Excerpts from GasBags, full text seen at www.taxpayersleague.com click GasBags.
Accusations of price gouging are a sure way for politicians to buy votes.
In 1999 the price of a barrel of oil was $10 and today at $70, an increase of 700%. In 1999 the price of a gallon of gas was 99 cents per gallon and now $3 per gallon, an increase of 300%. Who's gouging who. Inflation adjusted gas prices are still pretty close to their historical average, and much cheaper than they were in the late 70s and early 80s.
Simply put, the current rise in fuel prices is driven by the supply and the demand for oil in the world marketplace.
For 25 years the federal government has imposed a moratorium on the exploration for and and drilling oil off the coasts of America and the Arctic Nation Wildlife Refuge, including only a very small portion of the total.
No new oil refinery has beemn built in the US for over 30 years mostly due to demands made by environmentalists.
Are we running out of oil? Known oil reserves-oil we know is in the ground that could be recovered-have increased much gfaster than consumption over the past 50 years. Running out of recoverable oil isn't likely to be a major problem soon.
What about those high profits? If you listen to some people, all our woes are due to the greed of the US\'s "big oil" companies. Not because the executives in "big Oil" aren't greedy, it's just that they are no more or less greedy than anyone else in a market driven economy.
Oil industry return on investment have lagged behind the rest of the economy over the past 25 years. Oil companies actually make less money than most other industries.
Over the past year they have generated a net profit margin of 9.7%. That's good for an oil company but below the average margin of 13.85% for S&P 500 companies.
These low returns have discouraged investment, resulting in today's high prices. In fact, today's high profits will spur major new investments in the industry, increasing supplies and eventually lowering prices.
The single largest oil "profiteer" is government. In Minnesota taxes account for 17% of the price of gasoline at 40 cents per gallon. The oil industry has an effective tax burden of 42% compared to the S&P average of 30%. Federal and state governments have collected $2.2 trillion in taxes from "big Oil" over the past 25 years- more than triple the $630 billion in profits over the same period.
Excess profits tax, who's to determine what's excess. In 1980 congress imposed and President Carter signed a windfall profits tax on oil, and according to the Congressional Research Service it cost consumers big time. According to the CRS , the windfall profits tax caused decline in domestic oil production, and increased America's dependence on foreign oil.
Oil prices fluctuate with the market, not to the whims of oil company executives. The FTC found "no evidence" to suggest thst oil companies even had the capacity to, no less the intention manipulate prices in order to gouge customers.
Switching away from fossil fuels is not as easy as many would have you believe, and the process will take a bit longer than you may expect. And it is very, very expensive. Ethanol is very expensive to produce, has less available energy than gasoline, and gets huge subsidies from federal and state government.
Doing something always seems better than doing nothing, but history and basic economics tell us that markets are much better at adjusting to short and long term trends than government planners.
Full text can be seen at www.taxpayersleague.org and click GasBags.
|
