Here We Go Again

TechCentralStation.com ^ | 11-2 | Jack Rafuse

[EarthStomper]

Here we go again. Gasoline prices are dropping as usual with the end of the summer driving season. But oil companies are announcing huge quarterly profits, so the inevitable reaction has begun -- howls on Capitol Hill. Self-proclaimed friends of consumers want the profits refunded to "ease consumers' pain." They propose to do that through a "windfall profits tax," arguing that the government would make better use of the money than would the oil companies.

They point out breathlessly that one company's last quarter earnings were $9 billion, and then multiply it to reach $36 billion for a full year. (As a relative measure, that's about how much US families spend on their pets each year. Comparisons often help when hysteria is setting in.)

Twenty-five years ago, with gasoline prices at record highs and company profits "unconscionable" according to some, like-minded critics won the day in Congress and enacted a windfall profits tax. It was a disaster.

· It did not allow companies to charge world market prices for "old oil." So they could not spend money to rework oilfields; domestic production dwindled rapidly.

· It allowed them to charge market prices only for "new oil" from new areas. Companies had to bypass oilfields that they had discovered but not yet developed, and search (wildcat) in less likely places. Again, domestic production suffered.

· It allowed them to charge world market prices for imported oil. So the companies began to explore more in highly promising places overseas. Domestic production suffered; overseas exploration and development boomed.

· Critics complained that the companies were abandoning the US. One oil executive responded, "We're not moving out of the US; we're being thrown out."

Every subsequent study, including from the US Congress now entertaining the tax, showed that the era's price controls and windfall profits tax contributed greatly to our nation's increased reliance on foreign oil. Those policies did exactly the opposite of what they were intended to do. But without institutional memory, critics seem again ready to fall back on the old, failed policies and "do something" no matter what the result may be.

Not everyone wants a windfall profits tax. Some in Congress advocate opening the Arctic National Wildlife Reserve buffer zone to oil company operations; they are reviled for the thought. Others practically demand that the companies build new refineries to increase total US refining capacity. They point out that there has been no new refinery built in the US for 30 years. That's true, BUT:

· Increased refining capacity does not add crude oil to US or to world supply. The price of crude oil (and thus of gasoline) depends on the amount of crude oil on the market -- the supply among all the nations that use oil.

· More US refining capacity will not address those issues.

· US oil companies have continued to improve efficiency and increase refining capacity to meet US demand for gasoline and other fuels. Refining capacity is tight, but will continue to grow with demand. The main issue is supply.

· On the other hand, no company can or should spend several billion dollars to provide "excess refining capacity." "Excess capacity" does not pay for itself; any company that proposed to build it would see their shareholders shift investment to other companies that did not plan to build themselves out of profitability.

Others propose doing away with state or locally mandated "boutique" gasolines. At least 20 such gasolines must be sold in particular regions; they require special shipping arrangements and reduce pipeline efficiency. They virtually guarantee gasoline shortages or high prices in those areas.

Maybe it's Halloween week, but there's no treat here. Some of these ideas are tricks -- old, failed ones at that.

Jack Rafuse is a consultant on domestic and international energy, security and trade issues.

[xcamel]

18.6¢ per gallon Fedral Gas Tax???

..now THAT is gouging!

[q_an_a]

recent headline said Gas taxes in past 20 years = 1.2 trillion dollars, more than the profits of all oil companies combined during same period.

PS if gas taxes equal 1.2 trillion did we see all of that money spent on transportation? Lately people have complained about 250 billion dollar program covering next 5 years. that sounds like numbers = to gas tax, so was the transportation bill really pork or finally spending the people's money?

[Mathews]

That's just on the Federal level... don't forget about the State Taxes that will also be added into the price. Yikes!!

[IL Republican]

http://www.freerepublic.com/focus/news/1512241/posts?page=1

Click on the link above to see who is really gouging us!!!

The free market is working, let's let it work.

[xcamel]

waddayouthink?

[Willie Green]

Some in Congress advocate opening the Arctic National Wildlife Reserve buffer zone to oil company operations; they are reviled for the thought.

Big Oil profits tremendously when demand exceeds supply.
The ANWR enviro-obstructionists are merely useful idiots, helping Big Oil to keep the price at the pump jacked-up.
The Bush Administration and the GOP "leadership" may pay lip service to conservative demands for more domestic production. But you'd be foolish to believe them.
In a "green" pickle, Reichert edges away from Arctic drilling (Key vote switches to dems)

[WyCoKsRepublican]

Having a degree in Economics, I have no problem with Oil Companies and their huge profits. Does the word "Retained Earnings" mean anything to those who scream price fixing, etc. Now that prices have dropped, wouldn't it be wise to conserve even more, thusly keeping the supply high and the price low?.............duh..........

[ASOC]

A million dollars a mile for freeway?

Hardly free.

[q_an_a]

do you think spending 58 billion a year on roads collected in gas taxes is good or bad of interstate commerce? do you think that defend the shores includes spending on infrastructure?

Now it is possible that gas taxes are too high, but until someone gets them lower, the money should be spent on roads and bridges and transprotation projects. Texas gets less than 90 cents for every dollar we send to Washington, but if it makes the roads to Wy or New Mexico better then that is OK with me cause I drive through them every 2-3 years.

[xcamel]

That would be $15.78 per inch which you paid for with only $84.83 worth of gas in your tank.

[calex59]

Anyone who wants to see bad roads, then come to CA. We have some of the worse roads in the USA and some of the highest gas taxes, a prime example of how our money is not spent on infastructure, or at least not on roads. The enviros want us to spend it on light rail, etc. not roads, although everytime a new gas tax is implemented we are told it is for building roads but they don't even repair the old roads at a decent rate or do a decent job when they do repair them.

A recent trip to Colorado(deer hunting you know!)served to compare the roads in other states to CA roads. Makes a person sick to see how smooth and chuckhole free the other states keep their roads compared to the liberal bastion of a**holes unlimited.

[ASOC]

LOL

Stay out of Alaska if you want good roads. Even in town (Anchorage) you need a 4X4 to get around in some places

On the other hand, the views are nice

[WmCraven_Wk]

"But without institutional memory, critics seem again ready to fall back on the old, failed policies and "do something" no matter what the result may be."

Democrats DEPEND on the lack of 'institutional memory' and the overwelming desire to reap benefits from class/race conflicts.

[ShadowAce]

Check here for your state gas tax

[Chena]

Stay out of Alaska if you want good roads. Even in town (Anchorage) you need a 4X4 to get around in some places On the other hand, the views are nice

Wow, isn't THAT the truth. If the DOT put "bump", "dip", and "rough road" signs at the site of all bad road conditions, they would have to place warning signs every 20 feet or so. LOL