Americans are feeling the pinch at the gas pump. They believe they are paying way too much for a gallon of gasoline. Take a trip to England where you will pay about $6.00 per gallon. Most of the price is in taxes. I can remember seeing the movie Tender Mercies starring Robert Duvall as a drunken country-western singer who finds Christ and a new family. The woman he married owned a gas station. The price signs showed that gasoline was over $1.50 per gallon, and that was in 1983. I remember what I was earning in 1983, about one-fourth of what I am making today. Six dollars a gallon would make me about even.
The profit oil companies make on a gallon of gasoline is minuscule compared to what they pay for the crude oil, refining, distribution and marketing, and taxes. The oil industry employs tens of thousands of people, creates residual businesses, takes all the risks in drilling and transportation, pays billions of dollars in taxes, and gets blamed for gouging the consumer for unfair “profits” for delivering a volatile product safely to outlets of distribution a few miles from our homes and next to highways that criss-cross America. Government agencies, on the other hand, simply cash the checks for the taxes the gas stations collect from their customers. The combined state and federal taxes for California is over 50 cents per gallon. Nevada pays even more. Hawaii is the most heavily taxed state when it comes to gasoline. The United States average is somewhere around 45 cents per gallon.
Politicians don’t want to talk about high gasoline taxes. There are no votes in it for them. In fact, it might anger the American public and produce sympathy for “Big Oil.” It would expose the fraud of “price gouging” by the oil companies. I’m hopeful if prices remain high that more people will start talking about how state and federal governments are the real problem. Maybe even some in the mainstream media will start asking lawmakers why oil profits of about ten cents per gallon are “obscene” but nearly 45 cents per gallon of taxes is . . . patriotic? With this basic knowledge, what do some of the political sycophants from both parties offer as a solution? Windfall profit taxes. How does taxing oil companies help consumers? The goal is to make voters feel better and make them look magnanimous by scolding the oil bullies.
In addition to exposing political hypocrisy, high oil prices might get our Congressmen moving on opening our coastlines and parts of Alaska to exploration. This is a no-brainer, and that’s why Congress is dragging its collective feet. This is Economics 101—Supply and demand of a scarce resource. If you pass laws to curtail supply, there will be less of the commodity, and prices will go up. Of course, most Americans know little about how markets work, and Congressmen believe that by passing a law they can actually lower prices and increase wealth for all of us. Remember wage and price controls? They didn’t work.
It’s these crisis situations that bring the best out in American ingenuity and invention. High prices will give them the incentive to put their ideas to work. Please, don’t ask the government to do anything other than let the markets do what they do best: Bring us the things we need and desire at the lowest prices possible while still making a profit so they can continue to explore and develop new products. Aren’t we thankful that government stayed out of the computer and software business?