by Kerry Thomas
May 1, 2008
Because Gene Klumpp of
Conover asked, the simplified answer as to why we pay more for gasoline here in the Northwoods than
most locales west of us is that many of those stations are selling
ethanol-blended fuels.
Yes, the pump prices for these fuels are lower. But ethanol fuels reduce your mileage by
10-15%. This means that, in order to
realize a true savings, the price needs to be 10-15% lower per gallon in order
for you to break even on the price differential.
Klumpp asks “How can our Congress, Senate and president
allow this to get to this point of pure greed?”
The federal government tried price controls during the Nixon
administration. It was a miserable
failure. Along came the oil and gas
crisis during the Carter administration.
The federal government, under Democrat control, imposed new regulations
on our energy production industry, in an effort to repeal the law of supply and
demand.
Under the Clinton administration, more native energy supplies
were put off limits to domestic production.
Every time our federal bureaucrats try to impose their will
on “big oil” it’s the consumers who pay for it. Try as they might, when career bureaucrats (who have zero
experience in the energy production field) try to circumvent the law of supply
and demand, all they end up doing is raising the cost of energy production for
the private sector. And those costs get
passed along to the consumer.
Recall such bureaucratic brilliance as MTBE (methyl tertiary-butyl ether) as a gasoline
additive? That ended up causing
widespread groundwater contamination.
Or the boutique fuels solution, which only served to strain an already
stressed refinery capacity.
The green environmental movement wants us all to conserve,
to use less energy, to recycle, to change our light bulbs, to walk or use
bicycles instead of driving SUVs, etc etc etc.
They’ve been trying to convince all of us to do this since the 1970’s. They try to guilt us into changing our lives
to fit their idea of a utopian society, working in harmony with the earth, for the
betterment of all Mankind. And when the
guilt trip doesn’t work, they go the Legislative route, passing new laws to force
us to do things their way.
Did you know the energy bill that was enacted last year
outlaws standard incandescent light bulbs in a few years? We’re going to be forced to use nothing but
the compact fluorescent bulbs in the future.
Or that in many cities, plastic grocery bags are being outlawed? Congress is also threatening to impose new CAFÉ
(Corporate Average Fuel Efficiency) standards on automobile makers, forcing
them to increase their average fuel efficiencies. Remember what that gave us to drive in the late 1970’s? Recall such vehicles as the Gremlin, the
Mustang II, or the exploding Pintos?
No, the last thing we need is more bureaucratic government
interference in our energy supply system.
We don’t have an oil supply shortage. New oil deposits are being discovered all
the time. We have known deposits in the
Great Lakes region, in North Dakota, in Alaska, and in the Caribbean. China and Cuba are teaming up to drill in
the Caribbean. Canada and Mexico are
America’s largest oil suppliers. Brazil
just announced a new oil discovery that is estimated to be larger than the
known deposits in the Middle East.
What we have in America is a shortage in refining capacity.
Yes, we do need to expand our own domestic production of
native oil. But we also need to allow
the magic of free market capitalism to work.
We need to make it financially attractive to build and operate new
refineries in this country. We haven’t
built a new refinery in more than 30 years, and our refineries are running at
full capacity. Government regulations
have made the refinery construction business financially un-profitable.
Gene Klumpp calls it greed.
Well, in the words of Michael Douglas, greed is good. Greed works.
Another word for greed is profit. The average profit realized by “big oil” is 10%. That’s what the oil companies’ profit
margins are, after factoring out all the costs of oil production and gasoline
delivery. That 10% is what career politicians
are calling “record profits.”
And who makes a higher profit on gasoline, the oil companies
or the government? We pay 18.4¢ per
gallon of gasoline in federal excise taxes, and an additional 30.9¢ per gallon
to the State of Wisconsin in excise taxes.
Ask any of our local retail store owners if they could stay
in business with a profit margin of 10%.
Ask them what their markup is on their merchandise.
Shall I even mention the fact that all this
trouble in our energy sector really only began after Nancy Pelosi and the
Democrats took control in Congress, and started promising higher taxes and more
government regulations? Remember
Hillary Clinton spouting off about how she’ll “take” the profits of the oil
companies for her own pet projects? And
let’s not forget our own Jim Doyle and his mandates that get passed along to
Wisconsin consumers.
There are other global supply and demand factors in play
that affect oil prices. India and China are booming. China has more than 40,000
miles of highway under construction right now. They are adding 20,000 new cars
to the road each week. In India, one
clever entrepreneur just introduced a small, stripped down, no-frills car,
priced under $2,000, that is expected to enable a hundred million Indians to
take to the roads in the next few years.
The point is, don’t believe all these media sound bites you
hear, demonizing private enterprise, telling you they’re to blame for all the
troubles in the world.
The law of supply and demand governs energy prices, and the
price of everything else, too. Try as
they might, no government bureaucrat can change that law.