Tuesday, April 25, 2006

America, get a grip...

I'm sitting in the UT Pharmacy, and CNN is on. The Pres is talking about gas prices, and apparently 2/3 of Americans think high gas prices are a 'hardship', whatever that means.

People think that because oil companies are making so much money these that they are evil or something. They think the government should do something about it. Get a grip America, you don't know a thing about economics if you think that these high gas prices are the result of price gouging and 'evil' big business. I can't stand the prices either, but I'm not going to accuse an oil company.

Here's the reasons why gas prices are so high. This is as simple as economics gets.
1) Demand - Over the past 10 years, 100 million people in the far east (China, Japan, Taiwan, etc.) have moved to a standard of living comparable to the USA. They now want fuel. This means the demand has increased dramatically. Think about it. If there are 300 million people in the USA, and 100 million new consumers now want gas, you can expect for the price to go up.
2) Supply - The barrier towards creating new refineries and developing new sources of oil in the USA pretty much shafts any effort to increase the supply of oil in the USA. The demand has gone up, but the supply has remained relatively unchanged with respect to the demand. Coupled with the control that OPEC wields on prices in general, you can't possibly expect anything but a price increase.
3) Taxes - How much in taxes do you pay per gallon of gasoline? Do you know? In 2002, the average taxpayer paid 42 cents per gallon in taxes. (Source: Gas Tax Statistics) I couldn't find anything for 2006, but you can bet that your taxed-to-the-bottom dollar that they are higher now. Guess what else? The Federal Government gets more money from gasoline than any company does in profits. (Source: The Tax Foundation) So who benefits most from high gas taxes? The government. Who gets hurt? You do.

Let's be frank. If the government is really concerned about gas prices, they should eliminate all taxes on oil. Period. CNN, socio-liberals, and all you silly people out there who think Exxon is evil, look at the facts and try telling me again that we should punish oil companies for doing their job as best they can. The laws of supply and demand refuse to be violated. And go read some Mises or Rothbard, or some other book where you can learn some real economics...