Politicians Deserve Some of the Blame for High Gas Prices
Let’s start with the claim of those in Congress that the oil companies are gouging the public, price fixing among themselves, or just making too much profit. I don’t want to dwell too much on any of those points and would rather, for the most part, let oil company executives answer for themselves. I will say, however, if the oil companies don’t make a profit what incentive do they have to drill to find additional oil?
Some are calling for a tax on excessive oil company profits, called a Windfall Profits Tax. As pointed out in Capitalism Magazine, September 26,2005, at www.capmag.com, in an article by James Glassman, the United States tried such an approach between 1980 and 1987, and the tax (WPT) “reduced domestic oil production between three and six percent. This made the U.S. more dependent on imported oil.” At a time when we need to find more oil and reduce costs, some in the United States Senate are instead considering something that would make us more dependent on foreign oil.
Will politicians ever actually consider something that might rapidly lower the price of gas during the current spike in oil prices, like lowering or abolishing the tax on a gallon of gasoline? It seems not. It seems it’s just easier to try to look tough, to pretend you’re trying to do something, by taking on the oil companies. Again, I do not work for an oil company, and I will let executives defend themselves. I will not say they do or don’t need as high profits as they now have, but obviously they not only need profits to make the business viable, but also to be able to search for more oil.
According to statistics on the Internet, currently the federal tax on a gallon of gasoline is 18.4 cents per gallon. The average state tax to be added onto that is from 8 cents per gallon in Alaska to more than 40 cents in California, New York, and Hawaii, with a state average of 28 cents per gallon. That is not even counting local taxes, which might be added on in some locations.
From those statistics it is easy to see that during the current spike in prices, if state and federal taxes were abolished, the price of a gallon of gasoline could drop immediately from about 26 cents per gallon to almost 60 cents per gallon, with an average drop being possibly about 46 cents per gallon. According to statistics on the internet, taxes add about 15 to 20 percent to the price of a gallon of gas in the United States, while in the United Kingdom and France they add about 60%. Although gas is not measured by the gallon in the United Kingdom, the average equivalent tax per gallon there would be $4.20.
As an example of what the government can do, President Bush recently reduced some federal environmental regulations on oil companies. In my area, gas prices have dropped from about $2.95 per gallon to $2.57 per gallon in many cases. I am sure that many of those in Congress who gripe the loudest about the oil companies were opposed to what the President did, but it sure helped lessen the load on my wallet a little. Who knows the effect of state environmental regulations on the price of gas?
When gas prices first jumped to more than $3 per gallon, President Bush released gas to be used from our reserve supply, and the price, at least temporarily, went down quite a bit. Around the area where I lived it briefly went down to less than $2 per gallon. Once again, there where those in Congress who were against that, because they would rather complain than do anything.
Let’s consider other things the government could do to lower gas prices. According to the Department of Energy website, www.eia.doe.gov, the Alaska Natural Gas Pipeline Act of 2002 called for federal action to expedite the construction of a natural gas pipeline from Alaska to the lower 48 states. According to the website, the government, without the act, did not forecast the completion of the pipeline in the foreseeable future, even by 2020.
According to the provisions of the act, “this analysis projects that a pipeline linking northern Alaskan gas to the lower 48 states would begin operating in 2020, lowering the 48 wellhead price by .06 cents per one thousand cubic feet. âÂ?¦This case also does not project the construction of a pipeline before 2020.” The site also noted, however, that under proposed provisions in the Low Oil and Gas Technology Case, construction would begin in 2014 and result in prices in the lower 48 states that would be .32 cents per one thousand cubic feet lower than the corresponding case without that provision.
I love the environment, although I am not an environmentalist. It seems many experts believe that more oil could be found faster and gotten to the lower 48 states quicker than many environmentalists and those in Congress want-lowering our gas prices. This was even despite the fact that natural gas prices spiked this winter, putting an undue burden on low income people in paying their heat bills. Nevertheless, politicians would rather gripe at the President for not doing more to help the needy or the oil companies for their prices than to actually do something.
There are a lot of things driving up the price of gasoline – the price of crude oil from the Middle East, and America’s dependence on foreign oil, an uncertain situation in Iraq and throughout the Middle East, and the price it costs to find more oil. The next time you fill up your tank with gas don’t blame the oil companies only-if it all, however. Complain to your Congressman.
