You Can Fuel Most of the People
Monday, March 31st, 2008A friend of mine told me he’s glad someone is finally proposing a windfall profits tax on oil companies.
I asked why he thought it was a good idea.
“Those oil companies make too much money. Obscene amounts of money.”
“And you think there should be a limit on how much you’re allowed to earn?”
“Of course there should be. They’re charging us too much for gas.”
“And how much should a person or corporation be allowed to earn?” I asked.
“They shouldn’t be allowed to earn too much, especially when it costs the consumer.”
“I see,” I continued. “So we should come up with an arbitrary amount, and if somebody makes more than that we should tax them some more?”
“That’s the idea. Gas costs too much these days.”
“If gas costs too much, why not stop buying it? If nobody buys any petroleum products, the oil companies won’t make any money at all.”
“I have to buy it!” he said. “I have no choice!”
“So if gasoline were to cost $1,000 per gallon, you would still buy it?”
“No, I couldn’t buy it if it cost that much! It would cost me ten or twenty thousand dollars to fill up my tank! I don’t have that much money!” he ranted.
“So what you’re saying is gas doesn’t cost too much now.”
“That’s not what I’m saying! It costs way too much!”
“I don’t see it the way you do,” I said. “You said you wouldn’t buy it if it cost a thousand dollars a gallon, but you buy it now. What’s the difference? If you think it cost too much now, just stop buying it.”
“I can’t stop buying it, because I need it. I already told you that.”
“Right,” I said. “But you said you wouldn’t buy it if it cost a thousand dollars a gallon. Would you somehow stop needing it then?”
“No, I wouldn’t stop needing it. I just wouldn’t be able to buy it.”
“So you wouldn’t really need it, in other words,” I said. “You would figure out how to work around it somehow.”
“I would have to, wouldn’t I? Only the very rich would even have the capability of buying it.”
“So you’ve just told me again that gas isn’t too expensive at this time. If gas were a thousand dollars a gallon, and only the very rich bought it, the oil companies would go under in no time.”
“Yeah, but we should regulate how much they’re allowed to make. They’re making it because of us,” he said.
“Exactly! They’re making it because people are buying their products. Obviously, people might complain about prices, but the only way to measure whether or not prices are too high is by supply and demand. If demand decreases, prices are probably higher than they should be.”
“Well, they are higher than they should be. Those companies are making too much money!”
“Is Google making too much money? Should the government tell them they should only be allowed to make a certain amount? How about Starbucks? Wal-Mart? Target? What about Nike?”
“Well, they’re not oil companies. Oil companies are making way too much money!”
“How about,” I continued, if I told you the profit margin for oil companies was considerably less than that of the companies I mentioned? What would you think then?”
“I don’t know. They didn’t make as many billions as the oil companies.”
“Why not complain about what government has done to drive up the price of oil? They’ve forced us to use ethanol, which is about 20 to 30 percent less efficient than pure petroleum-based gasoline. It also costs more to manufacture, and uses vast amounts of petroleum products to manufacture and transport it. It has enough water in it to make it too corrosive to ship by pipeline, if such pipelines existed. It takes 1700 gallons of water to make one gallon of ethanol. Besides the regular government excise tax on gasoline, add another fifty-one cents per gallon to subsidize corn production. Subsidies for ethanol production are at least $1.05 per gallon. Gas prices haven’t gone up as much as food, everything from corn to wheat to dairy products and meat. We’re growing much less wheat and other crops which are being replaced by corn. Besides driving up the prices of vegetables, it costs more to buy feed for farm animals for dairy production and meat. We could bring in cheaper foreign ethanol, but your good old government has imposed a fifty-four cent per gallon tariff on that, to stack the deck in favor of the U.S. subsidized ethanol production.”
“Really?” he asked.
“Check it out yourself. And I haven’t even mentioned that China has ever-increasing demands for oil, and they don’t seem to care what it costs. That’s where the oil companies make a lot of their profits, and China gets a lot of its money from exporting its products to the U.S. And now some people are talking about taxing the oil companies even more? Do you think that will scare them into decreasing the price of gasoline, or increasing the price to offset the new taxes? Maybe I don’t know how all of this works.”
“That’s scary, but I still think we should do something about those huge profits.”
“Right. Let’s penalize people for providing a need and getting paid for it,” I told him. “Meantime, the government is adding about two dollars to every gallon of gasoline, through subsidies and taxes, and it’s affecting food prices even more than it affects the gas. And we’re letting vast reserves of oil sit in the ground due to over-regulation as well as bans on drilling. Makes sense to me, I suppose.”
“But I heard they were talking about decreasing the subsidy programs.”
“Yes,” I responded. “They expect to decrease farm subsidies by $4.5 billion, and instead provide incentives for conservation, which will increase by $7.8 billion. Whoopee! That’s quite a savings, don’t you think?”
“How do I know you aren’t just making all of this up?”
“Read the September 2007 issue of Amber Waves, a publication by the U.S. Department of Agriculture. You can read it online @
Amber Waves
“Okay, I’ll check it out.”
“As the late Steve Zeitz said, “You can fuel some of the people oil the time, and oil the people some of the time, but you can’t fuel oil the people oil the time.”

