Posted on 03/17/2022 9:36:56 AM PDT by Heartlander
Russia’s invasion of Ukraine is driving up already rising fuel prices and inflation. Prices at the pump are almost twice what they were two years ago. But the Biden administration’s response has been all over the map. First, officials denied the severity of the situation. Then, they claimed it would be transitory. Next, they argued rising prices would be solved by massive increases in government spending. And now they attribute blame not only to Vladimir Putin but also to alleged price-gouging by oil companies.
Last fall, the administration was pressuring these same oil companies to drill less because of climate change. Now it asks them to drill more, while accusing them of purposefully withholding supplies to raise prices. And this week, Senator Elizabeth Warren took the allegations of corporate greed to new heights, calling for a “windfall profits tax” on oil companies that she accuses of controlling the price of gasoline.
The idea has a long history. In 1980, after President Jimmy Carter lifted price controls for domestic crude, Congress passed the Crude Oil Windfall Profit Tax Act to address fears that oil companies would earn excessive profits—a term Congress never actually defined. Of course, if the government artificially forces the price of a product below the market rate, then removing that price control will cause the price to increase. The government had controlled domestic crude oil prices for decades, which led to supply shortages, especially after the OPEC oil embargoes of 1973–74 and 1979. When Congress passed legislation to lift controls and provide an incentive for companies to drill for oil in the U.S., increasing prices was the goal.
It worked. As price controls gradually unwound, U.S. crude oil production rose. The same thing happened when natural gas prices were decontrolled around the same time. It’s why the U.S. became a leader in gas: the opportunity for profits led to technological improvements that made drilling for shale gas deposits profitable. In the last decade, that supply bonanza led to much lower natural gas and oil prices that saved consumers hundreds of billions of dollars.
The original windfall-profits tax wasn’t even a tax on profits. It was an old-fashioned excise tax based on the difference between selling prices and a variety of pre-decontrol prices for different types of oil wells. The system was a convoluted mess that Congress repealed in 1988, by which point domestic crude oil prices were less than half what they were in 1981.
That brings us to today. The increase in crude oil and gasoline prices didn’t begin several weeks ago with Russia’s invasion of Ukraine, but when the Biden administration took steps to reduce crude oil supplies: cancelling the Keystone Pipeline and a sale of oil leases in the Gulf of Mexico and placing a moratorium on new oil and gas leases and drilling permits on federal lands. Amid claims that oil producers are withholding supplies to raise prices, the administration has rejected past efforts to boost supplies.
If you artificially restrict new supplies by making it harder for companies to drill for more oil, then prices will go up. If you increase taxes on profits that companies earn by selling oil and gas, those companies will supply less, causing prices to go even higher. Getting the story right requires a clear-eyed understanding of why oil is getting more expensive in the first place and of realistic solutions to lowering prices.
“Global Warming” fraudsters are funding Putin’s war on Ukraine, higher fuel prices, and inflation.
Ask anyone in the refinery business.
There are no backup supplies of gasoline or diesel.
Refined fuel products flow through the supply chain like electricity in a wire.
Those tanks at the refineries are just “surge tanks”.
The supply-and-demand curve is RAYCISS and must be canceled!
Only one response is the correct response to the multiple woes of inflation, supply chain problems, balance of trade, and international tensions. Drill, baby, drill! and take the onerous regulations that add nothing of value to the supply of crude oil and natural gas or to the environment, and rescind them all. Given free rein, the market forces unleashed will expand the daily flow of oil and natural gas, to the point where the US is once again a net exporter of energy, solving both our domestic troubles and international relations.
“Leading from behind” does not work and never has.
Oil must be located in the ground. This costs money.
Oil must be purchased from whoever owns the mineral rights to the oil. This costs money.
Oil must be removed from the ground. This costs money.
Oil must be transported to a refinery. This costs money.
Oil must be turned into gasoline at the refinery. This costs money.
Gasoline must be transported from the refinery to the dispensers. This costs money.
The dispensers must contain the gasoline and then dispense it into vehicles. This costs money.
We have people in Washington DC that prove every day the wisdom that you can not fix stupid.
Everyone who has any knowledge at all about how markets work knows that goods that are in demand, but scarce, will bring a high price. The only way to lower the price is to produce as much as the demand requires.
Every farm boy over twelve years old knows that when the crop year is bad, prices go up. When there is a really good growing season and everyone has a bumper crop, the price goes down.
The DC “wizards” are either stupid or purposely attempting to destroy America’s economy.
In either case, they are stupid and you can’t fix stupid. The only cure is to get them totally out of government positions.
Does the government increase the cost of gasoline?
I support a windfall salary tax on the increased salaries Congress people have just voted themselves.
“Does the government increase the cost of gasoline?”
Through gasoline taxes at the State and Federal Levels. Yep.
Gas Taxes and Rankings by State:
https://taxfoundation.org/state-gas-tax-rates-2021/
Are there other taxes/mandates where the government affects the price of gasoline/oil?
Not sure what your ‘argument’ is here. But, you can do additional research as easily as I can. :)
But all they have to do is lower their costs. /s
Yes, government policy, not just government tax, affects gas and oil prices. Limiting transportation options like the Keystone Pipeline causes consumers to rely on more costly, riskier, and less environmentally friendly means of fuel transportation. Examples include trucking, railroad, ships, and barges. Limiting oil lease sales in U.S. waters like the Gulf of Mexico causes deepwater drilling rigs to migrate primarily to West Africa and Brazil. Canceling drilling permits on federal lands causes exploration and production to occur outside the U.S and in areas that are geologically or technically more challenging, driving up the cost to monetize a reservoir.
Oil must be located in the ground. This costs money.
Oil must be purchased from whoever owns the mineral rights to the oil. This costs money.
Oil must be removed from the ground. This costs money.
Oil must be transported to a refinery. This costs money.
Oil must be turned into gasoline at the refinery. This costs money.
Gasoline must be transported from the refinery to the dispensers. This costs money.
The dispensers must contain the gasoline and then dispense it into vehicles. This costs money.
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Every step is taxed in some manner by federal, State and local government.
Sorry.
Old habit from teaching.
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