To Excise or Subsidize, or Just Lies?

Face it, there is no shortage of oil, there is no shortage of fuel.

Any Peak oil issue is at least a couple of generations away.



So why are we soon to pay $4.00 per gallon in a couple of month's , short of the (fake) supply and demand scenario that gets played on us whenever the question arises.

Well of course, world events and producer influences are there. But they need their money so we have no ability to influence that in reality.

Yes developing countries are using more and more, coupled with developed countries unable to reduce their consumptions. But we really cant change that either.


Then there is the currency markets that cause price shifts at every corner, but yet that too is not within our controls.


So where do we look for price relief? (short of the obvious reductions in consumption. Harder to do than say that is for sure.)


The Feds suggest they are 'investigating' big oil to see if market manipulations are occurring. Of course everyone likes that idea.

In the USA, Federal gas tax has been 18.3 cents since 1996. That equates to about 6% of current gas prices. (av. $3/gl retail)

Not much we can do there. Plus it hasn't been increasing like the prices so the percentage of Fed tax per gallon has actually been declining as a percentage of the retail price.


State gas tax is a different thing though. State gas tax has been increasing significantly and some states increasing as a percentage of the wholesale price increase. Normally you would think,...well, it goes to build and maintain roads. And I would likely agree.

Problem is though, the states legislators have been regularly 'dipping' into the fuel tax revenue funds to finance all sorts of other unrelated projects. Most notably in states that are obviously notorious for being unable to maintain a budget.


Point is, gas is going up and there is NO shortages. Demand is going up but that has definitely begun to slow with the increased costs, and it is becoming very obvious in the spending habits of the lower income consumers.


In my opinion, it is the STATES responsibility to provide tax relief to it's populations. They are the ones that are exacerbating the whole price issue. They are the ones using those funds for much more than maintaining and building roads. They are the ones that reap the most 'profit' from each gallon of gas sold.

Some numbers:

Federal gas tax per gallon: $0.18.3

State taxes current at July 2006: $0.26.4 to $0.63.4
api-ec.api.org...#


The billions and billions of dollars being collected each and every year by the states, for 'building and maintaining roads', equate to an average of 21 Percent of the cost of fuel when combined with the Fed tax. In excess of ONE FIFTH the pump price! And a marked percentage isn't even going to the roads, instead being 'borrowed' for other unrelated things.



So tell me,... do you really believe that "Peak Oil" is real and now?... or do you think this windfall the states are enjoying and misappropriating, could be the real reason for price increases. I would not doubt that an oil company could turn down an offer to help 'assisting' states bring in more cash for their fiscal irresponsibilities.


I think that the states should either LOWER their money grabbing off of fuel, or at least subsidise their own populations, as that is the source of the 'profits' that we can control.

Just my 2 cents.




edit, typo

[edit on 6-7-2006 by smirkley]

Here is a prime example of how this 'gas tax' is being used.

(and note this state is smack at the stopover point of the main feeder pipelines that supply the whole east coast.)

source: Winston-Salem Journal

The gas tax, currently at 29.9 cents a gallon, is under fire from those who want legislators to cap it, and polls show that voters don't want it to go any higher.

In January, the gas tax increased by 2.8 cents a gallon, the biggest jump in 20 years. Gov. Mike Easley and the state Senate have proposed spending plans recently to cap the tax at the current level, in part to prevent it from increasing next year.

-snip-

"We have probably the biggest challenge and the biggest problem facing our legislature in the next few years: how to fix our highways," said state Sen. David Hoyle, D-Gaston, a former member of the N.C. Board of Transportation.

Legislators don't want money just for highways - they also want it for bus service, airport improvements and rail. Charlotte is building the first leg of a light-rail system, and some leaders in the Triangle and the Triad want to start similar projects.

-snip-

State government has planned to spend $2.5 billion on transportation this year, with the federal government contributing an additional $856 million to the state.

-snip-

He disputes that there is a crisis in how the state pays for roads. Rather than finding new sources of money, he said that legislators should end the annual transfer of money from the Highway Trust Fund to the state's General Fund.

In 1989, state legislators and Gov. Jim Martin, a Republican, raised the state gasoline tax and created the Highway Trust Fund, which was designed as the first state fund dedicated to road construction.

The transfer from the trust fund has occurred every year. It's intended to make up for money that, until 1989, had gone to the General Fund, and this year the transfer was $253 million. Legislators have voted to reduce the transfer by $80 million next year while leaving most of it in place to pay for education, health-care and other services.

"I just don't think that we would be in the situation we're in if they had kept their hands out of the cookie jar," Graham said.

-snip-

"They (state officials) build roads to nowhere, and they leave the roads that are already congested even more congested," Coletti said.

Now, tell me, where is there reason to reduce the gas tax. It pays for so much. Like funding the general fund for the state, that hasn't for years been balanced. Is there a shortage there? No. In fact, NC is on the actual stopover point where the pipelines from the refineries travel through on the way up the coast. They will NEVER be out of fuel. They will never have to truck it in. Almost every state on that pipeline has some of the highest taxes applied to its consumption. I haven't researched it but I wouldn't be surprised if all the states fed from that pipeline network have had considerable difficulties balancing their own general budgets.


I can show you all kinds of sources that easily demonstrate that there is no shortage of oil anywhere.

But I cant demonstrate any sources explaining why the states use their gas tax like an interest-free trust fund to pay for their spending habits.

So next time someone says 'its all about supply and demand', ask them why a fifth of the retail price of gas is just for taxes. And if they say its for 'roads and maintenance',..ask them to demonstrate it. They cant.

Now if we consider consumer subsidizing by the states via gas tax 'holidays', rebates, or even ethanol subsidies, we have to consider the overall effects also.

Gas tax holidays are only a short term solution that promotes increased fuel consumption. Coupled with the fact that state spending does NOT change during a gas tax holiday, this would only in the short term, provide increased consumption by the consumer during this period and also further state budget deficits that would have to be invariably made up somewhere else in terms of revenues to cover for the loss of 'holiday' tax revenues.

A no-brainer that only offers temporary fake relief to the consumer at the pump. Something like a gas tax holiday is a great thing to legislate when applied in an upcoming election year.

The Ethanol solution:

Subsidizing ethanol guzzles consumers' gas and money

It has been more than 30 years since President Richard Nixon established a long-range goal of achieving energy independence, and yet oil imports keep increasing. As a result, many environmentalists and politicians are now suggesting that it is time for the United States to speed the deployment of ethanol and other biofuels as a "cheap" alternative to gasoline.

Lugar and other lawmakers have introduced legislation to boost federal loan guarantees for the wider use of E-85, a blend of 15 percent gasoline and 85 percent ethanol, and also require filling stations to sell this product.

But mandating and subsidizing the use of ethanol clearly doesn't make economic sense because the costs of producing ethanol are greater than the benefits.

-snip-

In Michigan, there are almost a dozen bills being considered in Lansing that would provide tax breaks and grants for producers, sellers and users of ethanol and biofuels.

Consider how ethanol is made. Corn is grown, harvested and then winds up at an ethanol plant. There the corn is ground up, mixed with water and then fermented. Finally, a mixture that is only about 8 percent ethanol must be distilled again and again until it eventually becomes almost pure ethanol.

Unfortunately, growing and harvesting the corn, and heating and reheating the fermented corn to produce ethanol require a vast amount of energy. Ironically, most of this energy to produce ethanol comes from fossil fuels.

-snip-

If you account for all the steps to produce ethanol -- oil to run tractors, natural gas to heat the fermented corn, and fuel to transport the ethanol by truck or railroad to refineries -- it takes 29 percent more fossil fuel energy to make ethanol from corn than the fuel produced, according to a recent study at Cornell University and the University of California-Berkeley.

Ethanol fails miserably in a simple cost-benefit test of energy efficiency, because there is actually a net energy loss in ethanol production from seed to fuel.

Without the enormous government subsidies for the production of ethanol, the corn-based fuel could not survive in the free market.

The current federal subsidy is 54 cents per gallon of ethanol, which is an estimated 30 to 45 percent of its production cost. And 14 states, mainly in the Midwest Corn Belt, provide their own subsidies for ethanol production in addition to the federal subsidy.

All of this adds up to billions of tax dollars annually that go to corn farmers and ethanol producers to artificially prop up a product that fails the market test.

-snip-

The inevitable economic consequences of capping the use of oil in favor of ethanol would increase energy costs in other ways. Most importantly, because ethanol's fuel performance is so much worse than gasoline, there is a significant decline in fuel performance, adding to fuel costs for motorists who might be forced to use increased amounts of ethanol.

source: The Detroit News

So now it appears that not only do gas tax holidays do nothing but remove revenues from states budgets that you know will be replaced in some other fashion, but the heavy subsidizing of ethanol based fuel products are so completely wacky and do nothing but INCREASE our fossil fuel energy costs and energy wastes as well as make some corn farmers richer and ethanol producers much more secure in a market that couldn't stand on its own.

Such irony in the scheme of things, but not surprising really.

Every time I read more on this subject it amazes me how the wool is being pulled over our eyes and our money being spent and taken from us as consumers. No lack of fuels, yet we willingly embrace warm fuzzy concepts such as ethanol as well as praise tax holidays when its offered.

Yet look beneath the surface and 'follow the money', and it becomes obvious that state taxes and budgets, and subsidies to companies, are the real issue.



[edit on 8-7-2006 by smirkley]