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Monday, April 28, 2008

Clueless

What does Hillary Rodham Clinton have in common with truck drivers? Cluelessness, that's what. Hillary has suggested that we take a "gas tax" break from Memorial Day to Labor Day (good idea) which would save drivers 18 cents a gallon at the pump.

However; and this is where she's clueless; she would like to make up that money with a "windfall profits tax" on oil companies. Now, I'm no business genius, but I know that taxes are a cost on business, and to make up profits, they pass costs on to consumers. So just how much will my gas price go down if I only replace one tax with another?

Then there are the truck drivers who are rallying in DC today complaining (rightfully) about high prices. The problem is that the folks in DC can't do much, short term, to lower them. They've been missing long term chances since the mid-90's by not doing anything to ease the litigation burden on oil companies that want to increase their refining capacity, or opening any new areas to oil exploration.

The truckers would like to see an end to the export of oil from Alaska. They are clueless on this. You see, we don't have the refining capacity on the west coast to handle that oil, and the shipping costs of sending it to the Gulf Coast is prohibitive, and would raise, not lower the price of gas. To ship from Alaska to Mississippi, Louisiana and Texas would require either small enough tankers to get through the Panama Canal, or trips around South America. Small tankers are inefficient and the trip around South America is a long one. The oil companies actually keep their (and your) cost down by selling what can't be refined on the west coast on the world market.

They'd like to see the national petrolum reserve opened up, which would give a brief respite from prices, but not huge. Most of our refineries are working at capacity right now, so you wouldn't be able to do much with that oil, except sell it on the world market to lower prices. No guarantee it would come here, and odds are it would end up in China and India. Both of which have excess refining capacity.

Truckers, for some reason, think that by revoking some of the exploration tax breaks that oil companies are given will somehow reduce the price of oil. Again, I'll go back to Business 101, if you increase the cost of business (exploration in this case) those costs will be sent back to the consumer.

You'd think truckers would get most of that, many of them have been raising the rate per mile they charge to haul cargo due to higher costs. Evidently they think that theirs is the only business that has to make up for higher costs somehow.

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