Posts Tagged ‘oil’

Gambling On Energy …

30 March 2012

It all eventually comes out of our pockets

Øbama uses apt terminology when he says:

Instead of taxpayer giveaways to an industry that’s never been more profitable, we should be using that money to double down on investments in clean energy technologies  …

Putting money into undeveloped technology is, of course, a gamble. Even more so when tossing the baby out with the bathwater as Øbama attempts to do by  regulating traditional energy sources out of existence, while letting it all ride on technological advances that have not yet occurred. And, much to our misfortune, Øbama has been more than adequate in proving to us that he is not very good at deciding when and where to bet. Plus, like one addicted to the game, he insists on going back to the table after losing his shirt  in the hopes of winning it all back by using the same failed strategy. Unfortunately, it is not his money going on the board, but ours. Doubling down on some already proven-idiotic “investments” is a fool’s game – it’s nothing more than an invitation to toss even more capital down the never-filled sink-hole of the liberal wishing well.

Also troubling is that, whenever Øbama makes one of these bets and loses, one of his cronies invariably is enriched. Huh! Wonder how that happens?

Lets look a the recent  theater in Congress regarding “subsidies for the oil industry“. This action, elimination of “subsidies” for the evil, rich oil companies was floated as a means to gain funds for alternative energy (gambling) while not raising taxes.  Lets look first at that word “subsidy”.  Mirriam-Webster defines the word as:

a grant or gift of money: as
: a sum of money formerly granted by the British Parliament to the crown and raised by special taxation
: money granted by one state to another
: a grant by a government to a private person or company to assist an enterprise deemed advantageous to the public

That last one appears to be their intent in the use of the term subsidize when they talk about the oil industry. So, then, our tax dollars must be going to the oil producers, the refineries to subsidize the production of oil and gasoline, right?

Dead wrong.

These supposed subsidies are in the form of tax credits or, rather, the ability of the “subsidized” industry to eliminate a portion of their income from the computation of taxes owed. By this definition, you are likely subsidized for owning your house and paying property taxes and mortgage interest. You’re subsidized for putting money into an IRA or a 401k. Get it? They’re not getting any money from the government; they’re allowed to avoid paying taxes on a portion (6% for the oil industry) of their income. This is akin to Congress claiming to have reduced the deficit today by eliminating some future planned spending (avoidance vs. actual savings), only they’re planning to spend today money that they don’t yet have; money they will get by eliminating the oil industry’s “subsidy” – in other words: another ordinary day on the beltway.

So, if Congress eliminated the ability for the oil industry to deduct 6% of the their income from their tax computatution, the oil industry would experience an actual 6.4% increase in taxes paid to the government, assuming no change in tax rate as a result of not deducting the 6% (do the math – it’s not that hard). So, what Congress (specifically: the democrats in Congress) wanted to do was jack up the amount of taxes oil producers pay on their income. They wanted to increase their (government’s) share beyond the egregious amount they already collect. (Notably, I did not include corporate income taxes in my previous treatise on taxes paid on a gallon of gas. Mea culpa…)

Of course, had they done so, the end result would be predictable: the cost of products produced using oil would increase.

Think about that a minute.

Can you name for me one product – just one product – you purchase regularly that does not involve oil in some way? If I were a betting man, I’d bet you can’t. But unlike Øbama’s record, odds are in my favor! I can think of no facet of our economy that oil does not touch in some way – whether it is transportation for employees, direct use within the product, transportation during stages of production or sales; transportation of  the components of machinery that make products; generation of the power required to produce it or control its production process –  oil is involved from the lowly sales outlet to the mighty financial markets. So, aside from the obvious impact at the pump, prices for everything you purchase would increase. Effectively, the democrats’ desire to tax evil industry is ultimately a tax increase to us all. Add to that the fact that the money Øbama would use for his energy gamble, contrary to what their use of the term subsidy would lead you to believe, is money the government does not have and you can see the results of this folly: higher costs for all, increased debt for the government,  higher taxes to pay against the national debt, and less money for you to meet your basic needs.

Painting industry as evil and greedy is disingenuous. No, to be true the issue can be better characterized as stupid politicians, misleading media, and gullible constituents.

-Pateratic

Socialism – Now In Chu-able Form

16 March 2012

Jumpin' on the Euro-gas Chu-Chu train!

Steven Chu famously offered that “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” a feat well under way under the Øbama administration. Gas prices have literally soared to new heights under the guiding hands of Øbama and Chu. In this campaign season, however, Stevie’s tune has changed. “I no longer share that view,” he recently quipped. That view is anathema to his boss’s reelection efforts!

Despite protestations to the contrary, I offer the Chu and Øbama merely no longer share that view with the public. The blocking of the Keystone XL pipeline is policy pointing to the view continuing to be alive and well in the administration. Oil production on federal lands having dropped to the lowest level in known history is physical performance pointing to the view continuing to be alive and well within the administration.

Just how, do you suppose, the prices would be inflated to European Sized? Why, by the same mechanism as the gas price inflation in Europe and, for that matter, our northern neighbors, Canada: through taxation. It is estimated that the taxes imposed on the sale of a gallon of gasoline are already on the order of 12 times  the amount earned by the oil companies as profit (more or less depending on what state you’re buying it in) – in the revenue split, taxes are second only to production (including materials) and transportation, with profit so far back in the running as to not count at the finish line (of course, even those paltry profits-per-gallon add up to billions at the end of the year).

“Hey, Pateratic!” you say. “What about production costs! Can’t the price be inflated through them?”

“Sure,” I reply. “Simply by increasing the regulatory burden and fee structure for production methods, components, and facilities, prices will be driven up. But note who would be doing this: not the oil companies, but the government. Enforced unionism for the workforce, too, can and is employed to drive costs higher.”

“You could increase the cost of production by opening new facilities,” I continue, “but the government won’t let you. Besides, if you did, that increase in costs would be ameliorated by the associated increase in production capacity and, therefor, supply would increase to the demand, driving prices lower  – absent of additional taxation and otther artificial perturbations to normal market forces.”

“Hey, Pateratic!” you again offer. “What about TRANSPORTATION costs! How can the government manipulate those? Those MUST be the responsibility of those capitalist pigs!”

“Nope. You’ve already seen an example, but you don’t realize it,” I reply. “Denying permission to build Keystone XL requires that Canada either sell to another market, or transport the crude to our refineries (Canada has surprisingly few, considering how low her population to land mass ratio is) via comparatively expensive truck or rail. Whether they choose more expensive transport, or choose another market, the results in the US are the same: a higher fuel costs. There’s one example. Another is the regulatory burdens and fees placed on those who truck hazardous material across our border and within our own country. Also, show me a tanker truck driver who isn’t a member of the Teamsters – enforced unionism. Finally, the licensing fees for each mode of transport, and (and this one is a bit Catch-22 in this case) the cost of fuel for the modes of transport – including all the taxes per gallon used.”

“Again, ” I continue, “you could drive up the cost of transportation by buying additional vehicles; however, without the additional capacity, they would sit idle, making that a poor business decision.”

“Man, you’re scaring me! They’re really into our pockets deep, aren’t they?”

“Oh, you have no idea!” I reply. “We haven’t even scratched the surface of even this gasoline example! Permit fees and leases for exploration. Permitting fees for drilling. Inspection and compliance costs. Legal expenses to fend off environmentalists – and the loss of sunk costs when the fight is unsuccessful. Permitting, inspection fees, and taxes on the distributors (gas station owners)… There is much, much more than this!”

From this hypothetical conversation, it is easy to see one reason why liberals would want to see Euro-styled fuel prices here. They see it as a veritable treasure trove of new tax revenue because, seriously: does anyone see a viable electrified car in the future? The Tesla turns to a very expensive brick if its batteries fully discharge. Consumers Report couldn’t keep their Fisker running long enough to get beyond their first test. The Chevy Volt is purported to perform better as fuel for a wienie-roast. Aside from these issues, all of these are impractical to buy, and equally impractical to maintain – and new gasoline-fueled cars are far cheaper to operate, and get comparatively better EPA estimated mileage! Since there is no viable, affordable alternatives to gasoline powered conveyances, if Euro-style prices were imposed here, the government gets rake in massive taxes from all who can still afford to buy gasoline – and there will be many. Note that none of what the government would impose is a benefit to anyone who is working to provide the product unless, of course, they are also on one of the myriad entitlement programs sapping the life out of our country at present – assuming the monies collected are not wasted in other modes (like, for instance, paying off cronies investing in ‘green‘ energy companies. I am personally convinced that ‘green’, in this context, refers to the color of the money lining the pockets of the associated Øbama crony capitalists, but that’s me…)

And what of Øbama’s claim that they are drilling more now than ever? The key part of that claim is the term ‘they‘. Though you are led to belief otherwise through his rhetoric, it is despite the Øbama administration that this is occurring; not due to it. The oil fields being drill, drill, drilled are, to a one, on private land. Those output of fields on public lands is at a nine year low…

Note: very little hyperbole had to be employed to achieve the sensational tone I was looking for. That alone should scare the crap out of you.

– Pateratic