Monday, May 26, 2008

It's a gas, gas, gas.

I spent the weekend filling the coffers of the opec sheiks. At a half C-note per fill up, it got old, (and expensive) quick.

So, I started contemplating the federal and state taxes on gas, and if they were necessary, if I thought a "tax holiday" was in order, and where does the money for gas go, and would nationalizing the oil industry (or socializing it).

Basis: the Fedrul gummint gets 18.4 cents per gallon for unleaded, and varying by State Gummints from 7.5 cents per gallon in Georgia to 32.1 cents per gallon in Wisconsin. So anywhere betwixt 25.9 cents to 50.5 cents per gallon is collected by the tax man.

But wait, there's more!

There's also sales tax, county tax, locality tax, franchise tax, underground storage tank (UST) tax, etc.

What we end up with is anywhere from 63.9 cents per gallon in the People's Soviet of California (which includes 6% Sales Tax. 1.25% county tax. 1.2 cpg state UST fee. plus local sales tax) to 26.4 cents per gallon in Alaska.

States use the money for whatever they want, here in PA the money generally goes to maintain the roads. We have more miles of road in PA than any other state in the nation (including Hawaii and Vermont). Fedrul munny is used for interstate highway maintenance.

So these tax schemes that espouse a "tax holiday" are pretty stupid ideas. If the federal gummint doesn't collect its tax, the interstates maintenance suffers, and the cost of gas drops 18.4 cents per gallon.

On a national scale, gas has risen in cost 1 cent per day for the last two months, so if future performance can be predicted based on past performance (a bad idea when playing the market) a tax holiday imposed for the summer on 20 June and ending on 23 September would reduce the average cost of a gallon from $3.80 to $3.62. On 17 June, gas would be back to $3.80, and by 23 September would be $4.75. The tax would kick in again on 24 September, and Gas would immediately jump to $4.93, just in time for the fall heating fuel push!

So, as we can see here, a "tax holiday" is like a vacation in Guadalajara--it sounds like fun until you drink the water, then it just stinks.

The big Detroit have been pushing high-powered, big engines on us for the last decade. SUVs rule the road, and the V8 grocery fetchers are partly to blame for the supply/demand crisis we are in.

The biggest reason we are dying at the pump is because of our own government. Not because of any taxes on gas, but because the dollar is damned near toilet paper as a foreign currency. You see, when the money changers set values on our currency, they look at a few things: our national debt, our current spending, plans for future spending, our gross national product, and gross domestic product.

If you look at the US as a business conglomerate, here's what you see:
The company is 9.4 trillion dollars in debt. (as of 0355 AM GMT, it is $9,399,523,515,966.29)
The CEO is supporting an operational budget of $3.1 trillion, and the company is spending $1.6 billion every day.
The board of directors (legislature) consistently adds pet projects of dubious benefit to the company's shareholders every time they pass a budget agreement.
Every subsidiary (the states) is also carrying its own debt.
The corporation, its subsidiaries, and shareholders are all borrowing on credit to pay off debts.

The shareholders will choose a new CEO in the next 6 months, and he (or she) will take over in the 2dd quarter of the 09 fiscal year. Among the choices they have, each candidate espouses programs of dubious fiscal responsibility, from promising free universal health care to all citizens, residents, legal and illegal aliens; to cutting tax revenues from the largest section of the population, eliminating income tax for 10 million people, raise minimum wage and costs to businesses; to plans to bail out people who borrowed more than they could afford to pay on houses.

Seriously, would you buy stock in this company? Just based on the thirteen figure debt I wouldn't invest in it. No small wonder that foreign investors won't pay top euro for dollars, either. If our money is worth less, (has less buying power) on global markets (think of the dollar as shares in the company) then anything we wish to purchase is going to cost more. For instance, at $200 per barrel for crude, Europeans pay only €100. We must increase the value of the dollar globally, through fiscal responsibility, sound economic policy, and paying down the national debt.

And nationalizing or socializing the oil industry? Forget it. The current oil industry averages nine cents per gallon profit. That's less than 1/2 the gummint's profit. (Or from the governments' point of view, a 1/3 revenue increase opportunity.) Has nationalization of any industry based on that industries' success ever happened? Does that seem like the American way? Life, liberty, and the pursuit of happiness is all well and good, but if you make too much money, we'll take ALL of it. The reason oil companies are making record profit isn'tfrom the price of gas. It's from the demand for gas. They are selling more gas than ever, and making the same profit per gallon they did three years ago. However, because supply is stable, and demand is increasing all the time, the cost goes up. The cost will continue to rise until it reaches equilibrium with demand. At that point, the price will stabilize. As companies strive for market share, prices will fall a little, but not much. The only way to reduce the price per gallon is to increase supply while stabilizing or reducing demand.

Let me say that again:
The only way to reduce the price per gallon is to increase supply while stabilizing or reducing demand. OPEC won't increase production. We asked, King Fahd told us to pound sand. We could explore domestic oil, and build modern infrastructure, but that would take five years at a minimum before we saw the first drop of domestic flow. So, in keeping with free market forces, if we actually maintain some amount of fiscal responsibility, the value of the dollar would increase, and costs would drop, and if we increase taxes on vehicles which waste fuel (luxury SUVs, sports cars, recreational vehicles (boats, RVs, jet skis, etc.) private planes (especially private jets) and all NASCAR events (really, 50 cars driving 200 MPH in circles? THAT'S a responsible use of gas?)

Once we stabilize our demand, then we look at the countries that sell us oil. If they start screwing with the cost of oil so they can buy another fleet of Bentleys, we drop a bomb on a palace. Eventually, they'll get the idea. Also, until we get the US oil infrastructure rebuilt, we need to annex Venezuela--you know--for "regime change."


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