$90 per barrel oil is here

Now is the time for action

By Neil Stevens Posted in Comments (26) / Email this page » / Leave a comment »

Oil just went over $90/barrel for the first time ever, and it's not just because the dollar is down. According to Bloomberg, crude oil prices are up 35% this year in Euros as well.

This should be an opportunity for Republicans in most states, as well as nationally, to push for a tax cut on poor and middle class Americans.

Read on for details...

Nationally we should repeal the federal gas tax of 18 cents per gallon. With the average price of gasoline in the US at $2.80 per gallon, this tax amounts to a 7% tax on the money all Americans, rich and poor, spend on the gasoline they need in their daily lives. Even those without cars of their own pay higher prices whenever they go shopping for food, clothing, or essentials, all of which must be shipped by truck.

In the states we should consider both repeals of state gas taxes (which in some states go over 30 cents per gallon) and exemptions of sales tax for gas (which itself threatens to go over 30 cents per gallon when gas exceeds $3.00/gallon in states with 8% sales tax).

All combined, this combination tax relief could save Americans seventy five cents on every gallon of gas. Now is the time to act to prevent this regressive taxation from putting any more strain on those Americans who can afford it least.

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$90 per barrel oil is here 26 Comments (0 topical, 26 editorial, 0 hidden) Post a comment »

What other means that money would come from? Just cutting taxes always sounds good on the surface, but with tax cuts means cuts in something else because the funding is no longer there. Unless you increase taxes somewhere else.

Instead of adding to our pockets through cuts, why not go to the source and oversee the Oil industry itself and find out why oil companies have posted record profits for the last few years.

From 2004-2005 alone Exxon Mobil's revenue increased by nearly 42% while the economy as a whole grew a little over 3%.

I am all for companies that make huge profits, thats the name of the game called capitalism. But at some point should companies see that just because they can do it, that doesn't mean that they should do it?

I don't know, maybe its just me.

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Let's nominate the Nash Equilibrium for President.

Buy some of their stock. You can get it for $95 and change.

Then you'll start complaining about how their return on equity persistently underperforms the rest of the market.

Let me assume for the moment that you drive a car or ride public transportation to work every morning. And that you live in a home that burns oil or natural gas to keep you warm on cold days.

If any of this is true, then you are the reason for high energy prices.

Stop demanding so much oil for your own personal, selfish use. You'll see that, like magic, the oil price will fall, and take XOM's revenues down right along with it.

waiting in the long lines at the gas stations....

The best way to reduce the supply of gasoline is to put a "windfall profits" tax on the oil companies. By the way, reduced supply usually means yet higher prices.

And if you REALLY want to go after the people making money off gasoline try the government. You pay about 5 times Exxon's profit per gallon in gasoline tax.

Finally, what's wrong with letting people keep their own money and letting THEM decide how to spend it? Some of those people may deicde to use their extra money to buy a new car that gets better gas milage than their old car. Others may decide to use their money to invest in alternative engergy. Still others will just reduce their driving, and spend the extra money on things that are important to themselves (like maybe education for their children).

Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.

While you claim to be pro-capitalism, your understanding is limited.

In a resource business, companies that do not invest enough to replace production (i.e., find new reserves to replace the barrels they produce), are essentially holding a "going out of business" sale, every day, with every barrel they produce.

If they fail in their search for new sources, guess what? The price goes up as the resource supply is less.

People have the mistaken notion that oil company profits go into a huge money bin. Nothing could be farther from the truth. Companies can pay dividends to their shareholders, or they can reinvest in their businesses.

Exxon's revenues may have increased, but their cost structure has increased as well. In the time that the price of oil has doubled, the cost of drilling and equipping a new well has doubled, too.

Exxon is in a hugely competitive business. They owe it to their shareholders to maximize their return; otherwise, company executives would just be presiding over the ultimate demise of the company.

It's such a fine line between stupid and clever. - David St. Hubbins

and offset that "cost" by eliminating the Dept of Education. There will likely be money left over and we can eliminate some other taxes as well.

Thanks for playing.
CongressCritter™: Never have so few felt like they were owed so much by so many for so little.

I can think of several things that taxpayers are currently paying for that could be cut to make up for the loss of revenue.

There are posters who can say it better than I can, but increased revenue for a company does not always mean increased profits.

"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

If we're going to cut taxes by, say, $20 billion a year, why is the gas tax the place to do it? Why not cut taxes on work (income and payroll taxes) or taxes on savings and investment (capital gains, dividends) or taxes on risk-taking (corporate taxes)? If you want less of something, tax it. If you want more of it, reduce the taxes on it. Isn't more work, savings, investment, and risk-taking better for the country than more driving or more gasoline consumption?

And the response "I'm for cutting gas taxes AND the other taxes!" doesn't work. Given a fixed level of tax cuts, every dollar in gas tax cuts is one less dollar in other tax cuts. That doesn't strike me as a good trade off. A good political trade off, maybe, but not a good economic trade off.

Why? The gas tax is regressive, and while the merits of progressive taxation can be argued, I think a regressive tax is bad policy.

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Let's nominate the Nash Equilibrium for President.

...gasoline taxes are a use fee. That is, if tax revenues are dedicated to road maintenance and infrastructure improvements. And if the tax is fixed in cents per gallon, as opposed to a percentage like you have in CA.

Personally, I think the price of gasoline needs to be high enough to encourage its conservation; people should be making an economic choice (like they were not forced to do for most of the period 1984-2004) to discourage its wasteful use. That price would reflect the inherent value of the product, and its replacement cost. Right now, people only seem to notice when the pump price starts with a "3" instead of a "2". The disconnect with today's oil prices is completely lost on them.

It's such a fine line between stupid and clever. - David St. Hubbins

the correlation between gas and oil prices just isn't there right now. A $90/bbl oil price doesn't guarantee that gasoline prices will shoot up. Look at the trend over the last year and the lack of a direct relationship between the two:

While I'm all for a gasoline tax cut, I don't think you can justify it on the price of oil.

...when they see me they'll say, "There goes Loren Wallace,
the greatest thing to ever climb into a race car."

It's such a fine line between stupid and clever. - David St. Hubbins

"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

I just heard a commercial from BP that said "Oil companies have to deliver Energy not just oil."

If I remember correctly that was one of his arguments. I think it was also the BP commercials which set him off in the first place. 8*)

Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.

I think if we tell people that crude oil prices are at all time highs, and that we can cut 75 cents off of what they pay for gas, that it'll sell.

HTML Help Central for Red Staters
Let's nominate the Nash Equilibrium for President.

I don't think it's a matter of selling - I just don't think the justification is oil price. I think you might get better buy-in by your logic about it being a regressive tax and the "fairness" aspects. That's the kind of logic our mush-brained liberal friends understand.

...when they see me they'll say, "There goes Loren Wallace,
the greatest thing to ever climb into a race car."

As I've said elsewhere this morning, I'm wondering if the current spate of higher crude prices (five record highs in five days) isn't being driven by speculators looking for further declines in the dollar.

Vladimir can speak far more knowledgeably than I can about energy-business fundamentals, and I defer to him in that regard. But on a very short-term basis, I'm convinced that some technical financial factors are coming into this.

It's pretty well known that huge buying and selling by hedge funds exacerbates energy-price movements that ultimately derive from fundamentals.

Another bizarre thing right now is the pricing of Chinese energy assets. I'm simply flabbergasted that PetroChina has more than doubled in market-cap over the last two months to become the second most-valuable business in the entire world, pushing GE aside. (XOM is first.) Even being blood-oil (Darfur) and dumped by Warren Buffett isn't holding this stock down.

CNOOC, a considerably smaller company, has nearly doubled in the same time. This supports my theory that energy prices are driven by dollar weakness, since China's currency is an undervalued peg to the dollar.

We scratch our heads, trying to figure out the fundamentals that drive oil & natural gas prices. A lot of the movement has to be due to the factors you cite: speculators, hedge funds and currency.

Right now a big issue is the disconnect between oil & natural gas. On an energy basis, 1 barrel of oil does the work of about 6 mcf (thousand cubic feet) of gas. In the past there was a lot of "fuel switching" if price ratios got seriously out of whack, but lately that doesn't seem to be happening much.

After Katrina, natural gas was expensive relative to oil; the ratio then was 4 to 1. Now it's about 13 to 1: storage is full and a warm winter is expected, which are the factors which drive nat gas demand.

It's such a fine line between stupid and clever. - David St. Hubbins

Dollar stronger this morning against both euro and yen (US Treasury yield curve is higher across the board).

And November crude is down below $89.

The reason gasoline prices are not rising in response to crude oil price increases is due to a stable/increasing gasoline supply... The system is currently constrained by refining capacity, not crude oil supply. We can thank the draconian environmental laws preventing the construction of new refineries for this problem...

of people don't realize when discussion of cutting the gas taxes comes up, is that there would be no loss in revenue. Every time the price of oil and then subsequently gas goes up, we are getting a tax increase, which regressively hits the poor. Most of these gas taxes were probably put into place when gas was 1.50 a gallon, or likely even less then that.

I have to disagree with Neil this morning.

While cutting gas taxes may be the politically popular thing to do in the face of rising prices, it is bad policy in the long term.

I've previously written a diary in support of higher gas taxes. I would also support an imported oil tax. I believe this is a matter of national and economic security.

We're relying on others to provide 70% of our energy needs. Many of these people want to kill us. We respond by giving them billions of dollars every year to fund the effort.

An additional side effect is that our main competitor for purchasing this oil, China, holds a large portion of our national debt, and thus we end up with the currency distortions that blackhedd does a much better job than I ever will informing us about.

There are many caveats I attach to support of increasing gas/oil taxes. They include it being revenue neutral, as well as increased domestic drilling. Ideally, it would be part of a comprehensive energy plan that would include a major push for nuclear power and adopting EU emissions standards, at least temporarily, for clean diesel cars.

You are being way too logical. People will continue to buy SUV's and whine, thinking Democrats will provide some type of handout. They will wax poetic about how it's Bush's fault and the crowd will clap.They will clap for Gore and his global warming agenda while businessmen get scared and stop building infrastructure such as clean coal plants because they believe legislation is coming that will make it unprofitable. We will increase our dependance on nations that hate us, increasing their ability to fund their global anti American agendas. Really, they have to be laughing at us.

This government is far too dependant on that tax money. You will never see a reduction, especially from Democrats until they find another source to bleed.

"Dulce et decorum est pro patria mori"
Contributor to The Minority Report

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