TCS Daily


Energy Policy for Idiots

By Arnold Kling - April 28, 2006 12:00 AM

"A plan by Senate Republicans to soften the blow of rising gasoline prices...has merit, U.S. Energy Secretary Sam Bodman said Friday...Frist's bill...would suspend until September 30 the 18.4-cent-per-gallon retail gasoline tax.
-- Reuters

I apologize to regular TCS readers. This essay is not meant to insult your intelligence. Instead, I am attempting to explain elementary economics to the most poorly-educated segment of our society, meaning people like Energy Secretary Bodman, Senator Bill Frist, Lou Dobbs, and Bill O'Reilly. Leave No Demagogue Behind.

Let's go s-l-o-w-l-y. Start by asking yourselves these questions:

  • Should the goal of U.S. energy policy be to raise long-term domestic energy production, or to reduce long-term domestic energy production?
  • Should the goal of U.S. energy policy be to increase profits earned by Iran and other foreign producers, or to reduce their profits?
  • Should the goal of U.S. energy policy be to increase consumer demand for gasoline, to leave consumer demand alone, or to reduce consumer demand?

Did you answer "raise long-term domestic energy production," "reduce profits of foreign suppliers," and "leave consumer demand alone" or "reduce consumer demand"? Very good! Those are very sensible answers. Before reading further, go back and repeat the questions and the answers five times, to make sure that they stick in your mind.

How Not to Achieve Our Goals

One policy that has been discussed in the Frist bill and elsewhere is to remove tax breaks for the oil companies. This is similar to the proposal for a "windfall profits tax" on oil companies. The goal of these taxes is to take money from the oil companies without taxing oil products per se. The problem with these proposals is that they reduce the incentive of oil companies to invest in domestic energy sources. Why undertake costly, risky oil drilling if the upside is going to be taxed away?

I am not an oil industry tax expert. I do not know whether the structure of oil taxes works well or poorly at balancing the goals of revenue collection, fairness, and providing incentives to increase long-term supply. If there are ways to reconfigure taxes that might improve on all of those goals, then tax reform is warranted regardless of the price of oil.

However, high prices today provide no reason to shift the balance of goals toward revenue collection and away from providing long-term production incentives. If anything, concerns over the energy outlook should lead us to want to increase production incentives and worry less about getting revenue from the oil companies. A windfall profits tax would amount to Congressional "revenue gouging" at the expense of the long-term goal of trying to increase domestic energy supply.

Who would benefit from a short-term suspension of the 18.4-cent-per-gallon retail gasoline tax? Probably not the American consumer. The biggest beneficiary might be Iran.

In the short run, the supply of gasoline is fairly inelastic. Current inventories of crude oil and refined products are fairly difficult to adjust, so that the supply of gasoline is what it is. That is why it is pretty certain that drivers face a "tough summer," in the words of the President.

If the supply of gasoline is what it is, then the price of gasoline will be whatever it takes to limit demand to meet the supply. If that means $3.00 a gallon, then consumers are going to end up paying $3.00 per gallon, no matter what the tax is on gasoline. (Note: this analysis applies only in the very short run. In the long run, supply is elastic, so that some of a tax cut would be passed through to consumers.)

If the tax cut on gasoline will not be passed through to consumers, then where will it go? It will go to oil suppliers. However, domestic suppliers will not get all of the extra revenue, because some of it will flow into profits, where it will be taxed. Only foreign suppliers will get a clean shot at the 18.4-cent-per-gallon windfall that a gasoline tax cut would provide. So, the biggest beneficiaries of our gas tax cut could be foreign suppliers. A gift from Congress for Mahmoud Ahmadinejad. How sweet!

Suppose that you do not believe my analysis, and you think that a cut in the gasoline tax actually would be passed through to consumers. In that case, would it be a good thing? Do we want to send consumers a message that gasoline prices really are not that high? Do we want them to make their automobile purchases and driving decisions based on the assumption that Congress can and will always find a way to hold down the price of gas? Or do we want consumers to understand that there is a chance that gas prices will stay where they are and rise further in the future?

Congress wants to treat American consumers like children, who should not have to deal with reality when it comes to the supply and demand for gasoline. It might be better to treat consumers as adults, and let us make grown-up decisions. These grown-up decisions probably will serve the country's interest more than the infantile energy policies now under consideration.

Arnold Kling is an adjunct scholar with the Cato Institute and the author of Crisis of Abundance: Rethinking How We Pay for Health Care.

Categories:

90 Comments

Oil Company Profits
Where do you all think oil company profits go? Into a cave somewhere?

"ExxonMobil's first quarter earnings excluding special items, were $8,400 million, up 14% from first quarter 2005. Higher crude oil and natural gas realizations and improved marketing margins were partly offset by lower chemical margins. Net income for the first quarter was up 7% from 2005.

ExxonMobil continued its active investment program in the first quarter, spending $4.8 billion on capital and exploration projects, an increase of 41% or $1.4 billion versus 2005. In the first quarter of 2006, the results of our continuing long term investment program contributed to a 5% increase in production.

The Corporation distributed a total of $7.0 billion to shareholders in the first quarter through dividends of $2.0 billion and share purchases to reduce shares outstanding of $5.0 billion, an increase of 67% versus the first quarter of 2005. As a consequence of the continued strengthening of our financial position, share purchases to reduce shares outstanding will be increased to $6.0 billion in the second quarter."

Everyone with an investment plan with ExxonMobile stock should be happy.

Problem with being in power
This is a problem the Republicans have being in power in an election year. They have to do something. They have to show some concern. Perhaps these are just trial balloons that won't be acted on because they're bad ideas. This is most definitely an opportunity to teach the function of the price system, much like hurricanes have become in recent years. Instead of name calling, we should sieze the opportunity.

oil = foreign oil
You say we should reduce our dependence on foreign oil. Given that domestic oil is, as you say inelastic (ANWR is tiny compared to our oil needs), this means reducing our dependence on oil. "Windfall" profits (actually, profits of any kind) to oil companies that allow them to tear up the countryside in Wyoming or Alberta are little help. What might help: car fuel economy standards, mass transit, alternative energy sources, gas tax so high that it raises the price of gas.

The "I told you so": the Bushies have been bad at economics from the beginning (read Professor Krugman). This seems to bother wingnuts only when it's major corporations getting screwed. But don't worry, nothing really bad for big oil is likely to get passed Cheney or Rumsfeld.

And just what
alternative energy sources do you suggest will replace oil?

Hmmmm...
I was going to dispute your rant up until this part:

>"(read Professor Krugman)"

Right there it was clear that you have absolutely no idea what you are talking about.

Never read Kling before, huh?
"You say we should reduce our dependence on foreign oil."

No, that's not what he said in the article and not what Kling's ever suggested. Read this for a primer: http://www.tcsdaily.com/article.aspx?id=012003A

There are no easy "solutions" to the recent price hike at the pump. Yes, long term, we need to look at tax simplification, subsidy reductions, opening up drilling in ANWR and mining of higher cost fuel sources in Montana, etc. But now, what each of us needs to do is decide if the price of a gallon of gas is worth the benefit and act accordingly. If demand continues to grow and outstrip supply, then the "problem" is us, and the "problem" will persist so long as a gallon of gas is a good deal.

FWIW, I spent about $100 on gas for a round trip in my small SUV from SoCal to Reno last weekend so that my parents could babysit my dogs while I was on a business trip to Denver. Entirely worth every freaking penny, even at $3.21/gallon at my most expensive fill up. I suppose lots of others still feel the same way, or demand would subside.

Not the only idiotic policy
Currently, the price farmers get for milk depends on how far you are from EauClair Wisconsin. This is great for farmers in California but bad for farmers in Wisconsin.

I maintain that this policy exists because California has many more votes than Wisconsin. It's a perfectly logical way of deciding things, see who votes most.

Sadly I see a similar situation with gasoline policy. The state that drives the most, but doesn't want new wells or new refineries, (especially in their state,) calls the tune.

would lowering the tax lower the price of gasoline
Probably not a lot, since Frist has promised to pay for this tax cut by eliminating tax breaks used by the oil industry.

probably hot air

why do you continue to lie
ANWR is not tiny compared to our needs.

Secondly, if you are looking to Krugman for economic advice, no wonder you are wrong about everything.

let's not forget the gulf
environmentalists aren't even let the oil companies explore in the eastern half of the gulf of Mexico, mostly out of fear that they might find something.

That's usually
what the Green prescriptions add up to.

President Bush Explains
Remarks by President Bush on the Economy
White House, April 28, 2008

THE PRESIDENT: Look, the temptation in Washington is to tax everything, and they spend the money -- "they" being the people in Washington. The answer is, is for there to be strong reinvestment to make this country more secure from an energy perspective.

Listen, these oil prices are a wake-up call. WE'RE DEPENDEENT ON OIL AND WE NEED TO GET OFF OIL. And the best way to do so is through technology. And I've been traveling the country talking about the need to develop alternative sources of energy, such as ethanol, and to spend money to advance technologies such as new battery technology that will enable us to have plug-in hybrid vehicles. We signed a good energy bill a while ago, and that encouraged, for example, one thing it's got in there is a tax credit to encourage people to purchase hybrid vehicles so that the consumptive patterns of the American people change.

And the American people have got to understand that we're living in a global economy, and so when China and India demand more oil, it affects the price of gasoline at the pump. And, therefore, IT'S IMPORTANT FOR US TO DIVERSIFY AWAY FROM OIL.

But it's also important for the people to understand that one of the reasons why the price is gasoline is up is there's tight gasoline supplies. And one reason there's tight gasoline supplies is because we haven't built any new refineries since the 1970s. And, therefore, CONGRESS NEEDS TO PROVIDE REGULATORY RELIEF so people can expand their refineries.

So it's a combination of people investing the cash flows, as well as regulatory relief to enhance the ability for people to achieve the objective, which is more gasoline on the market, which will help our consumers.

http://www.earnedmedia.org/wh04282.htm

and another
Windfall" profits (actually, profits of any kind)

You forgot that one, Tlaloc. You startin' to slip? :)

Good Analysis, Mistaken Assumptions!
If you answer the three questions about what should be the goals of U.S. energy policy "It should assure that I get lots of press headlines and that the least informed, most shortsighted 51% of the voters will vote for me." I suspect that wuo would generate an analysis that predicts the current behavior of our elected officials.

you're kidding, right?
I know I don't have Mark's refined sense of humor, but you must be kidding with:

> "You say we should reduce our dependence on foreign
> oil."

> No, that's not what he said in the article and not what
> Kling's ever suggested.

Kling's post says we should let oil companies keep their profits so they can do more risky drilling. I don't suppose they're drilling for solar energy.

No not kidding, reading comprehension is difficult
"Kling's post says we should let oil companies keep their profits so they can do more risky drilling. I don't suppose they're drilling for solar energy."

Kling's essay and previous essays do not say that we're doing this to reduce dependence on "foreign" oil. Nor do they even say what you say it says above. We don't "let" them keep their profits so they will do some particular beneficial thing. We trust that if they keep their profits, they will be the best ones to decide how much to reinvest in order to maximize future profits. Whether that's a lot or a little, doesn't matter. Whether it's foreign oil or domestic oil, doesn't matter. This is such a key Kling thesis, I don't know how you miss it. But in his current essay, what Kling is saying is that if we're gonna have an energy policy (which is granting a lot), the plans for dealing with the price spikes floating in Congress right now are counterproductive to what we should probably all agree a policy might/should look like. To miss that is to not have the mental faculties to handle subtlety or to just be a sophist. Heck LG, Kling is taking the Republicans to task. If your post is an exercise in arguing against Republicans, you should take Arnold's side. So I'm left to conclude that you're just not a very astute thinker ;-).

I did some work to simplify the argument for you. Click here:

http://send.realebooks.com/showBook.php?bH=141&c=6090e1569440e392c582bca76c6b4275

I thought he meant natural gas & hot air

I'm not making this up
I'm quoting from the post:

> The problem with these proposals is that they reduce
> the incentive of oil companies to invest in domestic
> energy sources. Why undertake costly, risky oil
> drilling if the upside is going to be taxed away?

Does this not mean more drilling? Please explain.



What the ^%$# are you arguing?
LG, in your original post, you wrote this, with the "you" in your post being Kling: "You say we should reduce our dependence on foreign oil."

So I call you on that because Kling NEVER said that. NEVER. You created a strawman. And you come back with "Does this not mean more drilling? Please explain." Seriously, is someone spiking your water with crack instead of Ritalin? Stay focussed. Admit you weren't paying attention, accept defeat, and move on.

Incentives
So what is the incentive for the state to encourage alternate sources? If the state can't tax it, they won't promote alternatives.

ANWR
How much oil could be produced at ANWR?
Or off the CA and FL coasts?
And the only viable option is nuclear. Nuclear power could power electric cars and make hydrogen for cars. Where is the greenie weenie advocation for nuclear power?

best guess
Kling says that: "U.S. energy policy (should) be to raise long-term domestic energy production", then that excess taxes will deter companies from risky drilling (drilling unlikely to find oil?). Why put in "domestic" if he really only means worldwide production? I took it that Kling felt that there was some preference for producing oil domestically rather than importing it. That's called "reducing dependence on foreign oil" most places.

Anyway, it seems unlikely that unleasing domesting drilling would make a big difference to our oil supply or our trade balance. Certainly ANWR will not, according to figures I've seen -- how much oil we consume and how much ANWR can produce.

I agree: theaircar.com
Whether the air car is ready for prime time or not, imagine if it were. How would the state find a way to tax the air? (I'm sure they would find a way.)
The state needs a controlled network of fuel supply stations to collect the tax.
If you could plug you electric car into you garage, again, how would the state collect its road taxes? (Toll roads, here we come.)

Tax Bite: FYI
"Tax Foundation studies have shown that state and federal treasuries profit handsomely from oil industry sales. The average American motorist pays taxes of 46 cents a gallon on gasoline, of which 18.4 cents a gallon goes to the federal government. States and localities pocket the rest."

http://www.latimes.com/news/opinion/commentary/la-oe-williams29apr29,0,4713201.story?coll=la-news-comment-opinions

Governments have NO interest in helping to develop energy sources they cannot control and tax.

Why We're in Trouble
Liberal Goodman commented that:

> The problem with these proposals is that they reduce
> the incentive of oil companies to invest in domestic
> energy sources. Why undertake costly, risky oil
> drilling if the upside is going to be taxed away??

Does this not mean more drilling? Please explain.

No! It means a lot more than that! The market (also known as the invisible hand) makes it painful to stay in a bad position. That pain can cause more drilling, it can cause people to NOT buy a "soccer Mom" SUV--sport utility vehicle (per Jay Leno after high prices: a suddenly useless vehicle), or it can even cause people to invest in more efficient vehicles. The genius of the market is that it allows "the masses" to make their own choices on how to deal with the situation, rather than relying on a beneficent but not always competent political process to make energy choices. Amazingly, the masses/people often come up with great ideas.
Presidential candidate Ross Perot and Senator Al Gore both advocated high gasoline taxes as a way to push the market and encourage people to make those choices. By the year 2000, presidential candidate Al Gore denied (three times!) that he would increase gasoline taxes.
I don't blame him. He had been beaten up by the voters who would not face an oncoming crisis. (His narrow loss could have been a McGovernite rout if he had fessed up to wanting higher gasoline taxes.)
Fast forward to today, hybrid cars are only a small percentage of the vehicle fleet, SUV's are the ruling brontasauri of the American autobahn, we have forbidden drilling in the best prospective new domestic oil areas (ANWAR and near Florida [Republicans named Jeb wouldn't sabotage American oil production would they!]. Moreover, alternate energy of wind farms is honored in the abstract, but not in the concrete off of Hyannisport.
Because we were incapable of making hard choices ten and twenty years ago, our friends (?) in Iran and Saudi Arabia are helping us today. We can delay the market by socialistically transferring the market signal of oil profits to taxpayers (They'll be grateful) and transferring government tax revenues back to taxpayers (how Raeganesque!). However, it will only delay the pain and make the final day of reckoning much more painful.
Unfortunately, Kling's analysis did not go far enough. The populace, acting through its government, has acted in a childish manner. One might say that it Yergin's "The Prize." meets "Lord of the Flies." We shall see how the ensuing drama and/or farce plays out.

if there's a chance of it becoming economical
they will, without govt urging

Energy Policy for Idiots
But I don't want to grow up. Growing up don't feel good.

Amen - the only energy policy our Government should have is for
'Congress wants to treat American consumers like children, who should not have to deal with reality when it comes to the supply and demand for gasoline. It might be better to treat consumers as adults, and let us make grown-up decisions. These grown-up decisions probably will serve the country's interest more than the infantile energy policies now under consideration.'

Amen!

The only energy policy our Government should have is for getting energy for their own needs. (Heat and electricity in Gov. buildings, fuel for Gov. vehicles and a plan to get energy for the army if needed).

Close the stinking DOE!

Energy
Isn't energy one of those food bars or some kind of energy drink?

Shucks y'all. I wuz wun uv da gize dat gradiated wiff onurs. Dontght ya no.

Thought for the day: It's for the children.

As a matter of fact...
...BP is one the world's larget producer of photovoltaic cells. So yes, at least one oil company is "drilling for oil" Royal Dutch-Shell is one of europe's largest investor and producer of wind energy. Many gas stations in europe utilize PVC panels to operate their pumps. LG, you are years behind the facts in your assumptions.

Kling's lesson was vague...
"Suppose that you do not believe my analysis, and you think that a cut in the gasoline tax actually would be passed through to consumers."
The 18.4 cent tax reduction proposed is a retail or "at the pump" tax reduction. If this occurred, the immediate impact would be to reduce the price from say $3.00 to $2.186 at the pump. Kling's analysis is correct when he said that even with the elimination of the tax consumers would still pay $3.00---he just didn't explain how that would be so.
A reduction in the price of a gallon of gas causes an increase in the quantity demanded and in the face of inelastic short term supplies the price will be driven back up to $3.00 or more.

Because
at $2.16 demand rises, forcing the price up since supply cannot in the short term be increased to meet that demand at that price level. Kling said supply was inelastic in the short term, but demand is not.

isn't that what I just said?

No
you said it was vague. It's not vague at all.

This will lower gas prices
Many say we will see $3.50/gal this summer. If you factor in Iran, who knows how high it could go. Everyone knows America MUST get off the oil. After September 11, 2001 I expected our President to call on Americans to GET OFF THE OIL. I was expecting a speech like the one JFK gave that motivated us to reach for the moon. As you know, this never happened. Eventually I realized that the only way this is going to happen is for us to do it ourselves. To that end I created this idea and have been trying to make it a reality..

The EPA is offering a research grant opportunity that I believe is a perfect fit for this idea. I have sent an e-mail to a hand picked list of university professors who have experience with government research projects. I’m looking to form a research team to apply for the EPA grant, conduct a social-economic experiment and surveys to determine to what extent the American public will support it, project the economic potential of WPH, and identify logistical, social and political obstacles as well as opportunities.

All government grants are awarded based on merit of the proposed research. I believe WPH has merit but your help is needed to verify it. You can help by posting your feedback. Let the professors and the EPA know what you think about WPH. Do you think this idea is worth pursuing? We need to know if Americans will support a plan like this.

Do you have any ideas to improve the plan?

Share any and all of your thoughts.

Tell your friends and family about this Blog post and ask them to post their thoughts on WPH

http://wepayhalf.org

Thank you

Craig

Energy Policy for Idiots
Economics for Idiots, too? --

Mr Kling seems to qualify to join the ranks of Luddite economics ignoramuses, Dobbs, O'Reilly et al. --

None of: the "price" of gasoline at the pump; a barrel of oil on the world market -- nor, with only one exception, the "profits" earned by any individual and/or entity along the route from oilfield to gas pump may be calculated or even measured without including the effect of the federal government's counterfeiter and most insidious taxation increaser, the Federal Reserve, into the equasion. --

By artificially depressing interest rates and by running its printing presses around the clock, the Fed has recently so debased the purchasing power of the United States Dollar as to have seen its real value halved since January 2001. --

Thus, given that gas prices were in some instances around $2.65 per gallon in 2000, there will need to be $5.30+ gasoline before we catch up with year 2000, "Clinton prices" and a barrel of oil, before it catches 1981's "Carter prices will have to be more than Ninety United States Dollars. A unit of currency, by the way, way, that maintains about as much relationship to the year 2000 USDollar as does the Iraqi Dinar to the Ugandan Shilling.

While meanwhile the insidious effect of the criminal enterprise the Fed and its pimps and useful idiot, including Dobbs, O'Reilly et al, call "an increase in the money supply," will have pushed everyone's illusionary "income" and illusionary "profit" into ever higher tax brackets. --

And the only windfall or any other net beneficiary will be the vast criminal enterprises AKA "government." --

Cordially - Brian

No Subject
Kling obviously asked you to recite the three prongs of what US Energy policy should be too slowly, as you've read a bunch into it. Try reading this goal at a normal pace, then we'll analyze:

* Should the goal of U.S. energy policy be to raise long-term domestic energy production, or to reduce long-term domestic energy production?

OK, correct answer is to raise long-term domestic production. However, that does not imply anything about reducing dependence on foreign oil. If we raise production 10%, but our oil needs grow 15%, we have increased production and increased dependence on foreign oil.

Again, I'm sure Kling specifically worded those goals in a way that did not talk about the cliched "problem" of dependence on foreign oil. As he points out in a myriad of other essays, we get most of our foreign oil from Canada and Mexico, but the overall worldwide demand for oil is what's pushing up prices. Even if we produced 100% of what we needed, it would not be staying here for less than $75/barrel if the spot market is at $75. The market is as fluid as the substance itself.

As to what difference more oil (from whatever source) would mean. Demand is high and supplies are tight. If a few million barrels a day reduction in capacity from Iran could shoot the spot price over $100, then you fairly assume that a few million extra barrels a day from some source could bring oil back to the $15-$30 range that most players think it will be long term. So ANWR could easily make that difference and make world supplies more secure.

Energy Policy
Just out of curiosity, when do you think we will have the depression to end all depressions?

I'd love to see you support your claim
that since jan 2001, the cummulative price deflator is 100%.

Wow
Really a sophisticated and astute analysis. But lets face it even if the Fed is printing money like a drunken sailor there is a factor of supply and demand.

re-read Kling
I did not see a careful exposition of how the price stayed at $3.00 after the price at the pump was reduced by the tax cut. He assumed, incorrectly in my opinion, that everyone would "get it". I simply clarified that the lower, tax-free price would stimulate demand and that that was the reason why prices would rise in the short run when short run inelasticty of supply is faced. Are you telling me that Kling detailed this mechanism?

He said:
" If the supply of gasoline is what it is, then the price of gasoline will be whatever it takes to limit demand to meet the supply. If that means $3.00 a gallon, then consumers are going to end up paying $3.00 per gallon, no matter what the tax is on gasoline. (Note: this analysis applies only in the very short run. In the long run, supply is elastic, so that some of a tax cut would be passed through to consumers.)"
My opinion, as one holding a graduate degree in econ, is that the demand mechanism is not explicitly handled. It is hinted at in the first sentence. For those who have a grip on econ( like yourself?)this may be quite clear. But Kling cannot assume that all his readers can see the connection. So to the lay reader his exposition is vague because it fails to establish the mechanism, on the demand side, why the price will fall then rise back to the market clearing price given short run inelastic supply. The lay person, not understanding this, will be left thinking "..but if the price is cut by the tax to $2.16 at the pump why will it still be $3.00 as Kling posits?"

inflation alters relationship of supply and demand...
The law of supply and demand is immutable--like the law of gravity. As you have pointed out it is always there no matter what the fed does. However, the problem is that when the fed inflates the money supply it devalues the dollar which means that the demand curves will shift upwards and to the right which will drive prices for goods and services up as well. Inflation of the money supply is simply a hidden tax that fed uses to spend more--the tax being the loss of purchasing power of the dollar because there are just more dollars around relative to the supply of goods and services. This is most easily seen by evaluating the effect of price increases on those with fixed incomes (everybody in the short run, before wages are driven up).

good post...
"And the only windfall or any other net beneficiary will be the vast criminal enterprises AKA 'government.'"
Excellent post.
The government is indeed a vast criminal enterprise that invades our wallets and property every day. I would much rather face common criminals because at least I am allowed (in some places anyway)to defend myself against them and they cross my path only sporadically if I am vigilant. You can just imagine what would happen if any of us decided to "opt out" of the tax system--aka government plunder.

Congressional posturing
Every Congressional proposal I have heard is laughable, from both sides:
1. Rebate every American $100.00
How ridiculous! Balloon the deficit by a few billion more dollars to pander to the us stupid voters.
2. Windfall taxes on oil companies.
Even more laughable. Corporations don't pay taxes. They pass those costs on to ... you guessed it, us poor sap consumers.
3. Ethanol.
Ok .... then we'd need to replace the fields changed to grow for fuel to fields that grow for actual food, further degrading limited available farmland.

We need to:
1. Allow oil exploration off the coast of California, Florida, and in ANWR. This should alleviate dependence on foreign oil, for a time, at least, until we can develop other energy sources.
2. Promote new alternative fuel technologies (other than ethanol, which just keeps farm subsidies going), such as coal gasification (we have some of the largest coal reserves in the world), fuel cells, or new technologies not even discovered yet. We are America after all, the country that landed on the moon before anyone else.

Windfall taxes
Gas tax so high that is raises the price of gas?

So you would be ok with the middle and lower class folks being unable to work because they can't afford the gas bill?

Reduce our dependence on foreign oil? Two ways: use less (your preferred method, I am sure), and develop more of our own resources. I prefer to do both.

"Windfall" profits? Do you believe those should be taxed? Who do you think will end up paying those taxes? And if we tax windfall profits, should we give tax money when "windfall" losses are recorded?

Actually it is about even…
…Depending on the state. Oil companies claim 9.4%, but they are making a lot of hidden money by charging their own refineries the going rate for their own oil. Total profit comes to around 75-95 cents per gallon depending on which company, which state, etc.

Same goes for the government. All of the federal taxes combined come to around 25 cents a gallon (give or take) with the big one the 18.4 cent federal excise tax. states take from 8 cents to 34 cents a gallon depending on the state and then there are the other little front end taxes, terminal taxes and sales taxes.

Total tax come in at between 36 cents and a bit over $1 a gallon (again, depending on the state). With the huge disparity in taxes it amazes me that gas prices seldom vary more than 60 cents or so from cheapest to most expensive state-to-state. Of course, those states with a sales tax hit you again at the pump and that tax doesn't show up in the advertised price.

In the end, yeah, they are both raking in big money.

Talk about wingnuts
first, ANWAR is not the only, and possibly not the biggest, untapped domestic find. There is the Rocky Mountain Front, Pacific coast and atlantic coast. Each have known reserves and each is bing put off limits at the behest of enviros. The estimates I read say that, at minimum, if these four were fully exploited, it could produce over 5 million bbl/day. At best it could go over 10 million bbl/day. U.S. imports are now around 12 million bbl/day.

Yeah, its just a tiny drop; like 40% of all U.S. oil imports; at minimum.

you aren't insinuating he is far ting in the wind?
'cause that's what it sound like he is doing to me.

So basically
we agree that the tax cut will not be passed on in the very short run because of the inelasticity of supply. It may well be that Kling skipped through the explanation too fast for some, but we agree on the mechanism.

So the question is, are the politicians stupid not to understand this, or are they clever, in that they do understand this and are setting up the oil industry to take the rap when the prices rise after the tax cut?

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