The gasoline "crisis" has brought out the worst in everybody, including the ridiculous spectacle of craven Republicans shamelessly trying to outpander the Democrats. Investigate Big Oil! Give everybody a hundred bucks to tide them over! For the record, if that matters anymore, here's a pretty good breakdown from NPR of just where your gas money goes. It includes this surprisingly honest and accurate assessment:
So you have a situation where demand has been growing steadily and inexorably, and the system of supply is quite vulnerable. That's the basic recipe for high prices.
Well, yeah. It's called supply and demand, and it's working today exactly the way it has for hundreds of years.
What do the Republicans have left, by the way, that distinguishes them from the Democrats? They're spending like drunken soldiers.* They groveled at the public opinion polls over the Dubai ports deal. The fumbled immigration and let Democrats move to the right of them on border security. I think a rout by the Democrats in November is looking more and more likely, no matter what anybody says about how safe most districts are for incumbents. And this won't happen because Democrats have a plan or a message similar to Newt Gingrich's Contract With America. Republicans are doing it all by themselves.
*I know the phrase normally used is "like drunken sailors," but I was in the Army and think the Navy deserves a break once in a while. We also lost our ability to exercise fiscal restraint while under the influence. The only difference between wastrel soldiers and sailors and members of Congress is that we usually woke up the next morning, hung over, perhaps with a tattoo and an unpleasant memory of a strange woman, and moaned, "Where did all that money go? Whatever was I thinking?" Members of Congress seem to be taking the advice of one of my uncles on how to avoid a hangover: "Well, son, you just keep drinking."
Comments
Well from the looks of today's headlines, it seems some Congressmen have been waking up with strange women too.
As I have stated for many years, we need to stop using the process of burning to convert fuel to useful work. For millennia we have been burning "fuels" which pollute. Ethanol is one of the most inefficient fuels around. It has 70% of the energy content and costs us the taxpayer 51 cents per gallon in tax credits. So when gas hits $3.00 a gallon, the cost of E-85 should e $2.30, but with a 51 cent a gallon tax credit that we pay for, it should cost $1.79 per gallon. How many know that growing corn is hard on the soil?
Congress keeps giving oil companies incentives to develop every more fuels to burn. Where has this gotten us? We are more dependent than in 1973.
It's time to move into the 21st century with truly renewable energy sources that are economical, environmentally friendly and truly renewable.
Doesn't anyone remember the gas crunch of the early 70's? The gov't really was pushing for alternative energy sources; things like solar energy and wind energy were being studied and persued. Well guess what, gas prices fell and all the new ideas were put on the shelf. Imagine where we would be today if those ideas had been developed. We would have had 30 years to refine alternative energy and we wouldn't be in the Mideast today.
Sue, windpower is fully developed now. In Denmark 80% of their electrical generating capacity is from wind. Solar power has now reached a point where solar cells are 20% efficient. This means that for every unit of energy from the sun that strikes the surface of the cell, 20% is converted to electricity.
Our politicians do not understand energy. They rely on lobbyists and we end up paying the price for their ignorance.
In the News Sentinel it is reported;
"Gov. Mitch Daniels used the State Department of Agriculture
I think one question is why we treat gasoline and oil differently from other energy sources. Electricy and natural gas are publicly regulated utilities. Should gasoline be treated in the same way?
OK, I'll ask this one more time - I think this debate is missing one thing. Politics aside, the mathematics of using corn aside - Jim has hit on the tip of the iceberg. Exactly what are the profits from the sale of gas ? Obviously, if they oil companies are only making a profit of 1 to 2 cents a gallon, there is no need for regulation and let's leave them alone. However, if they're making, say, 15 or 20 cents profit a gallon, then we have a problem and I would agree gas should be regulated as the other energy sources are. This post started with a pretty chart that showed the breakdown of the cost of a gallon of gas, ... "where does the money go" - the one thing that wasn't on the chart was PROFIT, ... how much do they make on each gallon of gas ?
Who is to decide what profit is too large? Look at the real-estate market. Should people be able to make 25% to 50% returns on the sale of their house? How about Bill Gates and Microsoft, should he be able to have that much of a gain? Biomedical companies like MEDCO-Sofamore Danek, Biomet and others make far larger profits. What you need to look at is the size of the investment (Capital) in relationship to the profits.
Oil companies are owned by people, mutual funds, pension funds, etc. People invest in areas where they believe demand will outstrip supply in order to make a profit.
Exxon-Mobile pays a nice dividend. Therefore the profits go to the shareholders. Some is kept for exploration and investing in new energy sources.
What we need is to make sure that products are not disadvantaged by subsidizing their competitors products.
profits are important in an area where the goods being sold are needed for so many people to live their daily lives. the sale of my house has no effect on how much it costs you to live, the sale of gas does.
I think one point (being missed) is the fact that a lot of *new technology* has been surpressed in lieu of "the bottom line" (for DECADES). And who winds up paying for that bottom line....WE do, every time we turn that key of whatever contrivance that burns gasoline.
It's funny now in retropect to note that Henry Ford made his Model *T* able to run on darn near ANY liquid fuel that would combust (to aid those in rural areas that didn't have "fillup stations" near them.
HIMAC research has an interesting website that sheds some light on the fuel dependency and how we SHOULD have weaned ourselves off of it (by now). And I have 20 year old Popular Science magazines that chronicle all the "breakthrough" technologies just WAITING to be implimented (that still haven't, btw).
Who can we really blame, though? Considering we are all part and parcel to the "master plan" (whatever that is), we can point fingers at the government, big oil, OPEC, Wall Street, and even that reflection in our mirror. There is plenty of blame to go around, that's for sure.
Just wish those in power would develop some conscience for our sake.
B.G.
HIMAC site:
http://www.himacresearch.com/docs/
I made my comment somewhat tongue-in-cheek, with the shameless intent of stirring discussion. Publicly-regulated utilities are, in essence, a form of socialism -- and the notion of expanding that frightens me somewhat. But -- it has seemed to work fairly well. I guess we have decided, as a society, that electricity, natural gas and even telephone service are such important commodities -- necessities -- that we regulate how much profit can be made from them.
So, is gasoline a necessity?
Oh, one more thing -- speaking of shameless. The very idea that the U.S. government will send me a $100 check so I won't be mad at my congressman or senator is simply absurd. I am insulted by the proposal.
Unfortunately, not every problem has only one root cause, would it were so, life would be so simple. I, too, am a problem solver in my business and am quite good at it - I don't pretend to have any of the answers to the larger issues - that's why I'm not running for anything. Just trying to stir the pot, ...
Let me try to answer Larry's question first. It's a little tricky, because people throw out these big numbers -- refiners "get" 99 cents a gallon, those who pump the oil get another 47 cents and on and on. That may pump up the people calling for a "windfall profits tax," but it doesn't really get us any closer to true profit than that chart I linked to showing where all the gross revenues go. As near as I can tell (and I'll let my numbers stand until someone shows me the error of my ways), the oil companies (there are but five left in this country) operate in around the 10 per cent profit range. Taken together, Exxon, Chevron and ConocoPhillips (the three biggest), for example made a profit of $8.19 on every $100 in sales in the first quarter. Maybe if you break that down and say oil companies are getting about 25 cents a gallon from us, that sounds like too much (though you're paying 40 to 60 cents a gallon in taxes, depending on which state you live in). But maybe 8.2 percent doesn't sound so bad, considering the thousands of people involved in getting those trillons of gallons of gas to us, especially considering profit margins in other industries.
How much profit is "obscene" and who gets to decide? High profits, don't forget, are integral part of supply and demand. When supplies get too tight and demand too great, the profits correct the market in two ways -- by getting people to use less, easing demand, and by encouraging more producers and production, increasing supply.
I also worry about giving the government too much power -- i.e., trying to circumvent the laws of supply and demand -- over goods we "need" -- food, water, fuel, medicine, shelter, the list could be nearly endless. There are only a couple of ways the government can manipulate the markets to make sure we get a "fair" price -- whatever that is -- hold down demand or redistribute by its own formula; anything the government does is only like to DECREASE supplies.
And how high is gas right now, really? We're pretty close to the record high in inflation-adjusted dollars, which I think hit $2.94 or so in 1980. Get back to me if gas goes much above $3. And the true measure is what percentage of your income you spend on fuel -- it's been about 3 percent for 60 years or so, and I think that's about where the national average is now.
The United States produces about 8 percent of the world's oil and consumes about 25 percent of it. Something like one barrel of oil in nine goes for American motorists. Demand in the rest of the world is growing by leaps and bounds. Oil is truly a global commodity, and sooner or later (probably sooner) we are just going to hit a wall. Having the U.S. government start taking over the American part of that global phenomenon would come to nothing good.
Well, yes, ... it is tricky, and those numbers are really big
"Let
yes, of course - but those are parts of the problem that aren't going to be solved anytime quickly, ... just like we're not going to get off oil quickly, we're not going to replace all out non-hybrid cars quickly, and we're not going to replace all the wishy-washy politicians quickly (although this is the only one we actually could do, ...)
Larry wrote "profits are important in an area where the goods being sold are needed for so many people to live their daily lives. the sale of my house has no effect on how much it costs you to live, the sale of gas does."
The cost of a house affects the standard of living. It affects how much you pay for rent. It affects what you pay for home repairs. The price of a house is based on reconstruction costs and location. As the price of land goes up, so does the ability to put a roof over your heads.
Geez, ... I give up.
Larry wrote "I