9:56 AM
Well we certainly all need energy, so perhaps we should reduce the tax on energy companies to zero. They will have more profits to plow back into exploration, and since the business will generate greater returns than taxed businesses, competition will increase and gradually drive down the costs to consumers.
If we instituted a windfall profits tax on non-necessary entertainment companies, perhaps they would be more careful about what they are actually producing and generate less mindless crap for us to watch. Not to mention it would drive some of them out of business.
Leonidas Hoplite on April 29, 2008 at 10:00 AM
My solution is to not buy a new car this year. I have a fuel efficient vehicle. Part of the $350.00 monthly car payment I’ve been shelling out will now go toward vehicle maintenance and higher fuel costs. My budget will balance.
Guess who is really to blame for the high demand for fuel? The automobile manufacturers. If the car makers voluntarily would meet the demand of the marketplace, that is, make very fuel efficient vehicles, their sales will boom. The price of fuel would decline.
Government’s CAFE standards are not the answer. A car buying public is your solution to this problem.
saved on April 29, 2008 at 10:02 AM
Or maybe railroad shipping will make a comeback and hand over its status as the 21st century buggy whip to the trucking industry.
James on April 29, 2008 at 10:11 AM
As long as the oil markets function, most of the solutions proposed here won’t work. Say the the US (#3 oil producer) puts one million barrels of new oil online, that’s about 1% of world production (84 mil bbl). At what cost? It is far more expensive to drill in the US than the ME or Africa. How much of a sustained price decrease? Not much, considering that the oil market is like a giant pond, there is effectively no “US” or “China” oil. Producers pour it in, consumers suck it out. The price is set at auction. (not a perfect analogy – don’t nitpick here). It takes years to bring a new field online, so it won’t even help near term prices at all. As long a the oil market functions – Use the other guy’s oil reserves first!
How about forcing the oil companies to use their ill-gotten profits (spit) to reduce the cost to Americans first? The world price for oil is the current worth of oil. Say ExxonHaliburtonCheneyHilter Oil Inc. lowers its selling price for gas to $2/bbl – consumers would still pay $3.5!. There are only two ways this turns out – A) gas lines/rationing + blackmarket to get the same amount of gas used today (important point – read on) – average cost will be at least $3.5. OR B) some wily Zionist :) middleman will buy the gas at $2 and move it to where it can be sold for $3.5 – the profit moves from one guy to another.
Price fixing and rationing at lower prices are just ways of forcing all people to involuntarily cut their gas consumption regardless of need. Sure, there will be plenty of expensive bureaucracy to try to even out the lumps but the average guy without time to work the system will suffer. Personal lesson from Katrina – its better to have some expensive gas than no cheap gas.
Realistically, the only short term solution is to use less gas and/or shift the personal budget around to adjust. Carpooling increases the effective mileage of an Excursion SUV from 16mpg to 32mpg – not bad for little cost (convenience). I use about 60 gal per month – dropping my $40/mth gym membership decreases my effective cost from $3.5 to $2.85/gal. Buying new car to save gas is not cost effective. Trading my 15 year old V8 Marquis for a Prius would save me about $1250 per year in gas at the cost of a car note (more than $100/mth) and higher insurance. Bad deal. I will buy a more fuel efficient car when this one dies.
Long term – liquid fuels are just too cost effective and efficient (in the largest sense) to give up. Replace oil as alternatives (alcohol, DME, synthetics) become truly cost effective. Subsidies are just a popular way of paying more for gas. Kinda of like how the lottery is just a way to get people to happily pay more tax.
deadman on April 29, 2008 at 10:14 AM
Carpooling, gosh, it’s just impossible! No, it’s not. It’s inconvenient. You have to search your neighborhood for somebody who works within a couple of blocks and has a similar schedule. One person may have to get to work earlier than usual and the other may have to leave later than usual or something. Lunch will have to be brown bagged or just something you can walk to from work, or again, a carpool situation.
I’m sure internet searches for shared rides have become more common. Like I said, once the price is high enough to offset the inconvenience, more people will carpool.
Buy Danish you and your husband haven’t reached that price/inconvenience point yet. OK. I hope you don’t. But, uh, folks driving 45 miles one way to work are not the same as truckers who fill their trucks to deliver stuff.
funky chicken on April 29, 2008 at 10:17 AM
Looked up the numbers awhile back…
sent em to OReily and his 10% less driving solution…
We need to increase PRODUCTION. We currently only produce 57% of the oil we did in 1970, even though we have the largest oil reserves in the world (shale, sands, Anwar, coasts).
Romeo13 on April 29, 2008 at 10:22 AM
Glad to see I’m not the only one doing their part to lower demand. I’ve started telecommuting once a week. I’ve also started leaving the wife’s SUV in the garage more often, using my sedan for weekend errands and such. Could I afford to add more money into my monthly gas budget? Sure, but that’s the problem. Too many people are taking the easy path and eating the extra $20, $40 a month. You have to draw a line somewhere. I’m going to start telecommuting more often in the future. Just as soon as my wife drops off the two little carpoolers she’s carrying.
BohicaTwentyTwo on April 29, 2008 at 10:23 AM
Bzzzzzzzt! wrong answer! Correct answer is – The consumers High mileage vehicles have been available for decades. People don’t buy many of them. The manufacturers only want to make as many as will sell. Extras are a loss. Anyone driving an Excursion today could have bought a Caravan instead – or a Focus, an ION or Civic. All have been available for years.
The secret to successful a business (forgotten by US makers in the 70′s) Make more of what sells, make less of what doesn’t.
deadman on April 29, 2008 at 10:24 AM
Why do our own Congresspeople keep cowering to leftists who block every attempt to increase our supply of energy. With such large untapped domestic sources of oil, still they refuse to increase domestic drilling and refining. It’s just plain outrageous.
Meanwhile they have us burning the food supply, sending prices rising daily. I’m told a tankfull of biofuel requires enough food to feed a person for about one year. So lefties indulge their feel-good fetishes at the expense mainly of hungry people worldwide.
petefrt on April 29, 2008 at 10:24 AM
It’s not the drilling that’s killing us, it’s the lack of refining capability brought on by Americans’ rabid adherence to BANANA/NIMBY* principles. Gas could/will be $5.95 gal. and there won’t be a single refinery brick laid yet because of local protests wherever they plan. Considering how long and agonizing the approval process, even an eventual approval means a long and agonizing struggle to actually get it built and running.
Here in Escambia county (FL), oil wells in the northern section have been reactivated because it’s at last profitable to pump. And everyone can scream about ‘windfall’ profits, which might be true if the oil industry was like retail and set it’s own prices. But they don’t. “Irrational exuberance” might well apply to what commodity traders have done to a barrel of oil and, while the industry reaps the benefits (and conversely, so do we because research, development and exploration dollars come from that, too), they can also suffer the effects when the wave has washed by.
For instance, I didn’t see any Senators or liberal Democrats flying in to hold oil workers’ hands when Houston was a ghost town in the ’80′s because oil was so cheap and the industry had basically collapsed. We’re ALSO reaping the effects of THAT today because we had excess capacity and could afford to be prissy about no more ugly refineries or oil wells in sight. Case in point: California. 90% of their agony has been brought on…by themselves.
Here on the Gulfcoast, our gasoline is barged in. Yup. That’s right. So, whether an Ivan or Dennis hits directly, or a Katrina slides by, we have big time fuel/supply problems. And that’s without the storm premium everyone gets to pay when a Gulf Coast refiner is washed out. We turn into a Third World country overnight.
As for
BanglaPensacola, I put together a little primer about our 12 months in ’04-’05, since no one seems to have heard of us. (For reference, major dad and I are 5 miles from the AL/FL border and 5 miles as the crow flies from the Gulf. On the radars, it’s usually under one of the fiercer looking bands.)Refineries, people.
*Build Absolutely Nothing Anywhere Near Anything/Not In My Backyard
tree hugging sister on April 29, 2008 at 10:25 AM
Being someone who has seen this over and over, beginining in 1974 and again in 1979 and both times I happened to be an Auto Tech working in Service Stations I’ve seen consumers do the same damn thing over and over again.
When fuel is in short supply they go out and buy small cars, hence the beginining of the end for Detroit in 1974 when Americans fell in love with the economy and quality of Japanese cars.
When fuel supplies returned to normal in late 1974 Americans went right back to wasteful habits and buying larger cars (although things would never be the same in Detroit)
In 1979 you can almost repeat the exact same scenario I wrote about above. When fuel supply went south and became expensive we tried to conserve. Hence the Diesels that became popular in the early eighties. Now look what happened to the price of Diesel. After things returned to normal, we became wasteful again. Seems we never fuc**ng learn.
As an anecdotal afterthought, last week I had to drive my wife to the Dentist here in San Pedro. As I sat in the parking lot while she was in the office waiting for to be seen, SUV after SUV pulled in and out of the parking lot. Usually with only one driver (Soccer Moms). As I watched these huge bus-like vehicles I know why I’m paying $3.96 a gallon for regular here in town. It doesn’t take a fuc**ng PhD to realize WE are the cost of high fuel prices. Not OPEC, Not Hugo Chavez, Not Pemex or Iran. IT’S US!
greasywrench on April 29, 2008 at 10:27 AM
deadman on April 29, 2008 at 10:24 AM
yes The automakers and the congress didn’t force anybody to buy their Escalade or their Expedition. We have Kia dealers here in town running ads that you can buy two cars for total payment of $249 a month. The two cars are itty bitty, very fuel efficient, brand-new, decent transportation. Even with gas prices where they are, apparently there isn’t huge demand for these cars.
funky chicken on April 29, 2008 at 10:28 AM
I do have a question though….
I remember that trough most of my life Diesal gas was cheaper than regular… by 30-50 cents gallon…
Now? Its 50 cents more than premium…
What changed that? Economic factors? Manufcaturing costs?
Romeo13 on April 29, 2008 at 10:30 AM
Goes right back to the refinery/supply issue.
Limerick on April 29, 2008 at 10:34 AM
Indeed. Environmentalism strikes me as a form sado-narcissism.
Mike Honcho on April 29, 2008 at 10:34 AM
Truck drivers can keep circling the Capitol demanding that somebody do something already (which is about as deep as their ideas go), but eventually they’ll have to face up to the consequences of $120/barrel oil. Railroads are going to become more competitive (especially if we start spending public money on them at a rate similar to highway spending) and many, many truckers will join the ranks of typists, travel agents, milkmen, blacksmiths and TV repair technicians as people whose jobs have been eliminated by economic forces.
factoid on April 29, 2008 at 10:35 AM
Oil refineries are running about 85% now because of lack of demand.
deadman on April 29, 2008 at 10:40 AM
Living in San Pedro, which is in the heart of the Los Angeles Harbor I’ve seen the shipping industry do a massive conversion to container transport over the last thirty years. Containers are shipped via large trucks. The increase in trucks on the southern Kalifornia freeways is staggering. I suspect that that has helped fuel (bad pun, I know) the increase in Diesel. That, along with the fact there have been no new refineries built in thirty years, thanks to the environmentalists is probably a factor. Anyone posting here who lives in the L.A. area can verify the number of trucks now on our freeways had probably tripled in the last ten years. Maybe that’s the reason. Anyone else have an answer?
greasywrench on April 29, 2008 at 10:41 AM
We won’t be seeing more shipments by train any time soon. The trucking industry won’t allow it.
amkun on April 29, 2008 at 10:41 AM
It still frustrates me how ignorant people can be about the oil industry.
Have the oil companies made a lot of money? Sure. That point can’t be denied. But the overhead — the cost of R&D, the cost of surveys, and of drilling — takes a lot more of the money than people realize. These “record” profits are also helping the companies drill areas that were unreachable before: They can afford to find ways to reach into deeper waters and other hard-to-reach places (except Alaska, heh). They can lease more rigs to drill, maybe even build their own. And the shortage of personnel in the industry right now (especially engineers) also means that manpower is at a premium, too.
But if these factors drive up the cost of oil, and people complain about it, how are we ever going to achieve “less dependence on foreign oil”? Exploration, drilling, transporting, and refining costs money — especially with refineries at capacity these days. The cost of adding ethanol certainly hasn’t helped matters, either. Thus, the cost of being “less dependent on foreign oil” is a high one.
Then there’s the push for the energy industry to be exploring “alternative fuels.” While I agree we should be looking for alternate solutions, this is also an expensive venture, requiring the same — if not more R&D funding than even developing new equipment for deepwater drilling.
Too many people don’t think about this when they (a) complain about the cost of gas, and (b) when they complain about oil company profits.
And I won’t even get into the additional costs for having to make so many different blends of gasoline.
Aside from the obvious fact that I’m an evil neocon — this is yet another reason I won’t vote for Comrades Clinton or Obama.
ScaryBiscuits on April 29, 2008 at 10:46 AM
Supposedly they converted some of the diesel plants to refine Gasoline.
Diesel takes less steps to refine then Gasoline, but when the gas crunch hit in the 70′s, and diesel cars started being built, the companies just started charging more. There were several oil companies, now just a few. Doesn’t take a genius to figure out that if your competition raises the cost by 25 cents a gallon, you can keep the same market share and make ten times the profit then trying to steal market share at a lower cost. Gasoline companies gave up decades ago selling on price, price wars can’t help an industry with just a few players. They all have enough market share.
right2bright on April 29, 2008 at 10:49 AM
Energy Victory.
nukemhill on April 29, 2008 at 10:50 AM
It also turns out that the Federal Tax on diesel is 6 cents higher a gallon than regular gas…
Romeo13 on April 29, 2008 at 10:51 AM
liberals never met a tax they didn’t like, wouldn’t raise or make permanent, during any recession and why not when they can just blame Republicans for it later.
Speakup on April 29, 2008 at 10:54 AM
Diesel has about 15% more energy per gallon than gasoline. That plus tax accounts for most of the difference in price. The wholesale price is set at auction – look up “distillates”.
deadman on April 29, 2008 at 10:54 AM
Um, no. The “trucking industry” isn’t exactly the Bilderburgers. Just like carpooling….once the cost of using railroads is less than the cost of using trucks, shippers will use rail transit more.
And government puts plenty of money into building/maintaining rail lines. Remember Trent Lott’s railroad to nowhere? Taxpayers had just helped upgrade raillines on the MS coast before Katrina hit. Instead of just fixing them again where they lay, Lott tried to force a $700 million plan to move the lines inland….so developers could build more beach front property.
If you want more rail lines that can go places like trucks, you’re talking massive use of emminent domain all across the country. That’s not a conservative solution to anything.
But once the price/inconvenience thing breaks in the railroads’ favor, more freight will go by rail. If you’ve ever waited for 30 minutes for a train to cross a road like we did in GA sometimes, you will see that quite a lot of stuff does go by rail….particularly coal
funky chicken on April 29, 2008 at 10:56 AM
We are also making a huge mistake in America by forgetting the one energy industry with a chance to take up huge amounts of slack. Nuclear. Once again we can thank the bunny-huggers and enviromentalists. The Nuclear industry (in the U.S.) has a record of no deaths. Can the Coal, Gas, or any other energy source make that claim?
Before anyone cites Chernobyl or Three mile Island, look up what actually happened at EACH facility.
greasywrench on April 29, 2008 at 10:57 AM
greasywrench has your answer to that. The WORLD’s commerce RUNS on diesel, not gasoline. And that demand can’t abate, unlike soccer moms choosing to carpool and saving petrol that way. A trucker, ship’s captain, locomotive engineer, farmer and tractor ~ on and on ~ has stuff to tote and a schedule to follow. And, like a something I heard the other day, even in developing Third World countries ~ where a bite a day was once the most you might get ~ now they’re getting a FULL meal (or maybe even two) and something has to grow to meet that increased consumption and some sort of diesel vehicle delivers it.
Capacity utilization is normally only in the mid-to-high 80′s percentage-wise, anyway. (Only the most advanced of refineries can even manage a 95% utilization rate as an average.)
There’s excess capacity in the system ~ experts estimate Americans used like 1.4% less gasoline last month ~ at this moment, that’s true. But that’s at this moment and industry experts are predicting that will be thinned out by the start of the summer driving season, not to mention when they have to start swapping over for mandated summer fuel formula changes. It will tighten up considerably and quickly. And THAT’S without either a refinery shut-down for maintenance, a refinery accident (fire, spill, etc.) or a natural disruption like Rita or Katrina. Any one of those will upset the delicate balancing act. And cost us dearly.
tree hugging sister on April 29, 2008 at 10:59 AM
From now on we will just ask you…
Tell us, do you think that there is “price fixing”? Are the costs greater now for drilling or less then 50 years ago? Are the wells more efficient now, is transporting more efficient or less? What accounting methods do they use to show or hide profits?
right2bright on April 29, 2008 at 11:06 AM
Well, you won’t like the answer but you are the one who decided to live a lifestyle where your hubby drives 90 miles a day. You made the choice to live so far away from his place of work so don’t get all snotty when somebody suggests that part of the solution is to move!
Whether it is stupidity, laziness, or some other factor is something you are going have to figure out for yourselves.
You are welcome.
highhopes on April 29, 2008 at 11:14 AM
Compare 18.6% profit in the oil industry to the 2% profit in the grocery industry, and you get the idea.
Let’s translate that to dollars at the ARCO pump. Suppose we deal with California as an example. We have 18.4 cents per gallon Federal fuel tax, 18 cents per gallon California state tax, 6% California State sales tax, 1.25% per-county sales tax, variable local sales tax, and 1.2 cents per gallon California UST tax (yup, the state gets to sip multiple times). Suppose gasoline is $3.50 per gallon. After subtracting the various taxes, I get about $2.90/gallon. 18.6% profit on $2.90 per gallon is about $.54/gallon. If the oil companies took proportionately what the grocers take, that would be about $.06/gallon profit. So, what we have is that reducing oil company profits to that of the grocery companies saves us Americans about 48 cents per gallon (actually, about 51 cents per gallon here in California after factoring in the savings from not paying the extra state taxes).
So, that $3.50 per gallon gas would cost you $3.00 if the oil companies took profit comparable to your neighborhood grocery store.
The Captain compares the oil companies to Microsoft. That’s actually a very good comparison. How does Microsoft maintain its market share of nearly 90%, and how do us consumers suffer in the pocketbook as a result of that near-monopoly status? Hint: It sure isn’t product quality… Why is an oil company’s margin about the same as Microsoft’s? And why should any business have a margin above, say, 5% — what should more than cover the value added (other than monopoly status) that those companies bring to the table?
unclesmrgol on April 29, 2008 at 11:17 AM
People in LA would drive to a block party! What one drives is part of the shallow materialistic meaningless Southern California lifestyle.
Seriously though, it is what I posted above, people choose where they live and what kind of a commute they have. I used to live in Long Beach because that’s where I was working. It sucked and I moved on as soon as possible but I wasn’t going to live someplace like Westminster or Garden Grove and deal with the commute from hell! That was my lifestyle choice. Others I worked with made the opposite choice.
Here in New Orleans, which is hardly the epitome of progressive infrastructure, there are busses and street cars and ferries which make it perfectly possible to get around without benefit of a vehicle if one so chooses. If, however, one opts to live 30 miles away on the other side of Lake Pontchatrain they can’t complain about decent public transportation within the city!
highhopes on April 29, 2008 at 11:23 AM
highhopes, you’ve said it all. I try and avoid the Freeways at all costs when I can but two weeks ago I had to go up North to Fresno and when I was going North on the 405 all one sees in the L.A and Westside area is car after car with one occupent. The Diamond lanes are practicaly deserted. My Sister and Brother-In-Law were with me and when we entered the high-occupency lane we went from 10 mph near LAX to immediately around 60 mph. All because the idiots who live here in Kalifornia REFUSE TO CARPOOL.
Many years ago I had a roomate who actually worked in the same auto repair shop as I and he wouldn’t ride to work with me. No good reason, he just wanted to drive his own car to work.
A year later the same guy actually lived less than one block from work but he STILL drove to the shop each morning. WTF!
greasywrench on April 29, 2008 at 11:37 AM
There was a tech stock bubble. Speculators sent tech stock prices sky high. People argued that those prices were justified. They were not.
There was a housing bubble. Speculators sent housing prices sky high. People argued that those prices were justified. They were not.
There is an oil bubble. Speculators are sending oil prices sky high. People are arguing that the prices are justified. They are not.
BUY LESS GASOLINE. Most American’s can conserve – they just don’t want to be inconvenienced.
blink on April 29, 2008 at 11:43 AM
We do need to drill for more oil. Alaska, the gulf, off Florida. There is no need to import 60% of our oil. Just the announcement of opening up some of this protected federal territory would cause prices to drop.
We need to stop the regulatory BS and lawsuits that prevent companies from building refineries.
bopbottle on April 29, 2008 at 11:48 AM
unclesmrgol on April 29, 2008 at 11:17 AM
The oil companies can make that profit margin because consumers are willing to pay those prices. Government shouldn’t be in the business of setting maximum profit margins for industries.
It just bugs me to see them then refuse to spend some of those profits investing for their own future as an industry. I think many execs have become true believers in “the danger of AGW” and/or just figure that the hysteria over AGW is going to end their business in only a few years anyway, so why invest in ways to streamline delivery of their product to consumers?
That’s how the price can stay artificially high. It’s very shortsighted behavior.
funky chicken on April 29, 2008 at 11:58 AM
Want to really know why you are paying more for gas? I think you should look at the value of the dollar. In 2002 the EURO was introduced. 1 Dollar for 1 EURO. Earlier this month the exchange rate was 1.60 dollars for 1 EURO. HMMMM, 60 cents more in 6 years. Now do you have an idea of why OPEC is at 120.00/barrel for oil. Better blame The Federal Reserve, Congress, and The President for letting the dollar lose so much in purchase power.
pueblo1032 on April 29, 2008 at 12:00 PM
This website needs to get some smarter members.
Um, here’s a quick example. If I can save someone $20, then I should be allowed to charge them $10. A 50% shared savings revenue model is very fair. If my costs are only $1, then I’ve made a 90% profit margin.
blink on April 29, 2008 at 12:02 PM
yep
funky chicken on April 29, 2008 at 12:02 PM
Forget gas-tax holiday or Windfall-profits tax. Any tax is a cost increase at the pump.
Lift the environmental restrictions and let the oil companies drill and build refineries.
Kini on April 29, 2008 at 12:11 PM
Sigh… look at my post at 10:22 AM.
A TOTAL 10% reduction in America’s driving habit will only constitute .0083 of worldwide oil consuption. That will NOT affect worldwide oil prices…
In fact, the annual decrese in America’s oil production since 1970 MORE than makes up for a 10% driving decrease by the American consumer. We now produce only 57% of the oil we produced in 1970.
Add in a population INCREASE of about .9% per year in America (census data).
The ONLY answers are a technology change, which cannot help today…. or more drilling, which helps in the near future.
Romeo13 on April 29, 2008 at 12:12 PM
Your “profit” number for the oil industry is completely wrong. The NET MARGIN for the entire refining industry is 5.6% (source Schwab research).
Since the capital required for the two businesses is grossly different (it takes a few million to open a grocery, but several billion to open a refinery) and the year-to-year variation in revenue and costs fluctuates wildly in the oil industry and is fairly level in Consumer Staples (like a grocery) a better comparison which takes this into account would be the Yield on an investment in the two industries:
Yield: 1.0 Grocery (ex: SWY) vs 0.9 Refinery (ex: VLO)
So get a grip!! The oil industry moves a lot of product, so the numbers are big: big revenue, but also big costs, and big expenses!! Some years’ big profits are offset by other years’ big losses. For example, VLO is spending 2.4 Billion just in refinery expansion at one facility, and VLO has had to shell out hundreds of millions just since the beginning of 2008 just for maintenance: this cost will also be in the billions by the end of the year.
Corporations are simply groups of people: they are NOT EVIL!! If you have a balanced mutual fund in your retirement or 401K, you probably are a part owner of dozens of oil-related companies with world-wide operations.
You want a world without oil? TAX ALL THE PROFITS AWAY!!
Then see how you can get along without heat, light, plastics, chemicals for use in food, medicine, construction, and every other aspect of your daily life. Fewer jobs because there will be virtually no industry. And be prepared for millions of additional deaths and a much lower life expectancy for all in such a world.
landlines on April 29, 2008 at 12:15 PM
1. Anwar
2. Anwar
3. Yugo
jimmer on April 29, 2008 at 12:18 PM
Romeo, it’s not global demand that has driven this bubble, it’s speculators. BUT if US demand falls drastically, the gas companies will drop the per gallon price pronto.
And the tax holiday is a good idea. How can any conservative oppose even a temporary tax break? Remember the Bush tax cuts were supposed to be temporary, and will be repealed if either dem wins in Nov. Does that mean they should not have been passed?
funky chicken on April 29, 2008 at 12:32 PM
If we actually moved toward a viable vehicle fuel source like Methanol (methyl alcohol) — and not this stupid push on ethanol, which is helping drive food commodity prices up to some degree — our country would be in a lot better position because the infrastructure changes would be minimal to almost non-existent.
Read up…
http://www.technologyreview.com/BizTech/wtr_16466,296,p1.html
eanax on April 29, 2008 at 12:39 PM
Excellent point pueblo1032, I was just thinking about the decline of the value of the dollar versus the value of basket of other currencies while reading about the fed meeting. Getting the dollar back to .8 Euro or so should drop gas prices to about $2.75
deadman on April 29, 2008 at 12:51 PM
Wrong. It’s a combination of greater and greater world-wide demand, limited capacity to pump and refine crude oil, disruptions in world-wide production (e.g. Nigeria, currently, and elsewhere), the falling value of the U.S. Dollar, and ultimately the commodity speculators.
ALL of these factors above have contributed to the huge run-up in oil prices. Other commodities have seen huge run-ups as well. Look at all of the precious metals that have gone up in market value – Gold being the best example.
eanax on April 29, 2008 at 12:51 PM
I searched for two data sources which indicates that a 10% reduction is worth about 2.6% of world demand. (If you have other numbers than please share.)
First of all, a 2.6% decrease in world demand could have a very powerful effect on price given the bubble. I bet we’d see more than a couple billion dollar hedge funds “blow-up.”
Second, 10% should not be our best effort. What if gasoline went to $8 per gallon? $10 per gallon? Would we see a mere 10% drop in US demand? I’m shocked at how inelastic demand has been thus far. It indicates to me that Americans are very inelastic about giving up their conveniences.
Don’t be sighing at me. If anyone should be sighing at anyone, it’s me, at you. :)
blink on April 29, 2008 at 1:00 PM
I’m sorry, but this is just obnoxious commentary. In order to carpool you need people who not only go to the same destination as you do every day, but who are on the same schedule. To further complicate matters, you also need to have a set schedule, which means that you have to clock in and clock out at a set time every day.
Maybe that’s how it works in academia, or with unions, or for government bureaucrats, but that’s not how it works in business.
Furthermore, some people need their cars during the work day to call on clients, or perform other aspects of their job functions. Bringing a brown bag lunch to work solves nothing (although if everyone tried it restaurants would go out of business and more people would lose jobs).
If you want to give out advice about moving, why don’t you give it to your fellow NOLA residents who couldn’t get off their lazy butts to leave town when a hurricane was coming?
The bottom line is that you don’t know a thing about my situation or anyone elses’, so you and others have a lot of freaking nerve lecturing us about what we need to do instead of setting your sights on Congress who are responsible for this fiasco.
I have been in favor of drilling in ANWR and offshore, in favor of building new refineries, and opposed to using food for fuel, and opposed to windfall profit taxes all along.
What have you done other than make idiotic suggestions that attempt to micromanage the lives of others (and insult those who are paying to rebuild your city after Katrina) from your perch in New Orleans?
Buy Danish on April 29, 2008 at 1:00 PM
Um, no….
Speculators can only make a windfall profit if there is a perceived supply/demand problem.
IF speculators knew that SAFE oilfields (ie not Iraq, or Sumalia, or Venezuela) were coming online they would NOT be able to speculate as they have. They are all about the profit margin on future oil prices… which is actualy what they quote when they price oil prices….
The REAL gas price increase from the OIL increase they quote won’t be felt for months yet…
Romeo13 on April 29, 2008 at 1:01 PM
Romeo13 on April 29, 2008 at 10:22 AM
Links are all in that post.
But here they are again…
http://tonto.eia.doe.gov/dnav/pet/pet_cons_wpsup_k_w.htm shows that 47% of the oil used in the US is used for driving.
Diesel-powered transport (trains, merchant ships, heavy trucks, etc.) consumes about 20%, and air traffic consumes most of the remaining 15%. Thus cars consume about 65% of Gasoline used (from Wikipedia).
From http://www.eia.doe.gov/pub/international/iealf/table12.xls in 2005 we see world wide 83,607,220 Barrels per day were used…America used 25,179.090 barrels per day, or 30% of the worldwide total.
So, if every US driver was able to decrease their driving by 10%, we would only be affecting 65% (Cars) of 43% (motor fuel) of 30% (oil used in US) of the worldwide supply….
Or…. 83/100ths of ONE PERCENT of oil consumed. Your 10% less driving solution will NOT affect worldwide oil prices because of declining US production.
As America currently uses 30% of worldwide oil production, your 2.6% is impossible, as not all oil America uses is for gas, and not all gas is used for Cars.
Romeo13 on April 29, 2008 at 1:07 PM
Bingo!
Buy Danish on April 29, 2008 at 1:07 PM
eanax, were you buying AMZN (amazon.com) at $300 per share (pre-slit)?
eanax, are you willing to go on the record right now and defend the prices of all these commodities?
blink on April 29, 2008 at 1:07 PM
It’s a perceived supply problem, not a real one. That’s the point.
Buy Danish, my husband is military. Wanna talk about crazy schedules a little more?
funky chicken on April 29, 2008 at 1:10 PM
perceived being the key word in that sentence.
blink on April 29, 2008 at 1:11 PM
But yes, when prices spiked post Katrina, lots of guys on base started carpooling and rearranging schedules as much as possible, and doing internet searches to find ride sharing arrangements.
It can be done if you care to be inconvenienced enough to do it.
funky chicken on April 29, 2008 at 1:11 PM
I NEVER suggested a 10% less driving solution. If you disagree, then please provide the quote and time.
blink on April 29, 2008 at 1:12 PM
Those trucks must have smaller tanks than I thought. My F-350 takes over $100 to fill it up. Diesel is much higher than unleaded.
kirkill on April 29, 2008 at 1:18 PM
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