Posted on 06/24/2008 2:10:40 PM PDT by John David Powell
Here we are with a new week and another round of posturing, politicking, and punditry regarding the price of petroleum. As happens when folks do a lot of talking, very little is said.
I hang around educated and talented people. Each individual has at least one university degree. Most read, watch, or listen to more than one news source every day. They span generations with ages ranging from the 20s to the 70s.
Yet, not a single person among them knew the answers to some basic questions pertinent to the growing discourse regarding the rising price of oil. A few knew some of the answers, and some knew a few of the answers. To be fair, I had to look up the answers, or else I would have been among the shoulder shruggers.
For instance, how big is a barrel? Answer: 42 gallons. So, now you know that when the price for a barrel of crude oil hits $140, that’s the same as $3.33 a gallon.
What nation supplies the most crude oil and petroleum products to the United States? Answer: The United States. According to the Energy Information Agency (www.eia.doe.gov), our country supplied 41 percent of the oil we consumed in March of this year.
What nation, other than the U.S. , supplies the most crude oil and petroleum products to our country? Answer: Canada. Our northern neighbor accounts for 12 percent of our nation’s oil and 20 percent of all the oil we import. The rest of the top five include Saudi Arabia (7 percent and 13 percent); Venezuela (6 percent and 11 percent); Nigeria (6 percent and 10 percent); and Mexico (5 percent and 8 percent).
How much oil do we import from Persian Gulf countries? I’m glad you asked. Persian Gulf countries accounted for only 16 percent of our foreign oil imports each year from 2005 to 2007. In fact, our Persian Gulf imports declined most of this decade, from a 15-year high of a little more than 1 billion barrels in 2001 to 791.9 million barrels in 2007.
What’s the difference between crude oil and petroleum products? Answer: Crude oil provides, among other products, gasoline, diesel and jet fuels, heating oil, liquefied petroleum gas, lubricants, asphalt, plastics, synthetic fibers, detergents, fertilizers, ink, crayons, bubble gum, deodorant, tires, and heart valves.
One barrel of crude oil (which is 42 gallons, remember?), yields about 19.6 gallons of gasoline. The other 22.4 gallons go into the products just mentioned.
How much of the cost of oil goes into the price of gasoline. Answer: A bunch. We consumed about 390 million gallons of gas a day last year in our cars, trucks, recreational vehicles, boats, farm implements, and construction and landscaping equipment. Back when crude was $68 a barrel (that was just last year), it accounted for about 58 percent of the price of a gallon of gasoline. The rest of the price came from refining costs (17 percent), federal and state taxes (15 percent), and distribution and marketing (10 percent).
By the way, the price of crude accounts for about 77 percent of the cost of gas at $4 a gallon.
Here’s a little something you may not have considered. What products that you buy on a regular basis are sold with tax included? Answer: Gasoline. For everything else, you add the tax at checkout.
The folks in California pay 63.9 cents a gallon in state and federal fuel taxes, the most in the nation. That’s just the base, though. Motorists there also pay an additional 6-percent state sales tax, with some paying another 1.25-percent county sales tax plus applicable local sales taxes. Same in Illinois , where Chicago motorists pay 12.75 cents per gallon on top of the 57.9 cents per gallon in state and federal taxes. Some Illinois motorists also pay a 6.25-percent sales tax.
Politicians, pundits, and other TV talking heads don’t like to provide these answers, because facts get in the way of positions that pander to the mob. We don’t point fingers at Canada , because it’s de rigueur to paint the Saudis with the broad brush of blame. Folks float the idea of a moratorium on state and federal gasoline taxes without explaining its minimal impact on gas prices, or without mentioning the $3 sales tax some motorists pay on top of a $50 fill up. Policymakers don’t explain that oil trades in the dollar, which is weak vis-à-vis the Euro, because that would require solutions for strengthening the greenback.
And, it’s easier for simple minds to convince simpler minds to impose windfall-profit taxes on pension funds and owners of Individual Retirement Accounts who invest in oil companies than to take on credit card issuers charging double- and triple-digit interest rates to the millions of people using plastic to pay for food and fuel. Talk about irony.
And, we sure wouldn’t want to impose a windfall-profit tax on someone who goes from making $56,000 a year as, say, an Illinois legislator, to $165,000 a year as, say, a U.S. senator, an increase of nearly 200 percent (not counting book deals or real-estate related loans).
Mundus vult decipi (and as my magician friends add: decipiatur)
John David Powell is an award-winning writer and Internet columnist. He may be reached at johndavidpowell@yahoo.com.
Excellent info - thanks for posting!
If you want to know what's what in the 'awl bidness', you've no further to go than FreeRepublic. Ask FReeper thackney (a real live petro engineer), or Smokin' Joe (hands on in the Bakken formation(s)), or Eric in the Ozarks (long-time trader of lower-end product), to name a few.
Others here might offer a thought or two on the actual (as opposed to the public perception of) workings in the crude and products. Some of us have even written books on the subject.
BTW, did you know that there's no such thing as a physical 'barrel' of oil? Doesn't exist, and the reason for it traces back to the kerosene mkt in the 1880s.
There is another aspect the “we need to focus on alternatives because oil is bad” crowd doesn’t consider. Oil is more than just gasoline. There are few aspects of modern existence that don’t depend on petroleum based products.
BTTT! Great article!
First time at the plate and hits one out of the park. Way to go!
Maybe the author never buys any form of alcohol but it also has the taxes included, not added at the checkout stand.
Since they can't outlaw American's SUVs and force them to ride public transportation, keeping energy prices high is another way to achieve their goal.
If American's lose their jobs due to cutbacks related to high energy cost, then too damn bad. Mother-Earth comes first.
Way to go, John. Once again, we geeks, with just a little bit of research, have no trouble completely trouncing even the most above-average lib. They are - well, they’re marshmallow-major, latte drinking lib arts sponges.
Exactly what I was thinking.
I can attempt seismic survey questions: 5 years in the GOM on a seismic ship and another 12 as a software engineer developing seismic processing software for a seismic company here in H-Town.
And cigarettes?
“Maybe the author never buys any form of alcohol but it also has the taxes included, not added at the checkout stand.”
Also, tobacco taxes are included in the price, and then many places, the sales tax is added on top of all that. No breaks for the tobacco users.
Good job!
“Folks float the idea of a moratorium on state and federal gasoline taxes without explaining its minimal impact on gas prices,”
And isn’t the federal gasoline tax used, or is supposed to be used, primarily for highway construction and maintenance?
That idea strikes me as silly, though it has appeal to many.
:^(
I saw a show the other day about the Bra industry. You guessed it...petrolium and ofcourse the almighty silk worm.
Very interesting show.
The same can be said for most of the other "trivia facts".
That taxes at all levels is greater than the obscene profits of the oil companies is very relevant when the idiot politicians zero in on "obscene profits" or "gigantic executive salaries". At least the oil companies are producing something useful for the amount of profits they make. And it is not irrelevant that those profits are distributed among millions of shareholders of oil company stock.
When was the last time government shared "their" obscene income (profit)?
Knowledge is always power, and being able to recognize BS when we hear it is useful, but so far has contributed zero towards solving the problem. The politicians still argue irrelevancies, suggest old and tired alternatives and, bottom line, contribute zero towards solving the underlying issues.
Isn't that wonderful?
If we BS our problems to death we lose our homes and our jobs and starve. If politicians do it, they can do it forever with no price to pay whatsoever!
What's wrong with that picture?
Thanks for the post. great info.
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