Tuesday, April 26, 2011

Paying the Price

With oil and gas prices shooting up almost on a daily basis, it's worth thinking about why that's happening. Some people blame the government, saying that restrictions on drilling and forcing companies to limit production causes artificial inflation of the price per gallon. Others argue that its the companies themselves, limiting their production on their own, or simply refusing to ship their oil, so that the demand exceeds the ready supply, the price goes way up, and they can use that as leverage to open up the sanctions and restrictions currently on them.

I tend to believe that it has more to do with corporate greed than government control. For one thing, a lot of these companies don't pay any taxes in the U.S. Also, they are posting record profits. Exxon Mobil, for example, will be posting record profits for the second time in three years. Their quarterly profits are expected to increase by 50% over last year! So, not only is Exxon Mobil raking in huge amounts of cash, they are paying nothing to the Fed, meaning that government gets nothing out of this.

In fact, the only place the government makes money on oil is when they add taxes at the pump. The thing is, those taxes haven't increased since about 2005. The federal tax is 18.4 cents per gallon. Gas is sold by the barrel, with each barrel holding approximately 28 gallons. That means that, in gas tax, the government makes about $5.15 per barrel of gas sold. States also add tax to fuel, generally about 20 cents a gallon. That means that, for every barrel of gas, states make about $5.60 in tax. Considering that a barrel of gas is going for about $112 in the U.S. right now, I think it's pretty clear that the vast majority of the money you pay for fuel goes to the oil company.


So how do we solve the problem of fluctuating oil prices? The most common sense answer is to end our dependence on foreign oil. However, the development of alternative energy that is comparable to gas will take time and money. And Americans can't afford gas at these prices for very long. So, in the relatively short term, the solution has to come from the people themselves. A great way to force oil prices down is to boycott one company specifically and refuse to buy fuel from them whenever possible. The obvious choice would be Exxon Mobil, the largest oil company that operates in the U.S. It doesn't mean you have to stop buying fuel altogether, you just buy gas from companies like Gulf or Sunoco. By boycotting one company nation wide, the profit for that company takes a big hit, and they are forced to lower prices in order to attract customers. Other companies then have to follow suit in order to remain competitive, and the price goes down everywhere.

Critics of this idea will say that it ruins local business. However, most locally owned gas stations only add about 1 cent per gallon for profit. That profit can easily be made up somewhere else if you go in and buy a candy bar or bottled water. Most convenience stores make little or none of their money off of gas sales, relying more on the subsequent sales they get when someone stops to fill up.

For the second time in three years, gas prices are reaching an all-time high. The only way we as the people can secure our financial freedom from these big companies is to show them the one thing that can stop their greedy pillaging in its tracks: A populace united against them.

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