What Should the Price of Fuel Be at the Pump?

Geek!This is Tim Whitney’s submission for the HP Magic Giveaway. Feel free to leave comments for this article as you see fit – your feedback is certainly welcomed! If you’d like to submit your own how-to, what-is, or top-five list, you can send it to me. Views and opinions of this writer are not necessarily my own:

Appears everyone is screaming about Big Oil and their record multi-billion dollar profits. In America, everyone has a god-given (or natural) right to work hard, deliver a quality product, and make money – commonly understood as Capitalism.

Based on my web research, information from the EIA, and my own calculations, we Americans consume approximately 190,858,000,000 (billion) gallons of gasoline & diesel fuel per year. My research also indicates that Big Oil makes about $0.10/gallon or about $19,000,000,000 (billion) dollars in profit on fuel sales.

Big Oil could certainly make more profits – if they choose to – as we are still a free county. As one loyal American Capitalist, I could not fault them if they did make more money on “their” products. This would certainly open the door for more competition (bio-fuels?) – if we truly have an open/free market.

Does this mean I like paying $3.00 per gallon for fuel – NO WAY! I’m mad as hell and I think we should all stand up and tell the “real profiteers” we are not going to take it anymore. Just who are the real profiteers?

Sure the Middle East is a big profit player and I would even pay more per gallon — if we could stop using imported oil. Yet again, they are businessmen and it’s their oil, coming out of their ground and they have every right to charge what they want to. If you don’t like what someone charges – buy it from someone else, this is also your right.

By now you must be wondering who I think is raking us over the coals – if it’s not Big Oil and not the Middle East. The answer may surprise you, but the real profiteers are the local, state, and federal bureaucrats. Say what? You heard me loud and clear. Did a bureaucrat dig a well, build a pipeline, a refinery, or even drive a delivery truck? When was the last time you saw a bureaucrat-owned and operated gas station? Yet, our bureaucrats make more than four times the money per gallon of fuel than Big Oil does. The average “tax” is $.046/gallon, filling the government coffers to the tune of approximately $87,795,000,000 (billion) per year. Where is the yelling & screaming about this unbelievable tax (profit) the government Bureaucrats take – for not delivering a product?

What should the price of fuel be at the pump?

  • $25.55/gallon – I hope you are wondering why I suggest this. Simple math is the answer. Total projected government Depredations in 2007 is expected to be approximately $4,400,000,000,000 (trillion). Big Oil gets $2.50/gallon and local, state, and federal Bureaucrats get $23.05 per gallon. I’m sure you think I’m crazy – as people are already going broke at $3.00 per gallon.
  • $14.29/gallon – this would pay Big Oil about $2.50/gallon and the Federal bureaucrats would get the rest – $11.79/gallon. Why? The Federal budget for 2007 is $2,251,000,000,000 (trillion), and simple math tells the rest of the story.
  • $2.58/gallon – with crude oil costs at ~$76/barrel, no calculator is needed here. With a Presidential Executive Order, “all” fuel taxes could be suspended, until the price of crude oil drops below $50/barrel. See Executive Order 11051. This would also demand a restraint in total government /bureaucratic spending by $87,795,000,000 (billion) or a two percent reduction in spending for 2007. Of course, this restrain may also spur Congressional bureaucrats into real action with regards to an energy policy – one that keeps their fuel tax gravy-train rolling (by making sure oil stays under $50/barrel).

Please give all the above suggestions a little more thought before dismissing them as nonsense or frivolous. Think of all the various taxes and non-productive time we could eliminate – especially the income tax – by simply putting “one sales tax” on our energy-based economy. At either of the “depredation prices” suggested in 1 or 2 above – there will be ample incentive / demand for competition, conservation, new more efficient fuel technologies, and an end to our imported oil addiction.

“European governmentshave long used gasoline taxes not only as an important source of revenue, but also as a policy tool to drive down oil consumption and reduce pollution. Williams said taxes account for about 66 percent of the pump price in Britain – so, of this month’s average price per gallon of $6.40, about $4.22 goes to the government.” – The Boston Globe, 04/30/06

Competition (and only true competition) will create extremely economical transportation, less vehicles on the roads, a surge in telecommuting, and alternative energy breakthroughs. Competition, not bureaucrats, will generate real energy results on an annual basis – instead of decades or centuries, if left in the hands of Bureaucrats. However, paying $511 or $286 for a 20 gallon fill-up at the gas station will bring a lot of things into perspective for each and every driving American – real fast. Maybe it’s this “perspective” the bureaucrats should be investigating – their own windfall profits on every gallon of highway fuel sold in the USA.

6 thoughts on “What Should the Price of Fuel Be at the Pump?”

  1. I agree that the price of fuel directly influences the speed at which we develop new energy solutions. High fuel prices were so bittersweet: we were all suffering at the pump, and yet people were finally talking about shirking our dependence on oil.
    Which is why our current gas prices are also so bittersweet.
    However, I think it’s prudent to remind that a large portion of our gas tax goes to the road system…but it doesn’t even cover that. Americans have chosen good, but expensive, roads as our public transportation, which is another reason our gas prices don’t approach those of countries with very good and very established public transportation.

  2. I have always been tremendously amused at the comparison of US vs Europe concerning our gas taxes. It seems to always be “European taxes are higher to give incentives to save fuel”. This implies that we could do the same here, but there is rarely a consideration of what would happen if gas taxes were suddenly increased in the US.

    The US is BIG, especially compared to Europe. (see http://goeurope.about.com/od/europeanmaps/l/bl-country-size-comparison-map.htm) Think about the two most influential cities in Europe – London and Paris (with apologies to Moscow, Stockholm, etc.). They are less than 400 miles apart. The two largest US cities (New York and Los Angeles) are almost 2800 miles apart. NY to Chicago is still twice the distance of London-Paris. To make a horribly long analogy short (or at least finish it off), there’s a whole lot more space between where we go in the US vs. Europe. That is something that we cannot change.

    I do think of the lost opportunity of not having an extra 5 or 10 cents per gallon over the past 20+ years here. If that money had been collected (with minimal effect on the economy – not like the effect $1-$2 tax would have) and spent on researching fuel efficiency, we’d be in much better shape today.

  3. Gas prices should be set by the free market, influenced primarily by supply and demand. The government shouldn’t be involved.

    If government returned to its Constitutionally defined size, they’d have more than enough money from corporate taxes, tariffs, excise taxes, etc. No special gas tax necessary.

  4. While you argue that government taxes on oil are “profit”, its important to note that taxes ultimately are intended to benefit the people who pay them. I believe its important to remember that in this case.

    However, overall I couldn’t agree more with your major premise. I still remember a CNN piece that ran over the summer, in the midst of our “gas price crisis” here in the US. The piece was done by CNN International correspondents from around the globe, in a variety of countries.

    They asked the citizens of those countries to comment on our gas price issues and the consensus was unanimous: “What gas crisis? They still are paying 50, 100, 200% less than we are”.

    The American mindset has been distorted by years of cheap oil prices. Our mindset must get corrected if we are ever going to tackle the real problem at hand. No short term solutions. No hot fixes. Real change.

    One policy solution that I’ve found interesting and researched a bit is a Carbon Tax. This is something supported by the likes of Al Gore to Ralph Nader.

    A few articles on it for anyone interested:

    We Need a Global Carbon Tax (by Ralph Nader) – http://online.wsj.com/article/SB122826696217574539.html

    Is The Moment Ripe For a National Carbon Tax? – http://www.carbontax.org/blogarchives/2008/11/24/is-the-moment-ripe-for-a-national-carbon-tax/

    Yes you can change the climate, Mr Obama (New Scientist) – http://www.newscientist.com/article/mg20026855.800-yes-you-can-change-the-climate-mr-obama.html?DCMP=OTC-rss&nsref=online-news

  5. $0.046 is less than one half of $0.10—not 4 times.

    Either you typo’d one of those, or your math jumped a groove.

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