Republican Oil Spill

Thursday, April 27th, 2006 11:58 pm by Neal

The Senate Republicans may just be hopeless.

Their bill’s provision to remedy gas prices by writing everyone a $100 check is like bad parenting. Hell, I feel like they’re trying to pay me off. What’s next? I’ll need at least $2500 in order to “forgive” the feds unwillingness to enforce immigration laws and protect the borders. I’ll let the administration slide on Iran for $50/week, but I’m raising my rates big-time when they get those North Korean missiles installed.

The Republicans are suffering from the same malady that has afflicted them for decades — the inability to lead — which is especially vexing considering this administration’s majority! Throwing $100 bills at disgruntled voters is worse than a short-term solution — it’s not a solution AT ALL! A short-term solution would be to cut the Federal gas tax. Fat chance with the highway lobby, and because beltway Republicans, like the Democrats, are wedded to their special interests, which reminds me of “Immigration Reform”… and so it goes.

John at powerline has a constructive, conservative rebuttal of the Senate Republicans approach in “Wasn’t There a Time When Republicans Knew Something About Economics?” He concludes

I want the oil companies to make enormous amounts of money. I want them to make enormous amounts of money so they can spend it on drilling wells and building pipelines and refineries. I talked to an oil executive recently who told me that the fact that we can’t expand our refining capacity is a scandal in terms of the public interest, but is actually good for the oil companies’ profitability. Look at it this way: if the oil companies agreed among themselves not to drill for oil in new locations like ANWR, and not to build new refineries, so as to limit the supply of oil and thereby drive prices higher, it would be illegal; indeed, it would be the greatest price-fixing conspiracy in American history. But it isn’t the oil companies that have conspired to limit supply and thereby drive prices higher. It is our government that has foreseeably, if not intentionally, achieved this ignoble end.

Neal Boortz, in “Let’s Not Be Confused by the Facts Here”, points out that the government — not the evil, oil companies — is the one making the “obscene” profits.

The oil company profits are not obscene. As of September of last year the total take for local, state and federal governments for each gallon of gas sold was 46 cents. In New York that figure is 63 cents. At the same time gasoline retailers were making about 12 cents on the sale of a gallon of gas. Right now the government take is approaching an average of 50 cents a gallon. Retailers are making about 14 cents. so … who is making the obscene profit? The local gasoline retailer invests in the community, buys a plot of ground, builds a gas station, hires the employees, pays the local taxes, deals with the local regulatory agencies, and makes a big screaming 14 cents on each gallon sold. Meanwhile, the government steps in without having invested one dime in that facility and takes about 50 cents per gallon. Some obscene profits, right?

As for profit margins … the amount of money earned for each dollar of sales … oil companies are nowhere near the top of the list. In 2005 pharmaceutical companies made about 17.6 cents for every dollar of revenue. That, for those of you educated in government schools, that works out to a 17.6% profit margin for the drug makers. How about your local bank? They made about 19.1 cents for every dollar of revenue. Almost a 20% profit! Not too shabby. And what about your household goods and cosmetics? Those companies earned 11 cents on the dollar. A lot of competition there. Now, the oil companies. What did they make? In 2005 the average was 8.5 cents per dollar of revenue. That works out to an 8.5% profit margin.

Maybe President Bush could have said something yesterday about MTBE. Congress recently refused to protect the MTBE makers from liability from frivolous lawsuits. MTBE is a component in gasoline … and the makers are bailing. MTBE is to be replaced by ethanol .. .but the ethanol producers just can’t keep up! This affects supply, and reduced supply in the face of increased demand means what? Higher gas prices? Could we get the ethanol we need from overseas? Why yes! We could! But the Bush administration has a 54 cent-per-gallon import duty on imported ethanol! There’s your price gouging! Drop that import duty and I wonder what would happen to gas prices.

It’s enough of a problem when Americans suffer from a tragic level of ignorance on issues of basic economics due to generations of state-run education. It’s even more tragic when politicians pander to that ignorance for political gain.

Indeed. If you made it this far, you’ll enjoy both articles.

Comments are closed.