Who is Happy About The Price of Gas?

Although this is not a political blog, I write this because of the impact energy prices are having upon the finances of American families.

Like the weather, our politicians of both parties talk about the price of gas, but don't do anything about it. Oh, yes, they have held "hearings" during which they castigated the oil company executives. They have also threatened to enact a "windfall profits tax" on oil companies.

What would be the result of a windfall profits tax? First, it would not produce a single gallon of oil, or a single cubic foot of natural gas or a single kilowatt of electricity. It would not produce any energy at all. What would it do? It would produce higher energy costs for you and for me. It would raise the cost of oil and gas. A windfall profits tax on oil companies is a windfall profits tax on consumers, on you and me. In reality, corporations do not pay taxes, their customers pay those taxes when they purchase the products produced by those corporations. When corporate taxes increase, the cost of their products increase to cover the cost of increased taxes. So you and I will pay the windfall profits tax if enacted.

American politicians have made it impossible or very difficult to produce oil on American soil or off shore fearing environmental damage. Although environmental concerns are always warranted, there has been great progress in protection of the environment by oil companies. Even during Katrina, there was no problem. Some want other countries to produce more which suggests that they are not very concerned about the environment in other parts of the world. It has been impossible to build nuclear plants since the late 1980s. France produces about 85% of their electricity with nuclear power, while we produce about 20% of ours.

What is the solution? Either produce more oil domestically or produce more nuclear power, and develop alternative energy sources while conserving more energy.

Many of the politicians, especially those on the left, have advocated for higher energy prices as a method to enforce conservation. In the past, some of them suggested that the tax on gas should be raised to as much as a dollar a gallon. So these politicians are getting their way now and consumers are paying for it. Just to be clear, all consumers are paying for it, not just those who purchase gasoline. Jobs and wages are being cut in the auto industry; it costs more to produce and transport food; it costs more to heat and cool homes, so everyone is paying for it.

For example, Thomas Friedman, the New York Times columnist said over two years ago on April 28, 2006 that “we need a tax on gasoline at the pump that will keep prices around $4 a gallon..." Senator John Kerry has advocated the same. To read more, see this.

Al Gore stated as recently as two years ago, in a September 18, 2006, speech at New York University, that he'd like to increase the gas tax even more. So who is happy about the price of gas? Al Gore is. John Kerry and many other politicians are. In addition, Thomas Friedman and many environmentalists are. According to Ed Riffle, Skyrocketing gas prices are making two groups happy. Apparently Senator Obama is another. "In a CNBC interview ...., Obama suggested that the main problem with high gasoline prices is their rapid rise, not their total of about $4 a gallon."'I think that I would have preferred a gradual adjustment,' Obama said.

Some of the more liberal politicians can be added to Ed's list, for example, Senate Majority Leader Harry Reid, on a recent appearance on Fox Business, said "Coal makes us sick, oil makes us sick, it's ruining our country, it's ruining our world."

I am not optimistic that anything meaningful will happen on the political front because it appears that political systems in the United States are broken. Are they beyond repair? As Robert J. Samuelson recently said, "Leading politicians either don't understand what's happening or don't want to acknowledge their own complicity." Further, he remarked, "If politicians wish to point fingers of blame, they should start with themselves."

Some experts are predicting that gas will cost $6.50 a gallon by Labor Day and others are saying that a year from now it will be $10.00 a gallon. Such prices would have a devastating impact on families and on the economy in general. Tighten your seat belts and get ready for what could be a very bumpy ride.

Later we will discuss who gets the money when you pay $4.00 a gallon. Where is your gas money going?

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