Oil windfall tax idea to fall by the wayside | VailDaily.com

Oil windfall tax idea to fall by the wayside

AP photoCrude oil prices used to be based on the cost of West Texas crude. Now theyre set on the New York Mercantile Exchange, which opens prices to speculation and hedging, industry analysts say. They say that can push the price up as much as $20 per barrel.

Governments won’t hit oil companies with a windfall profits tax because governments make more money from gasoline than almost anyone else.”In these times of concern over high gas prices, American consumers should remember that gasoline taxes have a significant impact on the amount they spend at the pump,” said Jonathan Williams of the Washington, D.C.-based Tax Foundation.American motorists pay an average of 45 cents in federal, state and local taxes for each gallon of gas they buy, according to the Tax Foundation.

And if you pull out the plastic to pay at the pump, high credit card fees enter into the equation. Credit card companies are making 9 cents per gallon when you pay with plastic for your $3 gas, according to Roy Turner of the Colorado/Wyoming Petroleum Marketers Association.”When gas is $3 a gallon, credit card companies make 9 cents a gallon,” said Turner.When the price of gas goes up, credit card usage goes up. Turner explained that credit card usage goes up from about 65 percent at $2.25 a gallon to more than 90 percent when prices top $3 a gallon.If you’re carrying a credit card balance, you’re paying sky-high interest on your gas purchases.Crude oil prices used to be based on the price of West Texas crude. The price of crude oil is now based on the amount a barrel of oil can fetch on the New York Mercantile Exchange. There’s about $20 worth of hedging and speculation in that price,Turner said.Goldman Sachs and Morgan Stanley, for example, have huge holdings and never take a wet barrel, Turner said.Most Americans drive and feel the pinch of high gasoline prices, but the cost of fuel affects the whole economy, said Rep. Mark Udall, D-Boulder, who represents Eagle County in Congress. Udall co-sponsored the Federal Response to Energy Emergencies Act, which would give explicit authority to the Federal Trade Commission to define price gouging for most petroleum products.”More domestic development and production might help a little, but with only 3 percent of the world’s known oil reserves, we are not in a position to solve our energy vulnerability by drilling at home,” said Udall.International issuesAll kinds of geopolitical winds blow gas prices around, said Turner.The situation with Iran makes oil buyers nervous, Venezuela’s production is down as that government continues to try to nationalize its oil industry; Nigeria production is down. The global economic boom centering on China and India is shrinking the size of everyone’s slice of the energy pie.Plug in the effect of hurricanes Katrina and Rita last year on Gulf Coast refineries – they’re still down in production – coupled with increasing demand for gasoline, and you have $3 gas.”Back when the OPEC oil boycott hit in the 1970s, employers, businesses and employees worked together to put together carpools and van pools,” said Turner. “Mass transit providers offered discounted passes. We’re 30 years behind in mass transit and its becoming cost prohibitive to build an effective subway system.”How many cars now have more than one person in them?” asked Turner. “I was down at the Capitol and I counted 13 in five days.”Strong vs. weakAlex Epstein, a writer with the Ayn Rand Institute pointed out in an op-ed piece that when the oil market was weak, not so long ago, no one was crying out for subsidies.”In the 1990s, the oil companies had no right to a bailout when oil unexpectedly fell below $10 a barrel. Likewise, we now have no right to seize their profits when oil unexpectedly rises to over $70 a barrel,” Epstein wrote.Oil prices remain the product of a supply/demand equation.”Producers and consumers have been willing to pay $70 a barrel for oil because it is worth that much to us,” wrote Epstein. “Oil is used by us to get quickly from point A to point B by car, train, or jet.”Epstein pointed out that the principle applies equally to employees and business owners.”Did the many former ‘nerds’ who made hundreds of thousands at Microsoft and elsewhere not deserve their money – should they be forced to ‘give’ it to society (i.e., to other people) – because they had no idea that cultivating programming skills would be so profitable? No, they chose to develop those skills, they staked their livelihoods on them, and their high salaries rightfully belong to them.”Vail, Colorado

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