Should We Permit The Free Market To Work?

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  #1  
Old 03-29-2011, 11:15 AM
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Default Should We Permit The Free Market To Work?

There have been endless exchanges in this forum on the need to "let the free market work". There have also been criticisms of the current and prior administrations over never having studied and agreed upon a cogent, long-term energy policy.

But I got to thinking--how could we permit the free market influence our lawmakers to begin to address this problem, particularly our growing importation of foreign oil and the implications that has on our economy? How could we get them to think more seriously about the blood and treasure they authorize with so little thought, and their failure to even think about addressing important issues facing the country?

It seems to me that if we included all the real costs of the oil we buy from the Middle East in the price we pay for gasoline, that might begin to get the attention of the public and the people they elect to Congress. What I'm saying is that the price we pay at the pump for gas doesn't come close to the real cost of the oil used to produce it.

Follow me here...
  • I would posit that were it not for oil, there is no way we would have started eight wars in the Middle East in the last 20 years. (That's right, go back and count 'em up--we've started eight wars there; three are going on as this is written.)
  • Our government spends something close to $475 billion per year for the military to fight those wars in he Middle East. (I arrived at that number by taking half the $653 billion budget for the Defense Department and adding the supplemental appropriation approved by Congress to fund the wars in Iraq and Afghanistan this year.)
  • We will import approximately 4.92 billion barrels of oil this year. The cost of that oil at an average of $90 per barrel--a conservative guess for entire year, I think--will be almost $450 billion dollars! (I might point out that amount is about 12% of the entire federal budget.)
  • The 4.92 billion barrels of oil will produce about 960 billion barrels of gasoline (at a conversion rate of 19.5 gallons of refined gas from each barrel of oil).
  • So...if we do some simple arithmetic, it's pretty easy to see that the federal government is spending a little more than $2 for every gallon of gas we use to fund the wars in the Middle East whose principal objective is to protect the sources of oil there--for the U.S. as well as the rest iof the world!
So now the question...if we were to permit the free market to influence our energy policy, how long do you think it might be before major changes in the policies of our government were enacted? Things like getting our military the heck out of Iraq, Afghanistan and Libya; things like laws to require much, much more fuel efficient cars; more all electric cars and trucks; the replacement of oil-fired domestic heating; an alernative for asphalt for roads; and on and on.

How would we go about reflecting the real cost of gasoline? What if we simply enacted a federal gas tax to pay for the costs of he wars we start in the Middle East to protect the flow of oil? That would be pretty close to a free market determination of the real price of gas in this country. Another benefit would be that it would provide almost a trillion dollars towards balancing the federal budget!

So, if gasoline suddenly cost around $5.50 a gallon instead of the $3.50 we pay at the pump now, how quickly would you be writing your elected representative to get off the dime and get something done about military spending and the creation of an energy policy so desperately needed in this country? How long would it take before we were demanding that we stop spending military dollars and killing American kids to protect the oil industry and subsidize the real cost of gas that we consume?

My guess is that it wouldn't take too long.

By the way, this approach doesn't add one dime to federal spending. All it does is move the expenditures from the federal budget, where our representatives just go borrow the money and run up the national debt, to our individual household budgets where we'd demand that something be done--and in a hurry!
  #2  
Old 03-29-2011, 02:43 PM
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I would disagree on the original premise that we've started all these wars. We've gotten involved in them and, except for our current Commander-In-Chief, took leadership roles in them; but "started them"? Maybe I'm the one looking at this wrong, but except for the 2nd war with Irag, which ones did we start?

Your free market solutions don't take the vast amounts of domestic oil below our own feet into the equation. Our economy is not going to run without oil in the short time. We'll need huge quantities of oil for the foreseeable future. There are at present no feasible alternatives. Our domestic oil coupled with the world's largest coal reserves could serve us for many generations.

While we debate about it and discuss future theories on alternative energy sources to run our economy, let's just start drilling. C'mon, really ............. let's start drilling. Anywhere and everywhere. We could use more refining capacity also.
  #3  
Old 03-29-2011, 03:04 PM
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Default To allow the free market to work there has to be SOME

cooperation from the government.
For example:

http://news.yahoo.com/s/ap/20110329/...obama_energy_4

btk
  #4  
Old 03-29-2011, 07:57 PM
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Quote:
Originally Posted by RichieLion View Post
I would disagree on the original premise that we've started all these wars. We've gotten involved in them and, except for our current Commander-In-Chief, took leadership roles in them; but "started them"? ....Your free market solutions don't take the vast amounts of domestic oil below our own feet into the equation. Our economy is not going to run without oil in the short time. We'll need huge quantities of oil for the foreseeable future. There are at present no feasible alternatives. Our domestic oil coupled with the world's largest coal reserves could serve us for many generations....let's just start drilling. C'mon, really .... let's start drilling. Anywhere and everywhere. We could use more refining capacity also.
A couple items to respond to. Did we "start" the wars? That's a whole lot less important than the premise that we became involved primarily to protect the flow of oil. Would anyone really argue that we invaded Iraq (twice), Afghanistan (twice), Libya, etc. because the American people felt so strongly about the dictators who ran those countries violating human rights or debasing women? I doubt that anyone would argue that. Our political leaders decided to spend American blood and treasure to most importantly protect the flow of oil out of the region. Almost all of the other arguments used to justify our invasions were secondary to oil.

Will our economy require huge amounts of oil to continue to operate? Absolutely. But is that a reason for our elected leaders to continue to kick the can down the road in addressing what really needs to be done to reduce our reliance on foreign oil? I'd argue that putting off inevitable decisions has been going on for decades--President Carter first established the Energy Department, which was supposed to come up with an overarching energy policy. Because nothing has happened since is no reason not to demand that it should start NOW!

As far as reserves which we have which are not being tapped, you're probably right. But the question is WHY? The answer is that the big oil companies can make a whole lot more money buying foreign oil, having most of it refined offshore, then selling it to U.S. consumers at a price of whatever the market will bear. Did you ever notice that the profitability of the oil companies actually improves when the price of oil rises? Why would that be?

What's missing is this equation is governmental intervention to "steer" both the public and private sector parties to a logical and necessary energy policy--smaller cars, electric cars, more drilling of U.S. reserves, more refining inside the U.S., more use of nuclear and less of fossil fuels, etc. All my theoretical proposal was intended to do is to get people thinking about how the real cost of the gas we use is being disguised by self-serving companies in the private sector and politicians who want only to get re-elected. Why aren't we drilling in the Gulf? Simple, because there was a big oil spill and the politicians are scared that if we resumed drilling and something like that happened again, they'd lose votes and maybe not get re-elected. Why aren't we drilling in the Alaskan wildlife preserve? Easy. Because it's a whole lot cheaper for the oil companies to buy oil from Saudi Arabia than to drill for it and send it by pipeline to a port to tranship to refineries in Mexico to make gas.

What I'm saying is that if the public was required to pay the actual cost of the gasoline they consume--a number much closer to $5.50 a gallon than $3.50, things would begin to change in a hurry. That would be a good thing.
  #5  
Old 03-29-2011, 08:23 PM
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VK; I think who started the wars is as important as anything else. Why make a point more inflammatory than it is. The whole world, led by us is concerned about the middle east oil reserves. We've always led, but it not a totally US problem or concern.

I hear what you're saying about the cost of procuring the oil from our own fields as opposed to the costs of just buying foreign oil, but it is also true that the oil industry has been trying to secure oil drilling rights and to be able to drill on previously approved sites on land and sea and has been denied time after time, so your points, while valid, are not the whole story by any means.

If gas prices rise to untenable heights the ones who get hurt first are the low income families and those with fixed incomes. The only reason gas is as high as it is now is because of taxation and not the cost of bringing the product to the pump.
  #6  
Old 03-29-2011, 08:36 PM
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Default Respectfully Disagree

Quote:
Originally Posted by RichieLion View Post
...The only reason gas is as high as it is now is because of taxation and not the cost of bringing the product to the pump.
Sorry, I have to disagree, Richie. A major reason for the escalation in the price of oil is the fact that our government is borrowing 40% of all the money it spends each year. Without going into a long economic dissertation, the result of that is that the U.S. dollar has weakened (become less valuable) dramatically in recent years. Our government has permitted, even encouraged that to happen. In the end, we get the right to repay dollars borrowed in the past with dollars worth a whole lot less in the future. But they're still dollars.

That's true until it comes to paying for oil. The Middle Eastern oil-producing countries demand payment for their oil in U.S. dollars. But they aren't willing to be "taken" by our politicians, who have permitted the dollar to become less and less valuable. The oil-producers control the price of oil very effectively by simply reducing the amount they pump to manipulate the price so that they keep getting the same amount per barrel or more, regardless of how much less valuable the U.S. dollar becomes. Then, of course, there's the rapidly-growing Chinese economy, which is buying more and more oil for their domestic use, also driving the price of oil up.

I disagree that the price of gas is as high as it is now because of taxation. My guess is there's a whole lot better chance we'll be paying $4 or $4.50 a gallon for gas in the future than ever going back to $3 a gallon or less. That will have nothing to do with taxes on gasoline.
  #7  
Old 03-29-2011, 08:52 PM
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The Government, federal and state still makes more money on the gas purchased at the pump that the Oil Company who provides it. When you add the federal taxes and the local taxes above and beyond the excise taxes and couple it with all the various taxes the oil companies pay separate from actual production, and then add highway motor fuel taxes truckers pay, even if they bought no fuel in that state; I would still insist that the government takes the lion's share of the cost of the gas you pump into your tank.
 

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