Lowering Prices at the Pump

Even if you’re in a higher income bracket than I am (which you probably are), you’re probably feeling the effects of high gasoline prices and are pretty tired of taking it up the tailpipe. High gas prices are not only putting a dent in our wallets when we pay to fill up our cars, they increase the price of everything that we can possibly think of to purchase. It is high time that “we the people” take appropriate action.

The government says that a reduction in the supply of gasoline is the reason why prices at the pump are skyrocketing. If this is true then why aren’t our “elected” leaders doing something wise that will increase production? Answer: They are either too obtuse to put together anything other than a short-term solution to the supply dilemma or they don’t really want to act in the publics best interest. It is difficult to tell which one of the answers is applicable if you consider the decision to use gas made from corn (ethanol) in order to shore up supply concerns. It is my opinion that this action only adds fuel to an economic fire that is nearly out of control. Bear with me for a moment as I explain this point.

Apparently, few people realize that gas is a tax. Everyone suffers when any new tax is levied on any particular item. These added “costs” will be passed to the consumer (you and me) and will do nothing to help the economy. The effect is negative and is immediately felt by business and property owners if it is directly placed on property. In the long run, everyone in the community feels economic woe.

An increase in property taxes is bad news for any city or county but an increase in gas prices is much worse! Higher gasoline prices affect the entire population of the U.S. I don’t understand why officials on the local, state and national levels can’t seem to understand the concept of taxation and the negative impact of their existence/increase.

The “tax” will continue to increase if something to correct the problem isn’t done soon. The increase could topple the U.S. economy that could lead to a global economic meltdown. What Hillary and Obama and the rest of the Dems advocate in order to lift the masses out of economic despair, would ultimately leave citizens with “change” in their pockets instead of dollar bills in their wallets. Their solution to the problem is to place a tax on companies that are involved in the production of “texas tea” (oil).

The answer to our problem isn’t to penalize the oil companies or institute new governmental rules and regulations. In fact, consumers will not see relief at the pump if the oil companies are penalized/taxed by the government, or not allowed to drill new wells and build new refineries (or build onto ones that currently exist) and they are not going to see lower prices if they continue the usage of ethanol in order to increase supply.

The plan to use ethanol was a mistake from the get-go. It has driven up the price of corn and everything else! How? Corn is used for livestock feed and is produced for human consumption. Many food products are made from corn. If a subsidy is placed on corn and farmers produce corn for fuel production there will be less of everything else (including corn for human consumption).

Shortages result in higher prices if demand remains the same. If higher prices are paid for corn, prices of livestock will rise (because it will cost more to feed the animals). If more corn is grown, less wheat, soybeans and other produce will be planted. If demand remains the same, prices will go up due to the same forces aforementioned (supply and demand). Farmers will get higher prices for the corn that they grow but it is a zero-sum since they will pay more to feed their livestock (or fill their gas tanks and bellies).

Many different products that we use everyday have been affected by the decision to pursue the ethanol plan. Think about it the next time you visit the grocery store. What did you pay for a gallon of milk or a pound of hamburger? How is milk made? Where does beef come from? What do cows eat? Accurate answers to these questions will allow you to see where I am going with this and how all of it fits together.

Life appears to be a big algebraic equation. What is done to one side will affect the other. It is obvious that some people lack the ability to fathom how everything relates to everything in some way or another and how changes can affect outcome. To explain it in detail would require the writing of a book so for now I will focus only on the issue of high prices at the pump and offer a few suggestions on how to alleviate some of the economic burden on the common folk.

The following ideas might help to bring down the price of gasoline if supply is the real factor contributing to the increase:

1. Shelve the ethanol plan

2. Permanently remove all excise taxes from oil and gas

3. Give oil companies economic incentive to uncap existing wells and drill new ones offshore

4. Put pressure on OPEC members to increase production (this can be done through threats of expropriation of assets and other economic sanctions rather than the lobbing of nukes or a full-scale invasion of oil-producing nations. My suggestion would be to start with the assets of Venezuela* since their leader, Hugo Chavez, has threatened to cut off the flow of oil to the U.S.)

5. Increase refinery capacity by building new ones or by expanding existing units and finally,

6. Drill in ANWR (and prohibit the sale of this oil to other nations).

*Citgo is a Venezuelan oil company that owns and operates gas stations and refineries in America.

Do these ideas seem far-fetched? I don’t think so. If the U.S. is truly the most powerful nation on the planet, then surely it can impose its will on nations that export oil to it just as Wal-Mart imposes its will on suppliers. Lets face it; gas prices shouldn't be above a buck! I don’t care what people are paying for petrol in the U.K. and other nations of the world. A dollar a gallon is more than enough for the stuff. It is my opinion that the multi-point plan I have mentioned, would bring prices back down to reasonable levels and create a rip-roaring economy (provided that the politicians on the local level can refrain from sticking it to property and business owners with additional levies and/or fines).

Why can't our politicians see that oil and gas prices are probably the biggest contributor to our economic problems at the moment (and that other forms of taxation will exacerbate the negative economic situation that currently exists)? Productivity will decrease and misery will increase if prices at the pump remain high. If this particular type of taxation continues to increase (or even maintain current levels), demand for products and services will decline as prices continue to soar. If demand for products and services decline, businesses will reduce the number of employees and cut benefits for those who remain employed. Foreclosures will continue to increase and our banking system will collapse. One can envision many other horrors if the events aforementioned occur.

If you think that total economic collapse could never happen, think again. If something isn’t done to correct the problems, everything mentioned (and more) may come to pass. The time is now to remove those in public office that act in their own best interest and put people in positions of power that will address the important concerns that the country faces as a whole. The persons needed for public office will put our energy issues first, cut government spending and make reductions in taxation and regulation of individuals and businesses permanent.

Comments

[Dittohead:]

This is the first sound comments I have seen in a long time. Keep them coming. People, write your representatives to open up ANWR & the left and right coasts to oil drilling. Then we won't have to sweat every hurricane that enters the Gulf of Mexico.

2008 Apr 13 09:17 PM

[byork:]

In what cave have you been asleep? Just now getting a whiff of fertilizer? Oil men running the White House... Using food to make ethanol (lousy two carbon one oxygen fuel) -Duhhhh wonder why fuel costs and food prices are so high?

2008 Apr 13 09:18 PM

[nakedtruth:]

Want lower oil prices? Do away with the speculators by raising the margin requirements. The margin requirement for stocks is 50% but for oil and other commodities it is only 5%. Law makers may increase the margin requirements for oil. To read more about this checkout the following link:
money.cnn.com/2008/04/...

2008 Apr 14 08:33 AM

[pup55:]

The only way to solve the problem is to tell a lot of people that they are not going to be able to drive. You don't want to do it, the government doesn't want to do it, no one wants to do it.

You can drill ANWR and build all the refineries you want, but at some point, either now, or in 20 years, or in 40, you are going to run up against geology.

Better to bite the bullet now, rather than wait for the problem to get worse.

2008 Apr 14 10:42 AM

[Ronmac:]

To poster nakedtruth, are our lawmakers going to raise the margin requirements for speculators and traders around the world? Gee, I didn't know we had that kind of influence. Speculation is driving the price up, some. But the basic fact is, we are using way to much oil to be sustainable. Countries that now export, will not in the not too distant future. To find oil in the quantities that we now use is simple expensive, if even possible. Sorry no one to blame..but ourselves.

2008 Apr 14 11:09 AM

[wachry:]

Mr. Milburn, do you really think that "oil and gas prices are probably the biggest contributor to our economic problems at the moment" I pay about $2700 a year in fuel for my pick-up truck. That is about one month of mortgage payment. I think the credit crisis has a lot more to do with our country's economic problems. I agree that we should open up all drilling to reduce the cost for the average consumer, but I think the hyperbole is unnecessary.

2008 Apr 14 01:06 PM

[Aurelien:]

Instead of simply prolonging the time we use oil for a bit and destroying our environment more in the meantime by drilling in the ANWR, why not devote more resources to developing renewable energy sources that will lower demand for oil. Wind and Solar energy costs have fallen dramatically in the past couple decades, and switching to them for our energy needs quickly makes a lot more sense to me.

2008 Apr 14 06:46 PM

[nakedtruth:]

Ronmac,

It appears you are ignorant not just about our influence but other things as well. Did we suddenly start using so much oil to drive up the price from less than $25 to $110 per barrel in a span of 3 years? I suppose you also believe that the high housing prices were justified by increased demand in housing and that the 0% money down and the funny mortgages had nothing to do with it. Well, we now how that ended. We are seeing unfold now.
The theory that there just isn't enough oil or that we will run out of oil is just a myth.

Incidentally, for anyone that cares, here is a chart of oil prices for the last 5 decades.
www.forbes.com/2005/11...

2008 Apr 14 10:48 PM

[carloz678:]

This rant about taxes is a smokescreen to hide the real problem. We have heard this crap over and over for ever. All the tax cutters claim to be patriotic Americans but all they are doing is buying prosperity today on credit. Any moron can live the highlife as long as he has your credit card. Thats whats happening. You think things a bad now. Just wait. The tax code is supposed to be about 50,000 pages long, most of it is about deductions. The average joe sixpack dosen't use any of them just the short form. I heard that hedge fund managers that made one billon a year get some break that puts them in a 15% bracket. Warren Buffet says his secretary pays a higher percentage than he does. And now congress has to fix the ATM, what a joke another 1,000 pages for the tax code.

2008 Apr 15 10:38 AM

[OilBaron:]

Interesting point of view, but I would like to know why the author is missing his/her own point. The point that many things are inter-related is true. So why not try to reduce consumption, or at least try to stop its growth. For example, enforce the regulations that where designed to force car companies into producing cars with higher gas mileage per gallon. If the average mileage is 20 miles per gallon, rising only 5% to 21 miles per gallon, yes only 1 mile per gallon would reduce at the pump consumption by 5%. That five percent reduction would net significant reductions in gas prices if all the analysts are right and the price of gas is high because of short supply and high demand.

Just think, just 1 mile per gallon on average. A true jump in mileage say to 5 miles per gallon would result in a 25% reduction in consumption, again if the problem with prices really is with supply and demand then prices would fall signficantly.

Before everybody questions these numbers, the 20 mile per gallon average came from

RechargeIT.org which quotes the "Highway Statistics from the U.S. Department of Transportation, Federal Highway Division" indicates that the average is 19.8 miles per gallon.

Interestingly, it also quotes the Toyota Prius at 44.6 miles per gallon without plugging it in, and at 66.2 with plug-in. At an average of 40 miles per gallon the result would be a 50% drop in consumption.

So, yes, everything is related, why not incent a drop in consumption, who wouldn't like to see that.... well besides the oil suppliers, refiners, distributors, retailers, and the governments that levy per gallon taxes on gasoline.....

2008 Apr 15 04:54 PM

[Paul T Conley:]

50 cents a gallon if you-
Get the GM Volt on the road and other electric hybrid cars.
Get the traffic light system smart sensors and switches.
Developing renewable energy sources that will lower demand.
Do away with the speculators by raising the margin requirements.
Drill ANWR & the left and right coasts to oil drilling.
If we don't do something soon we are facing an economic meltdown that will turn into this century Great Depression.

2008 Apr 15 04:54 PM

[bearfund:]

Gasoline is NOT a tax. It is a minor input to some products and a major input to others, that's all. Unlike a tax, you don't have to buy any gasoline if you don't want to. I don't know where you live, but around here we have electric buses and streetcars run on hydropower. Look ma, no oil! If nothing else, you can greatly reduce demand for, and therefore the price of, oil by ditching your car and riding mass transit instead. Yes, the ethanol subsidies need to go. But about everything else, you're just another whiner angry that you didn't get a free lunch.

2008 Apr 16 01:41 AM

[Mmarrkk:]

Gas prices aren't a big problem for many many people. I base this on the fact that:

a) I still see many people driving 2 blocks to the store rather than walking

b) most cars with one person in them commuting to work

c) most people on the interstate passing me up when I'm doing 70 mph. If those complainers would reduce their speed down to 60 they would save some money. And, amazingly, we wouldn't need the big nanny state government to legislate this. People can do this all on their own. If you have problems paying your gas bill, drive slower and walk more.

2008 Apr 16 09:56 AM

[Tao:]

I have always heard that if you keep the speed below 50 mph, that will make a huge difference, but you can't do it on many highways.

Town driving, stopping for lights, uses the most gas.

2008 Apr 16 02:51 PM

[Mmarrkk:]

Why can't you drive 50 on most highways? People will just have to go around you! Seriously, you could keep it at 60 and save a large amount too. But people would rather whine.

And the Prius owner who drives their little toy car 50 miles a day use more gas than my Suburban that I drive 10 miles per day. Doesn't stop people from bashing me when I drive my Suburban. Actually, I have 2 suburbans, one for me and one for my wife. One is old, though, and I don't want to shell out the cash for a new wind-up toy car. Even if I improve my gas mileage by 10 fold, the payout on a new vehicle is too darned long.

2008 Apr 16 09:26 PM

[South Texas...:]

Right to the point. Our politicians are mainly concerned with their pocket books and not with the public they are representing. It's unbelievable that the people I voted for and helped put in office have turned their back on me and my family only for their own well being and in turn, affecting every citizen of this great country. I agree, countries that have turned their back on the USA for their own personal benefit should forfeit their holdings in the US. Sorry Citgo, your Castro tactics will not work here and we thank you for your refineries and gas stations. Americans can take over from here. Enjoy your jungles and your 100% humidity. Americans have a long memory span and we will remember who are friends are and who are not. I also agree because of the devaluing of our dollar, Americans are paying to benefit the oil companies which have forgotten what America did for them. In that case, enjoy your sand and good luck with your internal affairs. I don't feel we should send our daughters and sons to fight a war where we still have to pay and get nothing in return. We tried to speak your language and respect your religion and you still burn our flag. Fine ... we'll drill in the gulf, extract shale oil for Wyoming and surrounding states and if the Green guys don't like it .... well, you can move to those sandy countries who despise the American public. Additionally, our politicians should be on full alert. They have a couple of months before the American public goes to the poles. If they do not heed our concerns, they will join the rest of us in the unemployment line, only to be hammered with discontent and possibly verbal abuse. Politicians should mandate that US Oil companies begin extracting oil products from our capped wells, drill in the Gulf, drill in Alaska, extract shale oil, build new refineries or expand on existing ones, and in return, if conducted in an expedited schedule, will receive tax relief and incentives. I'm sure the American public will have no problem with these incentives. Additionally, incentives should be given to auto manufacturers to develop an improved hybrid automobile and SUV which gets a minimum of 25mpg and if done accordingly receive these tax benefits. Americans want their companies to be successful and profitable because that's where we work, that's where we get the bread to feed and clothe our families.

2008 Apr 17 09:34 AM

[John Assam:]

Nice comment South Taxes.
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John Assam
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[John Assam:]

Nice
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