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Bold proposal from Republican Senators to address the gas crisis April 27, 2006

Posted by daveintexas in Politics.

3 simple steps 

1.  Take money from oil companies

2.  Redistribute it to voters hard working Americans feeling the pinch at the pump.

3.  Congratulate selves, praise the American economy and capitalism

Let's be honest, if all they want to give me is a hundred bucks, prices can't be as bad as everyone is screaming they are.

Some want to give them credit for attaching a "drill ANWR" rider.  Well not me.  If they had any balls at all we'd be drilling in ANWR now, and both coasts, we'd be building refineries, and we sure as hell wouldn't be raising taxes to hand out as bribes.  This is Socialist pandering.

Gutless.  Every damn one of em.


1. kevlarchick - April 27, 2006

Nevermind that oil company profits are right around 10%–nothing spectacular. The rest of the gross goes to taxes.

Speaking of a Socialist/Marxist pandering, Fidel Casto is now kneeling before the Chinese to get funding and equipment to drill off Cuba, less than 30 miles from the US coast. Clusterf*ck.

2. skinbad - April 27, 2006

I agree in principle, Dave. But I sort of feel like oil/gas is more akin to a utility company that could use some sort of consumer advocate type position to keep us from getting screwed–oil companies would go before a board and present their data showing their costs and demand are such that a certain percentage of price increase is necessary for the next x months. Oil is so crucial to our economy at every step and we have to consider OPEC’s motives in tightening or loosening the flow that it seems different than what I think of as “capitalism.” Of course, if we get into dairy/ag subsidies, etc. maybe it’s not so different. My logic is bad, but I feel frustrated.

3. daveintexas - April 27, 2006

Well skinbad, they’re all public companies, so their financial data gets published every quarter. In a post-Enron world, lying about your operating expense will get your executives thrown in jail, so I’m reasonably certain it’s factual. I agree on the need for legal oversight – I’m not arguing unfettered capitalism, but that oversight is the FTC (and Justice Dept on a bad day).

It’s not supply driving the price up – it’s available. It’s competition (global) and speculation (investors).

It just bugs the crap out of me that politicians scream “record revenues” and don’t say jack shit about the actual profit margin or the taxes they suck out of gasoline, higher incidentally per gallon than EM’s profit margin. If Senator Blutarksky wants to do something for me, how about suspending half the federal tax per gallon all summer?

4. daveintexas - April 27, 2006
5. Gabriel Malor - April 27, 2006

Economics is one of those things that can be frustratingly counterintuitive. And politicians only make the job of economists more difficult. For example:

The above plan, which would take money from oil companies and give it to car owners/gas purchasers/the general public (?), would actually result in NO change for consumers.

Let’s assume for a minute that the exchange will be perfect (that none of the money that will be taken will be kept by the government); this is, of course, a disasterous and moronic assumption–but I’m willing to let that go because the plan is TERRIBLE even if the assumption was true.

A tax on the oil companies (which is what this would be) would simply be another cost of doing business. The result of adding a cost like this is to make it more expensive for these companies to supply gasoline. The added expense means that companies will be able to sell the same amount of gasoline as before, but only at a higher price.

Consumers, meanwhile, will receive the money that was taken from the oil companies. This is a good thing since they’re going to need it to pay for the higher price at the pump.

Net change for the consumer: $0; they’re going to give it back because of the price increases.
Net change for the oil company: $0; they’re going to make the stolen taxed money back because of the price increases.

Now, here’s the real kicker. How many of us believe that the government can manage this without “losing” any money along the way?…Bueller?…Bueller?…Bueller? So the real outcome will be more like this:

Net change for the consumer: less money.
Net change for the oil company: less money.
Net change for the government: more money. (Yippee for politicians. I gotta get me some o’ that crazy-governmenting money.)

6. skinbad - April 27, 2006

Agree with your third paragraph 100%. Your link also showed gas prices around the country. Houston Houston was as expensive as most places on the map. That is astounding to me. Once in awhile I have to fill up a state car (state tax is not charged). It’s certainly an eye-opener.

7. Gabriel Malor - April 27, 2006

Oh, and skinbad, it’s important to remember that oil companies do not arbitrarily set the price of gas. As the link from dave shows, price is a combination of company costs and government regulation/taxes.

Companies try and make what I’ve called their company costs as low as possible. They streamline as much as possible because by keeping these costs–which are the only ones they can directly control–down, they can out-sell (read: underprice) their competitors. It’s not arbitrary.

Government regulation and taxes make another hurdle between low costs and the consumer. Companies can try and change these, but only indirectly. Ironically enough, Democrats have a good handle on this. They know there’s an oil lobby which tries to reduce regulation and taxes. (They also think that the oil lobby is trying to kill alternative energy and likes to get us into wars. Which is crazy-talk. But at least they have the concept down.)

8. skinbad - April 27, 2006

Didn’t know Gabriel was typing. My comment refers to Dave’s #3.

9. skinbad - April 27, 2006

G., You make sense, but when your realistic geographic roaming area has so little variation in price, it makes you (me) think no one is really trying to “underprice” anyone else.

10. Dave in Texas - April 27, 2006

Unless you believe there’s collusion skinbad, competition is what keeps the price as low as supply and demand will allow.

The only company in the US that is not publicly owned is Citgo – it’s owned by PDV/SA (i.e. Hugo Chavez).

11. skinbad - April 27, 2006

Maybe I’m ready to be fitted for my tin-foil beanie, but if some form of collusion was found, it would be about as surprising to me as the tobacco companies finally being found out for knowledge of health effects and marketing to young people.

12. Dave in Texas - April 27, 2006

How would EM, ChevronTexaco and Conoco Phillips collude with Lukoil, or PDV/SA? If the price is artificially manipulated, they certainly have the motivation it takes to capture market share by cutting crude to 55 bucks a barrel.

For that matter, why doesn’t Hugo just prove the capitalists are corrupt and undercut all those American oil companies? He’s a commie, politically that’d be a huge victory for him. Citgo is distributed at 5800 7 Eleven locations in the US.

13. olorinsledge - April 27, 2006

I’d say petrol is cheap in America at roughly $3 a gallon when compared to the cost here in Australia which is $6.95 a gallon ($1.38AUD litre x 3.78 then converted to USD).

Here in Australia we have a fuel excise (around $.38 AUD per litre) as well as tax (10% GST) on top of this fuel excise – sort of double dipping I guess. But then, that’s been around for years in Australia when you consider a company paying taxes, then you receiving a dividend off that company and being taxed on that too.

The major proposal by the motoring associations, federal opposition party and layman to reduce petrol costs is to reduce this fuel excise and then completing remove the tax on it.

Back to what you’ve posted, it makes no sense at all. As soon as something costs more for a business to produce/sell/market etc, that business will, in most cases, pass the cost onto the consumer. Unless the American government is going to legislate that they can’t pass this “charge’ on. But how are they going to regulate that? Here in Australia they can’t even figure out how the petrol price is arrived at, let alone try to regulate it.

14. The Comish (sic) - April 27, 2006

If we’re going to allow governmental regulation of the oil industry because it’s use is so widespread, do we have to do the same thing with other energy sources? By way of example, in 2004, energy consumption in the US was 39.8% oil, 23.0% natural gas, 22.5% coal, 8.2% nuclear, and 6.1% renewable. Cite. So if we’re going to regulate oil prices because of their importance in the economy, should we also regulate natural gas and coal? After all, their combined total is about the same as oil.

Frankly, I think that government price controls would be disastrous. Suddenly, the voters would have a reason to blame the government for high gas prices. And if that’s the case, do you think the government would ever approve price increases? Which would mean that eventually, all the energy companies would be forced to move elsewhere and sell their product elsewhere because they wouldn’t be able to make money in the US.

In other words, it’s a prescription for rolling blackouts in the US.

Yes, it’s inconvenient right now to have high gas prices. But it wasn’t that long ago that generations didn’t have 2 cars per family, subzero freezers, air conditioning in the summer, and widescreen tvs. And they seemed to get along fine. I don’t think we’re any more wimpy than those generations.

15. daveintexas - April 27, 2006

Microsoft posted a 29% increase in revenue over the same quarter last year. Should we impose a windfall profits tax on them?

16. skinbad - April 27, 2006

Honest question Dave:

For that matter, why doesn’t Hugo just prove the capitalists are corrupt and undercut all those American oil companies? He’s a commie, politically that’d be a huge victory for him. Citgo is distributed at 5800 7 Eleven locations in the US.

Are you saying Hugo won’t do this because he can’t? I assume he controls his product from drilling to distribution. Why can’t he undercut U.S. companies and even eat a loss for a time to make whatever political point he wants to make? What prevents him from doing just that?

17. michael - April 27, 2006

Why can’t he undercut U.S. companies and even eat a loss for a time to make whatever political point he wants to make?


Common sense and economic self interest are what prevent him from doing this. How many millions does Hugo want to piss away with below-market pricing in order to make a “political point”? I’m thinking zero. He has far more effective and cheaper methods of propagandizing.

And what would the “point” be? That socialist refineries are more efficient? Who cares?

And who would the audience be? Americans? Hugo really has no reason to care what we think. His key audience is domestic. Those are the folks he is ripping off, and the folks he needs to keep under control.

18. Russ from Winterset - April 27, 2006

Hugo Chavez stays in power because he gives massive amounts of state money to projects designated to benefit the poor. Oil is the key to this money, ‘cuz it’s not as if Venezuela has a Silicon Valley or Rust Belt. If he tampers with the oil money, even to score some international media points, he runs the risk of losing his base of support.

19. daveintexas - April 27, 2006

What prevents him from doing just that?

Same as the Russkies. He needs the bucks. He’s competing too.

20. Dex in TX - April 27, 2006

“Microsoft posted a 29% increase in revenue over the same quarter last year. Should we impose a windfall profits tax on them?”

Clinton and several states already tried it. EU is still going.

But you make a good point. You make money? Everyone wants a piece of it. Software, tobacco, oil, electricity, crazy blog money? Doesn’t matter. No matter how smart or together you are, someone will try to hold you back, bring you down to their level. It ought be one of the functions of governmeent to protect against this.

21. daveintexas - April 28, 2006

Oh don’t even get me start on the greatest lawyer/goverment corporate theft in the history of the world Dex.

The Texas AG should have gone to prison for his role alone in the tobacco MSA

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