Monday, April 24, 2006

Our scheming government:

Generally I’m not one for conspiracy theories but every once and a while certain stars align that make you wonder. With prices at the pump going back over $3.00 a gallon and the summer driving season coming our leaders in the Senate are once again threatening to impose a windfall profit tax on oil companies. Here is why I think this is a big government scam.

First oil companies do not set the price of oil. Oil is a commodity and is traded on a free market where the price is decided by supply and demand. The first reason why oil has reached $75 a barrel is because the markets are concerned that supply is being threatened. What’s interesting is that the reason supply is being threatened is a result of factors that range from geopolitics to the upcoming hurricane season. These are events that oil companies have no control over and are instead at the mercy of.

Reasons why prices are up is because of things like unrest in Nigeria, a crazy Venezuelan President who is now threatening to nationalize oil after private firms spent billions building it, Iran nuclear concerns and the United States decision to force oil companies to convert to ethanol for MTBE.

Not only does our government know that oil companies have no control over the price they also know they are one of the big reasons for the rise. The governments decision to force companies to switch to ethanol at the beginning of the driving season instead of the end is head scratching. Further the Iraq war and our constant verbal attacks on Iran are not being made by Exxon but by politicians pushing prices even higher. Now that Washington has helped push prices nice and high they figure they can do the next best thing, take the money by lying to the American people. Our government is trying to shift the blame and demonize our oil industry by threatening to tax them.

It doesn’t matter that our oil industry only has about 9% profit margins the lowest of any industry, as a comparison the cable industry has margins closer to 35%. It doesn’t matter because they know figuring out percentages is something that gives the American people headaches. Politicians like Hillary Clinton and Arlen Specter know that they can throw large numbers around like $10 billion and get the American people to jump on board.

Is creating policies to get oil prices up a grand scheme to jilt the American people into letting big Gov steal money from the oil companies? I don’t know but the facts are hard to ignore. What I don know is that our government already taxes the American consumer on every gallon we purchase to the tune of 18 cents per gallon for federal taxes and varying amounts on the state level, with New York charging an additional 32 cents. If our government was not scheming and meant it when they said they were concerned about the American people they would let oil companies keep their 9% so they can invest it in more supply. Instead they should give a temporary reprieve on gas taxes to help out during the driving season. I wouldn’t hold your breath waiting but at least you now have some food for thought when the government really starts talking “windfall”.

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