The Blog @ Spolitics

The Answer to the High Gas Prices

by Heywood U. Reedmore -- April 25, 2006 at 2:47 am | In No, Seriously | No Comments

It’s that time of year again — the annual parade of stories about high gas prices, the political pressure that comes with them and the calls from politicians to look into price gouging.  The Washington Post writes:

In a move that has not been previously announced, Bush will say that in recent days he asked the Departments of Energy and Justice to look into possible cheating or illegal manipulation of gasoline markets.

This is of course, nothing new.  Check out this story from ten years ago.  In 2000, the stories started to become a regular staple in the press, blooming every spring.  Only this year, because of the record-setting profits from Exxon, we’re getting a new twist.  Both Democrats and Republicans are talking about a “windfall profits” tax.  According to the Post:  

Sen. Carl Levin, D-Mich., said he believes gas prices “would come down within a matter of days” if President Bush told oil companies that he was going to support a windfall profits tax.

Hopefully, this is just populist rhetoric. Because unless these sage politicians foresee global demand waning, robbing oil companies of their profits is the last thing you want to do.

Part of the problem, in addition to global demand, is refining capacity.  It was tight to begin with.  It got a lot worse when Katrina blew in.  Increasing refining capacity takes money and oil companies are not going to make those large investments unless they believe they’ll continue to make a profit.  Raiding “Big Oil” with yet another tax is a bad idea.

Getting less attention in the media is another culprit: a new regulation just going into effect that requires refiners use ethanol instead of MBTE to reduce emissions. The Post writes:

  …prices at the pump also reflect the higher cost of delivering and blending ethanol into gasoline, as mandated by federal and state laws designed to combat air pollution.

“Not only are these costs higher than for the additive ethanol replaced, MTBE, but ethanol is also in tight supply,” analyst Trilby Lundberg told Reuters on Sunday.

In today’s editorial, the Wall Street Journal writes about the ethanol shortage:

…As recently as last year, ethanol was selling for $1.45 a gallon. By December it had reached $2 and is now going for $2.77. So refiners are now having to buy both oil and ethanol at sky-high prices. In short, the only market manipulation has been by politicians.

You’ve got to love how these politicians demonize oil companies when their meddling is a larger contributor to high gas prices.  If it wasn’t for the Democrats, oil from ANWR would be easing the supply shortage by now.  And as the Journal notes, Congress could also reduce the pain at the pump by ending the 54-cent-a-gallon tariff on imported ethanol that protects domestic suppliers.  Forget about ”Big Oil,” the real bad guys might be “Big Corn.”  

But there is one magic wand solution you’re not hearing discussed.  Through taxes, the various levels of government are raking in large amounts of dough as a result of high gas prices. Rather than rob “Big Oil,” Congress could pass a gas-tax holiday.  Depending on where you live this could decrease the price of gas anywhere from $0.50 to a dollar.

Talk about price gouging and unearned windfall profits! Uncle Sam and his nephews are making a killing. Let’s raid Big Government instead.

Welcome!

by Heywood U. Reedmore -- April 24, 2006 at 6:03 am | In No, Seriously | No Comments

Up until now, we folks at Spolitics.com have been having all the fun.  Now it’s your turn to get in on the act.  There’s no need to register if you just want to post comments.  Or you can set up an account and become a contributor.  Simply click on the “register” link at the bottom right and you’ll be a part of the blogosphere in no time.