Posted by
Josh Todd on Saturday, May 26, 2007 6:05:57 PM
The following piece was prepared for and posted on the Montgomery County Ohio GOP Blog at http://montgomerycountygop.wordpress.com/.
The operative questions are: Why are gas prices so high and what should be done about it?
Gas prices are so high, naturally, because gas companies are greedy and want excessive profits. What else? I am only kidding, of course, as there are several reasons aside from greed that have driven our gas bills up to $40 or so each time we stop.
First is the cost of production. It costs the gas companies money to buy the barrel of oil, have it shipped, refined, and then delivered to your corner filling station. That is where the largest portion of your gas bill originates.
Second, and probably most important, is supply and demand. Even as prices rise, we as Americans, by and large, do not change our driving habits. We whine about gas prices but we don’t stop driving. Then, the two largest nations in the world—China and India—have billion-plus populations that are driving at exponentially increasing rates. Thus, they are demanding a larger share of the world oil supply. When people want more of something, the price usually climbs.
Third is government. Governments of all stripes tax gasoline at alarming rates. They also place requirements on gasoline blends and restrictions on drilling and refining domestically, the latter causing us to import more of our oil and gasoline than we would otherwise.
When all is said and done, there are two profiteers: the gas companies and government. Gas companies receive a rather small portion of each dollar as profit, perhaps a nickel, when we subtract what they have to pay in production costs (materials, labor, and transportation). Meanwhile, government, which produces no gasoline and pays no production costs, earns the largest portion of profit in the form of taxes.
Now let us answer the second question: What should be done about it? Here the assumption seems to be—but may not be—that government must and should do something about it. I challenge the wisdom of assuming a governmental role with one exception. Based on the premise that Uncle Sam and the State of Ohio must act, here is what they should and must do: cut taxes on gasoline, especially if we are concerned with immediacy. Doing so would take a larger chunk out of our bills than any other idea, even the bad ones like taxing “windfall profits.”
After that, governments should deregulate and allow for domestic drilling and refining, which wouldn’t cause an immediate change but would help in the long-term. Last but not least, government should create incentives for exploring new forms of energy. And one more note: Congress should not—I repeat, not—sue OPEC, especially when it, as a body, could ease the burden now via tax cuts.
Until then, however, prices will remain higher than we would like. I suggest that angry Americans take up the issue with their taxing authorities immediately.