Gas Prices And Windfall Tax Policies: Let's Get A Grip!

This Morning Drudge's headline reads: $200 OIL PREDICTION ROCKS MARKET The story from Yahoo entitled Oil hits record $122 on $200 oil prediction, supply concerns outlines the fear in the market and does it's best to frighten the bejesus out of folks with speculation about $200 oil. What this piece, and many like it, lack is any explanation of how the free market and supply and demand work!!! But I suppose since the media in this country (and really most country's to be honest) have little to no clue how these practices work... it's a bit silly for me to expect them to do anything else but scare people into submission, especially in an election year!

Which leads me to a couple of items I wanted to share with you -- The first being an email I received from a a trusted and reliable source who will continue to go nameless who wrote:

With Americans just now grasping the possibility of $5 gallon gas by the summer, Senators Clinton and Obama – and their friends in the mainstream media – are demanding energy plans that tax the Petrovillains. In fact, it appears that the Democratic energy plan (Obama and Clinton agree) is to tax our way to lower prices and energy independence.

Here are some thoughtful editorials from Saturday’s Wall Street Journal that hit some very good facts while knocking back calls for tax increases, and Investor's Business Daily that details how the private sector – and supply and demand forces – are taking control of the energy crunch: “For users, higher prices mean finding ways to do with less. For producers, they mean finding ways to produce more. The confluence of these two forces usually results in lower prices. This is what's happening now with oil.”

Key highlights from the Journal editorial:

* “Normally, when you tax something, you get less of it, but Mr. Obama seems to think he can repeal the laws of economics. We tried this windfall profits scheme in 1980. It backfired. The Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3% to 6% and increased oil imports from OPEC by 8% to 16%. Mr. Obama nonetheless pledges to lessen our dependence on foreign oil, which he says ‘costs America $800 million a day.’ Someone should tell him that oil imports would soar if his tax plan becomes law. The biggest beneficiaries would be OPEC oil ministers.”

* “They [politicians] want lower prices but don't want more production to increase supply. They want oil ‘independence’ but they've declared off limits most of the big sources of domestic oil that could replace foreign imports. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks want to be President?”

* “Thomson Financial calculates that profits from the oil and natural gas industry over the past year were 8.3% of investment, while the all-industry average is 7.8%. And this was a boom year for oil. An analysis by the Cato Institute's Jerry Taylor finds that between 1970 and 2003 (which includes peak and valley years for earnings) the oil and gas business was ‘less profitable than the rest of the U.S. economy.’ These are hardly robber barons.”

* “Late this week, a group of Senate Republicans led by Pete Domenici of New Mexico introduced the ‘American Energy Production Act of 2008’ to expand oil production off the U.S. coasts and in Alaska. It has the potential to increase domestic production enough to keep America running for five years with no foreign imports. With the world price of oil at $116 a barrel, if not now, when? No word yet if Senators Clinton and Obama will take time off from denouncing oil profits to vote for that.”

And the Second item from Rep. John Boehner's office:

At her press briefing last Thursday, Speaker Nancy Pelosi (D-CA) acknowledged one of the universal truths of supply and demand when she said “certainly more supply lowers the price.” But when it comes to rising gasoline prices – which today are $1.28 more per gallon than when Rep. Pelosi became Speaker – House Democrats have OPPOSED increasing the supply of American-made energy at every opportunity. It’s an issue that puts the Speaker on the defensive, especially considering that San Francisco has the highest average gas prices in the nation. According to the Associated Press, “The highest average was in San Francisco at $3.95.”

But Speaker Pelosi and House Democrats don’t seem to mind the high prices. In fact, they want to make gasoline even MORE expensive. Two prominent Democratic committee chairmen have proposed gas tax increases of up to 55-cents per gallon. House Energy & Commerce Committee Chairman, Rep. John Dingell (D-MI), has proposed increasing the federal gas tax by an additional 50 cents. And Transportation & Infrastructure Committee Chairman James Oberstar (D-MN) has proposed at least a five-cent tax hike of his own, which he confirmed again last week. Taken together, that’s an additional 55 cents per gallon on top of the already painful Pelosi Premium!

Republican Leader John Boehner (R-OH) last week stated plainly that Democrats want to make gasoline more expensive:

“Not only do Democrats have no plan to lower gas prices, they actually want to increase them. We’ve got Chairman Dingell wanting his 50 cents a gallon tax on gasoline to fund his climate change proposal. You’ve got Chairman Oberstar yesterday, says he wants an increase in gas taxes in order to fund infrastructure. I have to ask Speaker Pelosi. Does she support increasing gas taxes as two of her chairmen have called for over the course of this year? The American people don’t want high gas prices, they’re tired of it and Congress ought to be doing something to deal with it.” (AUDIO)

In the two years since then-Minority Leader Pelosi promised the American people a “commonsense plan” to lower gas prices, not only has she refused to reveal it, but prices have actually risen at an incredible pace – from $2.33 on January 4, 2007, the day Rep. Pelosi took the Speaker’s gavel, to $3.61 today. And among those hit the hardest by this $1.28 Pelosi Premium are working families, small business owners and employees, and local communities from coast to coast, which have been forced to cut critical services such as school bus transportation and law enforcement.

With Speaker Pelosi’s hometown facing the highest gas prices on record, will she support a more than 50 cent gas tax increase proposed by her committee chairmen? And where is that “commonsense plan” to lower gas prices she promised? Families and small businesses are looking to their elected leaders to help ease the strain of record gas prices, not higher taxes that will squeeze family budgets even further.

Please see the original for links and more info.

Perspective is a good thing and so is fully appreciating and understanding the reasons why were in this situation, how market forces work, and how best to rectify the situation.

The Democrats don't want any of this -- "they're only interested in making you afraid of it... and telling you who's to blame for it!"