It seems that everyone is complaining about high gas prices. I can predict that some of the listeners who call into my radio program will ask why the prices are so high. There are lots of answers: OPEC, speculation, limited domestic drilling, limited refining capacity, ethanol mandates, different types of boutique fuels, etc. And we also talk about who is hurt by high gas prices: truckers, suppliers, people on fixed incomes, etc.
But let’s ask a different question. Who benefits most from high gas prices? If you said oil companies, you would be wrong. Certainly some of the oil companies have reported record profits. But the biggest beneficiary of gasoline sales is government.
The Tax Foundation looked at a 25-year-period (from 1975 to 2002). They found that governments have collected more than $1.34 trillion (in inflation-adjusted dollars). This is more than twice the amount of domestic profits earned by major U.S. oil companies during the same period of time.
If you look at their graph you can see, that since the early 1980s total gas taxes have always exceeded oil industry profits. Part of that reason is due to substantial hikes in the federal gasoline excise tax in 1983, 1990, and 1993.
It is also worth noting that the tax revenues continue to climb no matter what the economic circumstances. By contrast, oil industry revenues fluctuate. The graph demonstrates the economic reality that oil industry profits are highly cyclical. Although they are currently experiencing a boom, there have also been busts.
These economic facts are worth keeping in mind as Congress considers whether to implement another windfall profits tax similar to the one signed into federal law in 1980 by President Jimmy Carter. It is also worth keeping in mind when political commentators (and some politicians) talk about increasing gas taxes in order to reduce gas consumption.
The next time you hear those comments, remember that government is the greatest beneficiary of high gas prices. I’m Kerby Anderson, and that’s my point of view.
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Dear Kerby,
I have two main points to make about economics of gas prices. One, since government taxes are per gallon how is it they are cause of higher prices unless they raise the rate? Secondly, prices should reflect all production costs plus reasonable profit. How have these prices doubled in about two years? It is not because of rising costs. Yes demand has risen putting pressure on supplies. Since prices are set by the auction system of oil futures, not production costs, prices are bid up. That's why they come up with lame excuses like storms etc. These things might increase costs slighly, but not $1.50 a gallon.
So where does the money go? It goes to producers. An example is, if a well was dug 5 years ago and the owner got $50 per barrel but now is getting $115, where was the cost increase? 10 tp 15% is reasonable but not 230% when you look at the incomes of those in this business you can see where the money is going.
JQ Click here to reply to this post
Gas Taxes
Posted On: 04/23/08 07:07:24 PM
Age 45, KS
As several economists have pointed out, gas prices are a function of supply and demand (duh). If you remove the gas tax (as McCain has proposed) this will simply stimulate more demand and prices would climb back to about what we're paying now. You can pay the government with a hope that the money will go to improve our infrastructure, or you can pay the oil companies--take your pick. Click here to reply to this post
Our Gas is Cheap... Relative Idea?
Posted On: 04/23/08 04:48:48 PM
Age 39, FL
Our friend, evidently from Europe, says our gas is cheap. Well, our nation is also much larger than European nations and we drive by necessity in most cases. The argument about who pays more has many more factors than just the cost per gallon (or litre).
The real question is "What should it cost per gallon?" Here in the USA it gasoline is over-priced. It is alt least double what is a fair price.
However, government and our nation's enemies are driving the prices up. Congress does not care, because we pay for their gas. And their healthcare. And their retirement. And... well, you get the picture- they do not have any effect from what they decide for the rest of us. Click here to reply to this post
IS SODOM OUR SISTER
Posted On: 04/24/08 02:48:21 PM
Age 64, OH
Crude oil is $120 per barrel on the open market at this time. There are 42 gallons in a barrel of crude. 120 / 42 = $2.86 per gallon. That is just for the raw materials to make gasoline. They have to transport it to the refinery and refine it and then transport it to the station. They have to build and maintain the filling station. $2.86 + .74 = $3.60 That means they have to do all this for $.74 per gallon. It is more complicated than this of course because they get about 48 gallons of products from a 42 gallon barrel after it is refined, but only about 51% of the oil can be made into gasoline. So you only get about 24 gallons of gasoline from a barrel of oil. They are NOT overcharging for gasoline in this nation. We are simply spoiled hogs who expect more than our fair share of the world resources, and are cry babies when we do not get our way. We have seen nothing yet. There is probably going to be a real shortage of gasoline by 2010 or 2012. This will be caused by "Chindia" (China and India) growing demand for more oil as they build more highways and cars. There will simply not be enough oil and this could bring our economy to its knees. Our civilization could even fall if we do not act now to prevent it. The 1st step would be for the church in this nation to repent for being so arrogant, apathetic and hoggish. Ezekial 16: 49 " 'Now this was the sin of your sister Sodom: She and her daughters were arrogant, overfed and unconcerned; they did not help the poor and needy. 50 They were haughty and did detestable things before me. Therefore I did away with them as you have seen. Lou Click here to reply to this post
Gas Prices
Posted On: 04/23/08 01:52:05 PM
Age 57, TX
Kerby, you make a good point, however I disagree with how you make it sound like the oil companies are a group of altruists engaged in an enterprise where they are only making a modest living. You and I both know that if the oil companies weren't making a killing in this business they would be getting out of it faster
than rats on a sinking ship. They are the one's who always come up with the lame excuses for price increases, such as switching over from one seasonal blend to another, or there was a hurricane "somewhere" or an pipeline ruptured or like back in the '70s that oil barges suddenly broke apart just before delivering their payload to a refinery (this happened at least 3 times on the east coast). The answer is BOTH the government and the oil companies are responsible and both need to get out of the way of innovators who want to develop alternative fuel sources. The root cause of all of this is power hungry greedy people. Click here to reply to this post
More explanation needed.
Posted On: 04/23/08 01:40:22 PM
Age 45, SD
I don't get it. Isn't the federal gas tax on a per gallon basis? How does the government then benefit from high gas prices? It would seem that high prices lessen demand and consumption so the government would collect less in taxes. What am I missing? Click here to reply to this post
One government employee to watch one private citizen work
Posted On: 04/23/08 12:28:39 PM
Age 61, MO
The U.S. governments, both Federal and State, have almost completely stopped serving the people. Growth in size of government, billed as providing more services, has actually proveded more burdens on the citizens. The exhorbitant tax on gasoline is necessary to help fund the exhorbitant cost of running an over-extended, inefficient government. Printing more money is yet another way government slyly pays for its excesses, which is really another form of tax burden on the citizens. Instead of spending so much energy in deciding which candidates would best represent us in fine tuning government, perhaps we should merely demand a drastic reduction in government all the way around. Of course this means that we would have to take more responsibility for ourselves. George Cancilla Click here to reply to this post
What's the problem?
Posted On: 04/23/08 09:55:29 AM
Age 43, ENGLAND
I don't know how to brak it to you guys but you still have the lowest petrol prices in the world (well Saudi arabia might be less). Over here its almost 3 times what you pay (see http://www.aaroadwatch.ie/eupetrolprices/default.asp for comparisson).
If you didn't all drive such needlessly wastefulness vehicles you'd all be rich.
PS
What has this to do with a Biblical worldview? Click here to reply to this post
Gas Prices and Taxes
Posted On: 04/23/08 09:13:55 AM
Age 44, KY
Thank you, Mr. Anderson, for that excellent point and information, thought the media has created such a hatred for big business and especially big oil, I doubt most folks who read your article and allow the information to register! Not that I am a fan of Sen. McCain, but he has called for the suspension of all Federal Fuel Taxes for the Summer... of course that idea was received exactly they way you would expect a "Tax reduction" to be received in Washington D.C.... DOA!!! Click here to reply to this post
Tax reduction problems
Posted On: 04/23/08 03:21:14 PM
Age 35, TX
Reducing one tax (gasoline) will only put greater burden on other taxes, or cause the govenment to borrow more money for foreign sources, or devalue the dollar by printing more out of thin air (inflation). For ANY tax cut to be successful, it must be met by an equal reduction in government spending. Cutting gas tax is nothing more than "feel good" legislation, and a tool to get votes. I won't get excited until I hear of reductions in government spending. Click here to reply to this post
666
Posted On: 04/23/08 07:18:55 AM
Age 55, MO
Our government , high taxes? This cocoon has been cleverly woven. o'l baal is a live and
kicking, but his time is about up!
byron
maranatha ! Click here to reply to this post
