Thursday, April 27, 2006

Americans are dumb as dirt about gas prices.

Nation: I really do not want to go on some ticked off rant but people are ignorant about simple economics and the world around them. If I have to read one more idiot talking about windfall taxes or how the oil companies are price gouging when no one has come up with any evidence that it occured in previous investigations. There is not much Exxon can do unless you want to pull a Chavez and nationalize all the oil companies which would make matters worse. But it would make people "feel good." Look at some of the arguments against the oil industry. They don't pay taxes. Bloomberg about Exxon record profit quarter:

Profit fell short of expectations because the company's effective income-tax rate jumped to 46 percent from 39 percent, shaving $1.03 billion in net income, said Kenneth Carroll, an analyst at Johnson Rice & Co. in New Orleans.
What about forcing the oil companies to cut prices and spending?
Spending Is Rising Chevron Corp., Exxon Mobil and other oil companies are raising exploration spending to capitalize on surging energy prices. U.S. oil futures indicate that investors expect prices to stay above $70 a barrel through the end of 2009 after touching a record at $75.35 this month. Exxon Mobil is attempting to drill a gas well 32,000 feet (9,754 meters) below the floor of the Gulf of Mexico, which would be the deepest ever drilled. Exxon Mobil plans to start pumping oil and gas from eight new projects this year, mostly in Africa and the Middle East, after starting eight in 2005. Twenty new projects are slated to begin production in the next three years. In March, Tillerson told a gathering of analysts in New York that the company's costs for drilling rigs, pipes and other equipment rose about 5 percent in 2005, less than half the increase incurred by Chevron. Tillerson's goal is to raise the company's output by about 5 percent annually for the next five years. Refining Margins Widen Exxon Mobil plans to spend $5 billion this year on refinery expansions and new chemicals plants. The refinery projects will increase the amount of crude the company can process into products such as gasoline and jet fuel. Exxon Mobil also is modifying plants so it can refine more high-sulfur oil, which is cheaper than the low-sulfur grades preferred by many refiners. Profit margins on refining are widening after some companies idled plants or reduced output to perform maintenance work delayed by the hurricanes of 2005. Based on futures prices, U.S. profits on processing crude into refined fuels averaged more than $9 a barrel in the first quarter, an 11 percent gain from a year earlier.
What about a windfall tax as championed by that economic genius Dick Durbin.
A windfall-profits tax imposes a penalty for the sin of making farsighted investments. Oil companies spent money drilling holes in the ground back in the 1990s even though there was a glut of oil that sent pump prices below $1 a gallon. The customary reward for doing that is to make money when the glut finally ends. For Congress to confiscate a share of that return amounts to telling oil companies they should not have invested in production. Had they not made those investments, of course, there would be even less oil around today--and prices would be $4 or $5 a gallon instead of $3. A windfall-profits tax is a clever trick, if you want to make sure that gas prices never come down. You don't have to take my word for it. President Jimmy Carter responded to the last energy crisis by getting Congress to enact a windfall-profits tax. A study by the Congressional Research Service found the tax reduced domestic oil output by at least 3 percent and boosted imports by 8 percent or more. We could run that experiment again, and I'm sure the Saudis would thank us.
First clue you have a problem is championing laws that were used by Jimmy Carter. What about capping prices on gas at the pump? It worked well in Hawaii.
Gasoline price cap's time may be up By Sean Hao Advertiser Staff Writer The end of Hawai'i's controversial gasoline price cap seemed more certain yesterday after Senate leaders offered a compromise that could pave the way for a repeal of the law. Sen. Ron Menor, D-17th (Mililani, Waipi'o), a key supporter of the gas cap, softened his position as prices rose to more than $3 a gallon for regular at most O'ahu stations. Menor said he is now willing to replace the cap with a law that would require more disclosure of oil industry profits and empower the governor to bring back temporary price controls if needed. House leaders, who want to end the price cap, said Menor's offer could break a stalemate that, if unresolved, would have left the gas cap in effect for another year. "Given this proposal, it looks very likely that we should be able to come up with a compromise," said House Majority Leader Marcus Oshiro, D-39th (Wahiawa). The momentum to end the price caps comes as motorists braced for the ninth rise in the gas cap in the past 10 weeks. The cap, which is adjusted each Monday based on Mainland prices, will likely rise 4 cents per gallon next week, according to House calculations. That's on top of a 14-cent increase this week. Gas prices are the highest they have been since just after the cap was put in effect in September, and public opposition to the cap has been building as prices rise. "When the cap was introduced, I really thought this was our savior," Ben Castillo of Wailua, Kaua'i, said in an e-mail. "Obviously, we were all wrong. I speak with truckers and other small business and we all agree: The cap needs to be reviewed."
We could always cut back on all the taxes that are put on the price of gas.
CAVUTO: Are you ignoring the taxes? Senator, I'm asking you simply, are you ignoring the taxes? Would you roll back those taxes? DURBIN: No. I'm telling you the taxes pay for the roads that we use. CAVUTO: Would you roll back those taxes? DURBIN: No. Let me tell you, you look at the traffic congestion in America and the need for mass transit, you want to cut the source of funding to deal with that congestion? You're wrong. We have got to have taxation of users of our roads, in order to keep them safe and to keep them modern and to build mass transit. Neil, you can't walk away from that. CAVUTO: So, $50 cents a gallon, the taxes are OK? The 9 cent profit, that's not OK? DURBIN: Oh, stop the 9 cents.

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