Peak taxes

I’ll give credit to Mr. Sam Taylor for including yet another bash from one of Bellingham’s more prominent BDS sufferers. In his Herald article, Sam quotes the ailing councilman:

Councilman Terry Bornemann even used the opportunity to take a jab at the Bush administration, saying he thought it was an “interesting coincidence” that oil prices for the past six years have skyrocketed during the Iraq War and oil companies’ profits have done the same.

state tax The subject was whether or not Bellingham should commission a task force to study the effects of “loss of oil supplies and increasing gas prices.” I might argue the loss of oil supply, but I won’t argue the supply of irony when observing public officials.

Yes, gas prices are increasing, but there is no shortage of oil, just an overabundance of big government interfering with drilling and refining capacity. As for the Councilman’s remark; yes oil companies profit. They invest, they risk, they profit. It’s called capitalism. It goes hand in hand with freedom and liberty. And if oil companies had the freedom to responsibly drill and refine oil where it is available, then no one would be throwing around the term “peak oil.”

Ironically, the petroleum industry is not alone in turning a profit from oil sales. Our government also profits when oil companies profit. I find government to be a little less deserving of the profit though, since they risk nothing and profit everything. Stories of government oil taxes aren’t published nearly as much as stories of oil company profits.

In 2006, America’s major oil and natural gas companies paid an estimated $81.5 billion in income tax. In addition, these companies collected over $48 billion in excise taxes in 2006 on behalf of the IRS. Additional taxes and fees imposed on the industry include gross production or severance taxes, import duties, and property, sales, and use taxes. U.S.-based petroleum companies must compete in the global oil and gas market to ensure a stable supply here at home.

That was the other side of the issue as presented by the American Petroleum Institute. The federal government is collecting billions upon billions from the oil industry, and as income tax, the government is profiting more when the oil industry profits more. An interesting situation that I’m sure doesn’t lower gas prices. In addition, the colorful little map shows how our local governments are also skimming over 54 cents of our money for each gallon of gas we pump. That’s a lot of taxing even for those who drive a Prius, worse for a family mini-van, and potentially devastating for business.

The moral of this story is that our elected government shouldn’t waste a penny of our money studying the effects of the problem; we know they won’t be good. Rather, we need our elected officials to study and implement ways of eliminating the problem. Petroleum related taxes should be first on their list because unlike the Peak Oil scare, Peak Tax is a real tangible problem.

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8 Responses to “Peak taxes”

  1. Gus says:

    Could you imagine the cost of electric if even a moderate percentage of Californians actually switched to electric vehicles in the next 2 or 3 years.

    Or if the California companies switched over to proton energy membranes for their power. There are plenty of options available but nobody is asking the scientists making the headway.

  2. wally says:

    I think there are solution out there to be found and I think that the best way to find them is through capitalism. Government, especially socialist governments, don’t have a track record of finding the type of solutions we need.

    I just hate to see more taxes piled on the problem, because that same money might be used to find the solution in the private sector. And I’m not talking about limited moratorium or a a one time stimulus check; I’m talking about consistently leaving more money in our hands so we can find solutions or invest with business we feel are likely to find solutions.

    I’ll have to defer to your knowledge of the 2047 tip point on oil, but I’m glad that it won’t happen tomorrow. And I’m actually ok with the prices staying high or even going up if it is due to market and not taxes. Both money and time will be needed to find and implement solutions.

    Could you imagine the cost of electric if even a moderate percentage of Californians actually switched to electric vehicles in the next 2 or 3 years.

  3. alfredo says:

    I see your point regarding new technologies coming into play before the oil is gone. This is almost a certainty because as supplies decrease, the cost of oil will increase dramatically. The peak oil crowd may sound like doom sayers, but their point is valid regarding increasing prices as supplies diminish.

    I think everyone is hoping science finds something better than our current alternatives before increasing costs begin to significantly affect our ability to produce food and electricity. There is a true dilemma, however, in that our civilization hinges on fossil-fuels, we don’t have reasonable or efficient alternatives, and we can’t exactly rely on science to find one.

    In any case, USGS estimates give us until around 2047 before supplies begin to dip barring no more unexpected large discoveries. That is a cushion, but it’s coming up quickly if it is even close to accurate. I don’t expect oil prices to go down significantly again without the discovery of a cheap mass-producible replacement. As noted by many economists, we could completely eliminate the federal gas tax, and the affect on prices would be negligible. As the King of Saudi Arabia recently noted, he could greatly increase production of oil, but why should he, as he is meeting demand?

    Gus, I’m sorry to hear about the Virginia highway project. I also think that we could reduce taxes greatly if we could eliminate waste, fraud and abuse; among other things. Unfortunately there are few people in politics who seem to have any interest in such matters.

  4. Gus says:

    Okay, I’ll say the word. The government is hypocritical to criticize big oil. Instead of calling them to congress to rail them over the high price of gas they should be asking what can be done to reduce the price. Maybe they don’t want to hear the answer? Maybe the answer is “reduce the stranglehold of taxes and you reduce the price of gas”. Maybe the answer is “allow us to build more refineries”. Maybe it’s “open up ANWR to drilling”. It could even be “make gas blends unified across all 50 states”. But no, we get threats about windfall tax increases to punish gas companies for being capitalists. (which, in turn, turns into gas price increases for the people.) All the while the government is pulling in 81.5+48=129.5 billion dollars of taxes from gas and oil every year.

    Here in Hampton Roads Virginia we have had a road project contracted since before 1998. This road project was put on hold several times due to contract failures, bankrupt companies, horrible workmanship, and various other pitfalls. It isn’t money that’s at fault. It’s the shoddy way the government deals with getting things done. The problem can’t be solved with more money. It needs real solutions.
    (That road project is still being worked on today, over ten years later.)

  5. wally says:

    There are some theories out there about sustainable oil supplies, but I wouldn’t argue with the fact that oil is limitless. But I do wonder if we will ever run out? Will we actually pump the last drop or will new technologies be exploited before that happens?

    New sources of energy, new technology and I’m sure some cultural changes will happen. Excessive taxation doesn’t help. Governments tightening their belts will keep more money in our hands where we might invest in new more fuel efficent cars, or heaven forbid; a business or product that reduces our need for oil.

    As for infrastructure, I’d rather see a tax break as prices go up. A vehicle burning $4/gallon gas doesn’t wear the roads any more than one burning $3/gallon. And miles driven will probably go down causing less wear and tear on roads.

    It just seems pretty opportunistic for government to profit from and contribute to, higher gas prices.

  6. alfredo says:

    While I agree with many of your sentiments regarding taxes, there is not an infinite supply of oil. There may be more discoveries on the way, and there are more expensive ways to extract oil from untapped regions; but there is surely a measurable quantity. That is a mathematical truth, and to suggest otherwise is fantasy. In fact, we know now that several of the world’s major oil fields have peaked. That is, the number of wells operating at full capacity is in decline. This is not due to politics, but due to the nature of decreasing finite supply.
    Additionally, it is probably safe to say that the current environment of oil price increases has more to do with increased demand, as mentioned in China and India, coupled with the declining value of the dollar, than with taxes or politics. Those taxes do pay for our infrastructure by the way. While there are other ways to pay for infrastructure, such as tolls, it would also be fantasy to believe that infrastructure just miraculously appears without anyone paying for it.

  7. So long as China and India have a growing middle class and a growing industrial base, their demand for oil will continue to increase. Those industrious fellas at the mercantile exchange in Chicago are going to probably keep betting that this demand will increase. This probably accounts for 70 to 80 dollars a barrel currently as the continued defense of Western civilazation accounts for about 20 to 25 dollars a barrel. The value of the dollar has declined against the Euro, and meanwhile Terril R. Bornemann is flappin his jaws Bush Bashing. Why doesn’t he remember that he is a city councilman? Maybe he should run against Rick Larsen in the Democrat Primary this year?

    What continues to amaze me, however, is that Terril never takes flight with his arms flappin’ away in all his excitement lecturing down to the people…

  8. AFY says:

    Maybe the government should take over all of the Oil Companies and make gas free!

    If you think gas is expensive now, wait until you see what it cost when it is free!