Oil companies have largely taken the blame for our"record high" gasoline prices. But, are oil companies really to blame for our current situation?
Examine the facts:
In 1950, $1 would buy you a lot more than it would today. What cost you $1 in 1950 will now cost you $8.78 in today's dollars. In 1950 gas prices were about 30 cents a gallon. If we adjust for inflation, gasoline prices should be $2.64. This is assuming taxes remained the same.
But taxes haven't stayed the same...not even close. In 1950, the tax per gallon of gasoline was roughly 1.5%. Today, taxes on gasoline make up about 20% of the posted price of gasoline, and a significant portion of the cost you pay to fill 'er up.
That 30 cents per gallon in 1950 should cost about $3.13. This assumes that the supply and demand of oil and gas has remained constant. However, China and India have been consuming more and more energy every year with no end in sight.
The last oil refinery built in the United States was completed in 1976. Government regulation has prevented any refineries from being built since then. Other countries have nationalized their oil industry which makes investors nervous about doing business with a dictator or group of dictators (I wonder why) which in turn causes a risk premium to be priced into the oil we must buy from other nations.
Lastly, about 9.5% of the price of gasoline goes to the oil companies. A whopping 20% goes to Federal, State, and local taxes. A very small percentage goes to privately held gas station owners and the rest is used up in the cost of production and getting the product to market.
Politicians often tell us about "greedy" oil companies. But if "windfall profits" were the real issue, why not go after other industries who have larger profit margins than oil companies?
For example: The profit margins for the [Periodical] Publishing industry is 24%, the shipping industry has 18% profit margins, application software boasts 22% profit margins, the tobacco industry rakes 19%, water utilities operate at 10.2%.
What's the solution? Cut back product distribution? Now that will cause a problem...more of a problem than we already have. What's another solution? Cut their profit margins down even more? They already operate on pretty thin margins. Don't these companies have a right to exist? And, if they don't, then who does? And why?
A third option is to leave them alone. Tell your representatives to eliminate coercive laws, regulations, and then demand lower taxes and spending in Washington. - 15224
Examine the facts:
In 1950, $1 would buy you a lot more than it would today. What cost you $1 in 1950 will now cost you $8.78 in today's dollars. In 1950 gas prices were about 30 cents a gallon. If we adjust for inflation, gasoline prices should be $2.64. This is assuming taxes remained the same.
But taxes haven't stayed the same...not even close. In 1950, the tax per gallon of gasoline was roughly 1.5%. Today, taxes on gasoline make up about 20% of the posted price of gasoline, and a significant portion of the cost you pay to fill 'er up.
That 30 cents per gallon in 1950 should cost about $3.13. This assumes that the supply and demand of oil and gas has remained constant. However, China and India have been consuming more and more energy every year with no end in sight.
The last oil refinery built in the United States was completed in 1976. Government regulation has prevented any refineries from being built since then. Other countries have nationalized their oil industry which makes investors nervous about doing business with a dictator or group of dictators (I wonder why) which in turn causes a risk premium to be priced into the oil we must buy from other nations.
Lastly, about 9.5% of the price of gasoline goes to the oil companies. A whopping 20% goes to Federal, State, and local taxes. A very small percentage goes to privately held gas station owners and the rest is used up in the cost of production and getting the product to market.
Politicians often tell us about "greedy" oil companies. But if "windfall profits" were the real issue, why not go after other industries who have larger profit margins than oil companies?
For example: The profit margins for the [Periodical] Publishing industry is 24%, the shipping industry has 18% profit margins, application software boasts 22% profit margins, the tobacco industry rakes 19%, water utilities operate at 10.2%.
What's the solution? Cut back product distribution? Now that will cause a problem...more of a problem than we already have. What's another solution? Cut their profit margins down even more? They already operate on pretty thin margins. Don't these companies have a right to exist? And, if they don't, then who does? And why?
A third option is to leave them alone. Tell your representatives to eliminate coercive laws, regulations, and then demand lower taxes and spending in Washington. - 15224
About the Author:
Only so much information can be covered in one article. If you want more information about any aspect of personal financial planning, please visit David's website.
