POPULISM AT THE PUMP? - KMOV.com

POPULISM AT THE PUMP?


Courtesy: WFAA-TV

In the last entry I talked about answers to bringing down the prices we pay for gasoline.
Today, the media received the following Op-Ed piece from Senator Claire McCaskill, who apparently has decided someone named "Big Oil" is completely to blame:

Last Stop on the Oil Company Express
A column by U.S. Senator Claire McCaskill

"For the last six years or so, the oil companies have had a sweet ride.
This administration, being former oil executives themselves, and past
Congresses gave a wink-wink, nod-nod to the oil companies while they
stood before the people saying we need to "jawbone OPEC" to bring these
gas prices down.

Here we are today starring at a jaw-dropping $3.20 a gallon on gas
station signs, while the oil companies remain on the fast track to major
profits.

Let me just say that again - we're paying record prices while they're
making record profits. No matter how many times I say it, it doesn't get
any easier to stomach.

Even worse, last year Congress forked over $9 billion dollars of our tax
dollars to the big oil companies in tax breaks and subsidies. That
doesn't make sense. The people who need the relief are consumers, not
the big oil companies. "
"It'll be a long road toward giving consumers the relief they so
desperately need at the pump. However, Congress has the opportunity to
start now by repealing the hand outs to big oil and moving forward with
meaningful legislation to help American drivers. I'll fight as hard as I
can to make it happen."

That's a partial text, and you can read the rest in your newpaper tomorrow. But it's obviously a populist approach to the problem, and given the opportunity there are several questions I would address to the Senator.
1) Even if you cut the "9-billion" in tax breaks and subsidies, how will that give us relief at the pump?
2) If you sell widgets, and the sprocket for your widget goes from $30 to
$65, you'd pass that along to your customer. Assuming demand for widgets did not drop, and your profit margin remained the same, wouldn't profits go up accordingly?
3) For a more immediate impact, why not cut gasoline taxes? Gas would immediately drop as much as 45-cents a gallon nationwide. According to the Illinois Petroleum Institute, taxes across the nation average 18-cents(Federal), and 27-cents (State).
I do know it's 37-cents a gallon in Illinois, and 17.5-cents a gallon in Missouri.
4) Why not demand that 'Big Oil" spend an amount equivalent to the subsidy on efforts to pump every possible gallon of existing oil from our own soil, so we're less dependent on others?

Problem is, I already know the answer to each one of those questions.
The profit amount of "Big Oil" is irrelevant, if it's the same percentage of income as it was before. The bigger issue is that oil companies often have a stake in pumping the product, refining the petroleum, and selling it at the pump. If they control every aspect, and there is less competition, manipulating the price becomes very easy. Instead, maybe the government should build several large refineries on old military bases, and offer up the extra capacity whenever oil companies cry "shortage". Now that's putting your "gas tax" dollars to work.

Marc

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