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Free Citizen

This writer espouses individual liberty, free markets, and limited government.

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Location: Jackson, Mississippi, United States

Saturday, June 14, 2008

The Truth About Gas Prices

"When Shell Oil president John Hofmeister recently appeared on Glenn Beck’s show [on CNN2], he pointed out that Shell’s profit margin, at about 7½ percent, is well in line with the profit margins of most industries. Hey, since Google’s profit margin is more than three times Shell’s, why not slap Google with an excess profits tax?"

by Robert Ringer

“Pain at the pump” has become the favorite catchphrase for media folks. It’s a cute little saying, but, speaking as an apparent minority of one, I’ve never quite been able to figure out why people pick on gas. After all, isn’t it just as painful to pay $250,000 for a house that used to cost $8,000? Or $30,000 for a car that once cost $3,000? And look what’s been happening to the price of the most basic foods (e.g., milk, bread, eggs).

The fact is, everything in life is relative. Relative to what Americans have been used to paying for gas, $4.00 a gallon sounds like a lot. But relative to what countries such as the UK, France, and the Netherlands pay — $6-$10/gallon — Americans have it made.

Contrary to what politicians would like us to believe, the main factors driving up gas prices are:

1. Supply. So long as “environmentalists” have their way, our lack of domestic supply assures that gas prices will continue to rise.

2. Demand. The emergence of China and India as economic superpowers assures continual upward pressure on energy prices.

3. Currency devaluation. And, above all, it will take more and more of the rapidly devaluing U.S. dollar to pay for less and less foreign oil.

Of course, there are other factors that play into the equation as well (such as the 18.4¢ per gallon federal excise tax [plus the 18.8 cents per gallon Mississippi excise tax]), but the three I’ve listed above are the main causes of “high” gas prices — and that’s not about to change anytime soon. In fact, political realities virtually guarantee that gasoline prices will continue to rise.

But the single biggest cause of future increases in gas prices is likely to be the confiscation of oil company profits, euphemistically referred to as “excess [or windfall] profits tax.” This will cause... Read more>>>

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