Lessons in Leftist Logic: Raise Taxes to Bring Down Gas Prices

April 28, 2011 By 17 Comments

The American Petroleum Institute has responded to Obama’s blame game by calling the energy policies “alarming.” API President Jack Gerard said: the administration has chosen “inaction on essential energy projects that would create jobs, drive economic growth, and boost federal revenues…. The best thing the administration can do on gasoline prices is to encourage greater oil production and greater fuel efficiency here at home. Launching another gasoline price investigation, when it’s obvious strong demand and world events are driving today’s markets, is pointless.”

Gas at the pump typically spikes in the spring. What pesters Obama is that as oil prices rise, his poll numbers fall.

Historically, as crude oil prices have increased, so have fuel prices. The reverse is true, too. The gradual growth in the global economy is increasing demand for oil and gas. Although growth is centered in Asia and the Middle East, U.S. demand also is growing.

The “biggest single component of retail gasoline prices is the cost of the raw material used to produce gasoline—crude oil,” the American Petroleum Institute acknowledges in its publication “What’s Up with Fuel Prices.” But “other factors—including weather events, geopolitical risks, inventories, exchange rates, and spare capacity—also have an impact…”

In spite of persistent Democrat attempts to appeal to the naïve by claiming that oil companies make huge profits, “Oil and natural gas earnings are typically in line with the rest of the manufacturing industry, averaging about 7 cents of every dollar of sales over the past five years. Critics usually focus on only half the story—profits. Profit margins, or earnings per dollar of sales (measured as net income divided by sales), provides a better way to compare financial performance among industries of all sizes.

Also, contrary to critics’ charges, oil companies aren’t owned just by a little pack of stingy and wealthy insiders. The 55 million households with mutual funds, the 45 million with personal retirement accounts, and millions of other stockholders typically have some of their money in petroleum stocks.

Although Obama desperately wants to hike up taxes on oil and gas companies, they already bear an effective tax rate of 48.4 percent, according to API statistics, compared with 28.1 percent for all other S&P industrial companies. A study by the research firm Wood Mackenzie (WM) found that from 2011 to 2025, negative economic consequences of higher taxes will more than offset any short-term gains in tax revenue. The study also found that increased access and development of domestic oil and natural gas would create an added half million jobs by 2025.

WM said that oil and gas companies paid $1 trillion in total income taxes from 1980 through 1008 and more than $178 billion to the government in rent, royalty, and bonus payments from 1982 through 2009. The oil and gas industry provides the Treasury with more than $95 million every day. The industry supports more than 9.2 million U.S. jobs.

If only Obama would give up the blame game and allow oil and gas companies access to domestic resources now off-limits, this could create hundreds of thousands of jobs in our jobless economy. Gas prices could even trend downward.

 

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About

Tait Trussell is a national award-winning writer, former vice-president of the American Enterprise Institute and former Washington correspondent for The Wall Street Journal.

  • geez

    Yeah, here's another opportunity for Obama "the payoff king" to funnel some more of our money to his cronies. This POS has got to be voted out and voted out with a passion. We can't afford anymore of obama's "leadership"!

  • theleastthreat

    I remember the good old days when Carter was President. Yes, those are now the good old days!

  • Y Brandstetter MD

    Right now the US produces only twenty percent of the oil it consumes and no amount of drilling will replace those 80 percent in the short term
    However, the US has an abundance of natural gas, coal and sun from which to extract unlimited electric energy provided the transmission lines are overhauled, something government and industry can do. With electric supply assured it is a short hop to electric cars with swappable batteries, a technology championed by a US based international consortium, Better Place. Rather than burning the imported oil at an efficiency of 5-9 percent (city driving where most miles are driven) one can drive the EV in comfort with 90 percent efficiency (motor does not run when not moving). Its all there for the taking and building, if the Right stops protecting the Oil Empire.

    • kasandra

      I don't know about driving "the EV in comfort." Have you looked at what using the heating or airconditioning does to the miles you can drive on electricity alone in one of these vehicles? Also, we have an imbedded inventory of about 250,000,000 gasoline powered vehicles on the road. If you stopped building any more today, and sold 10,000,000 electrict cars a year, it would still take a quarter of a century to replace the current inventory of gas powered cars with electric cars. So, the reality is that for quite some time we are going to require a lot of petroleum. It is clear that developing more petroleum is contrary to the stated policies of this administration and much of its political party. They have been blocking drilling and refining for decades. This doesn't mean that alternative sources shouldn't be developed. It just means that it's not an "either-or" situation despite what our leadership says to appeal to its political base.

      • Supreme_Galooty

        What you say here simply makes too much sense for any pie-in-the-sky, wind/solar cretin to understand. These people remind me of the sycophants who surrounded King Canute: "Upon your command, Oh Great King, the tide will surly come no further." Or, "Plunk your magic twanger, Froggy, and the government will invent the perpetual motion machine."

    • kasandra

      P.S. And that isn't even taking into account that most things you use in your daily life even excluding your car are made in part from petroleum products. For instance, to quote "The Graduate", "I have one word for you – plastics."

    • chrisnichols

      the "Right" isn't just protecting the "Oil Empire", they are protecting a companies right to risk their own time and money to develop a product to sell on the open market. Which means they are protecting you. If any of that other crap worked, people would buy it voluntarily. Why can't people on the left not understand the concept of voluntary contracts?

      • http://www.plusaf.com plusaf

        Who is John Galt?

  • theleastthreat

    First of all, let me say that I do not wish to get into it again with yet another Leftist, so that's why I''m not directly replying to Y above. However, to power electric vehicles, we would need to expand our electrical grid. That means new plants and transformers and cables. Without these things, we could expect brownouts and blackouts and nobody would be driving (or watching TV, playing nintendo, or refridgerating our comestibles). Also, EVs don't have range. To charge an EV may take special hookups in the home so apartment dwellers could forget about that. Swappable batteries? How long does the swapping take? And who is going to invest in building up that kind of an inventory? That could easily cost millions and millions of dollars. It's economics, not the Right.

  • theleastthreat

    Furthermore, a simpler idea is to drill for oil. A longer term (and relatively simple)approach is to get auto makers to build CNGVs and market them in large cities. That way the supply infrastructure for CNG (compressed natural gas) is limited to large urban areas like Dallas-Ft Worth or Atlanta or Tampa-Orlando, etc. Or using mobile fueling stations (supply trucks) for smaller cities. The dealerships would be located in those places as well, cutting distribution costs for the car companies. Also, natural gas needs little, if any, processing to make it into fuel for a vehicle. Gasoline needs a lot more and ethanol even more still. So Y, it's not really us (on the Right), it's the lack of vision and leadership from our government that is holding us back. And it's economics.

    • http://www.plusaf.com plusaf

      theleast…
      the gotcha in your solution is "to get auto makers to build CNGVs…"
      that's not very "free market" of you, is it?

      the answer is for the marketplace [that's you, me and the guy behind the tree...] to demand them and refuse to buy anything else. otherwise, the "make them" will become another government mandate passed by the know-nothings in Congress, and I, for one, am tired of that…

      peace out.

      • theleastthreat

        I didn't mean a Gov't "get them to". It was a sort of generic "get them…". The Gov't wants ethanol and EVs for some reason. I'd rather have a CNG-V than an EV any day, but since gas is the thing, I go with gas. However, I do think that the best way to market CNG vehicles is in the large cities first and let it spread to the rest of the country and that would get them to build these cars in the first place. That's all I meant.

  • CHARLEY 60

    The oil companies were given the tax breaks to do the search for oil. Check it out, they did there job and you can now see where the oil reserves are over the entire earth. The job is done so should be the the tax cuts for it. To expect them to use that money to develop new energy alternatives, is like putting a fox in the hen house and telling it not to eat any chickens. INEL, here in Idaho, developed a reactor back in the 90's that could be operated with out the danger that is showing its ugly face today. No more fuel rod storage problems either. They built one and proved it. Us taxpayers payed millions for that to be done. What happened-big corporate dollars-read GE. The funding was stopped by Congress and INEL was told to dismantle it. Called IFR.

  • Steeloak

    Corporations cannot be taxed, they simply pass the cost of any taxation on in the price of their goods & services. Only the final consumer of those products & services pays the tax, since individuals have no ability to pass on the cost to someone else. Therefore, tax breaks mean you pay less for something a company provides, ending tax breaks means you pay more. Best is to impliment the Fair Tax and eliminate corporate taxes altogether.
    If a technology is good and makes economic sense, the market will make it available to all. If it isn't, then the government will spend billions to prove it doesn't work.

    • http://www.plusaf.com plusaf

      Steeloak….
      more accurately, corporations CAN and ARE taxed… all the time.
      AND to maintain profitability, if possible, they DO pass those taxes on as costs to all of their customers…. that part is accurate.

      But a tax break has the same impact… a tax break to a corporation or industry makes THEIR product less expensive to THEIR customers, but the tax credits are paid for by the same zero-sum game the government plays… the "breaks" have to be compensated for by tax revenue paid by EVERYONE: the customers AND non-customers, alike.

      that, my friend, is not a free-market "answer," either.

      if you don't like tax breaks, get behind a movement to end ALL of them for ALL recipients of tax breaks. But if you forget to include recipients of ALL OTHER government subsidies, such as agribusiness and all the others, you're "speaking with forked tongue."

      you can try to have it both ways, but i'll call you on it.

      • rlmky

        plusaf
        You are the one trying to have it both ways. Taxpayers only make up approximately 50 percent of the people. Remember almost half don't pay income taxes. Corporations will pass on taxes to all their customers unless government sets prices and then you end up with shortages. Remember Carter. If a business can't make a profit, they will either move their business where they can make a profit or get into another business. In either case you end up with shortages.

  • http://www.americanprogress.org/issues/energy/ H. M. Smitty

    Halliburton Brings In Record $5.3 Billion In First Quarter, Credits Increased U.S. Oil Production Under Obama

    Oil giant Halliburton reported record revenues in the first quarter of 2011, pulling in $5.3 billion. In a severe blow to the right-wing’s daily talking points, Halliburton attributes their robust earnings to increased domestic production under Obama:

    Halliburton’s consolidated revenue in the first quarter of 2011 was $5.3 billion, compared to $3.8 billion in the first quarter of 2010…These increases were attributable to increased activity in United States land…

    “I am extremely pleased with our Q1 results, as overall revenue in the first quarter set a company record of $5.3 billion. North America delivered strong performance as margins progressed due to increased activity…” said Dave Lesar, chairman, president and chief executive officer.

    Lesar is confident that, under Obama, domestic energy production opportunities will continue to grow: “We have been confident about the robust outlook in North America, and the prospect of higher activity in the coming quarters has made us more bullish in the strength of our business in 2011 and beyond.”

    The right wing has consistently and falsely accused Obama of choking off domestic supply. American Solutions, an organization funded by the fossil fuel industry and controlled by Newt Gingrich, accuses Obama on a daily basis of blocking domestic oil production. In reality, under Obama, U.S. oil production has reached its highest levels in nearly a decade.

    Despite record revenue and profits, Halliburton and the rest of the oil industry continue to receive billions in taxpayer subsidies. Last night, John Boehner said he’d be willing to consider eliminating these subsidies, but his spokesman quickly walked back that statement. Of course, less than two months ago, Boehner voted to preserve all subsidies for the oil industry.