Oil Subsidies / Tax

cdub said:

Same here. That guy has his info all wrong. Does he know how much government subsidies exit for oil companies that make the price of oil so artificially low?

Government Fiat (sp?) my bum. Oil companies get 10000x more tax loopholes and subsidies compared to EV consumers and companies.

He needs to drive that car - then he'll know exactly why people want it. It's from CONSUMER demand. The government rebates is just icing on the cake.

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The thing about oil subsidies is that most Americans need a car. Even poor and lower middle-class Americans typically need a car. Most things are spread out here and certainly in this economy you take whatever job you can get stuck in a house you can't afford to sell and if that job is miles away, you need to take your car. It's not like we have Swiss-precision public transport in this country: setting up that infrastructure is expensive and typically ends up being subsidized again to make them accessible to the lower-class Americans that can't afford the true cost -- not to mention, as we have already fairly argued, that driving with gasoline is so much cheaper.

The problem is, you can't just eliminate those subsidies; you'll be hitting those who can least afford to suffer. Instead, as we all agree, the solution is to have incentives to wean Americans off of oil while still keeping oil artificially cheap. It means we have to spend more money in the short run, but if programs like the $7500 tax credit and consumers realizing how much eye-poppingly cheaper kWh are compared to gallons of petrol are able to effect enough Americans, we won't need as much oil, we can reduce our subsidies of oil and move those subsidies into renewable energy sources.

As for the Volt, the main reason I decided against the Volt is because a) they dropped the EV range from 60 mi to 40 mi and b) given my weekly commute, I'd end up filling up every 2 weeks instead of every 1 now, and that doesn't get me very far. I want a solution that has me visiting the pump on more a monthly interval, not every fortnight. But what I will say about the Volt that is very cool and revolutionary is what people keep forgetting to mention when they talk about it: it's a series hybrid. A series hybrid is more efficient than a parallel hybrid like the Prius, at least from an engineering point of view. This is a very wonderful design feature, not just that it's plug-in. So in the end, although the Volt is not for me, I do very much hope it succeeds and the closer we get to weaning off of osama-bin-lodoline, the better!

TimeHorse said:

The problem is, you can't just eliminate those subsidies; you'll be hitting those who can least afford to suffer. Instead, as we all agree, the solution is to have incentives to wean Americans off of oil while still keeping oil artificially cheap.

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With respect - and agreeing with all else you wrote - I have to challenge this. The oil industry is making huge - insanely huge record profits. Profit levels aren't likely to go down because the infrastructure, refining, etc. is in place and fuel prices will/do ultimately follow oil prices.

The only thing that dumping the oil company subsidies should do it slightly reduce the oil company's profit thru the phase-out period until the industry reaches a new level.

If only we had politicians that had enough guts to stand up to the oil industry and make sure they know that gouging the consumer is not a good option...

AndyH said:

The only thing that dumping the oil company subsidies should do it slightly reduce the oil company's profit thru the phase-out period until the industry reaches a new level.

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In an ideal world, I would agree, but without the heavy hand of government price-fixing things to force the nasty pill down the oil companies' throat, I think history shows us they will be happy to pass any extra cost down to us consumers lest they spurn the wroth of the mighty share-holder. And if the government fixed fuel prices, we could end up with shortages like we had in the 1970s. I think it's because the government allowed prices to rise to $4+ a gallon we didn't end up with the endless lines at the pump we had back then during that shortage. I wish Rachael Maddow was right, but I think from history and basic economics she isn't quite.

Don't get me wrong, I totally want to stick it to the fat cats and stop giving money to the Bin Laden family and companies that prefer oil-battered shrimp. And I think there will be a time for this, when EVs represent a large portion of the market and more of the public realize that EVs aren't just cheaper to run, they're much cheaper to run! Then, let's stick it to Dutch Shell, British Petroleum, Exxon/Esso-Mobile, Texico, Citco and all them fat cast (yes, I am accusing Hugo Chaves as being a fat cat, but for a different reason that I won't get into here) because hopefully by then most Americans won't care if petrol hits $10 a gallon or $0.20 per mile (50 mpg) when their EVs are costing maybe $0.05 per mile or less.

AndyH said:

If only we had politicians that had enough guts to stand up to the oil industry and make sure they know that gouging the consumer is not a good option...

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Couldn't agree more! Here here! (in my best parliamentary back-bencher voice)

Some food for thought on oil company profits. I hear people get all worked up about the big numbers, but it is an industry with big numbers and small changes make huge differences. For example, industry wide, the us consumes 375million gallons of gasoline per day. If the price of gas were moved 1 cent per gallon it would create a $350 million profit or loss per quarter for the industry. At $2.50/gallon they are making $84 billion per quarter. That makes a $1 billion profit only 1.2% of sales. Anyhow I'm not defending the oil companies, but just pointing out that the large numbers are related to the large volumes of sales(gallons) and not huge profits per sale(gallon).

Just as a simple comparison a home building company can make $100 million per quarter on $600 million in sales. That is a 16% profit and the investors were angry that it was not more.

Record numbers wont bother me as much as a record percent of sales. The record numbers are partly determined by the consumer (assuming the oil company can produce it).

Yes, but it wasn't the number of dollars. It was the percent change period over period.

Income is expected to be stable, with an anticipated growth rate. Their's skyrocketed. That indicates profit reaping, not sound business practice.

palmermd said:

Some food for thought on oil company profits. I hear people get all worked up about the big numbers, but it is an industry with big numbers and small changes make huge differences. For example, industry wide, the us consumes 375million gallons of gasoline per day. If the price of gas were moved 1 cent per gallon it would create a $350 million profit or loss per quarter for the industry. At $2.50/gallon they are making $84 billion per quarter. That makes a $1 billion profit only 1.2% of sales. Anyhow I'm not defending the oil companies, but just pointing out that the large numbers are related to the large volumes of sales(gallons) and not huge profits per sale(gallon).

Just as a simple comparison a home building company can make $100 million per quarter on $600 million in sales. That is a 16% profit and the investors were angry that it was not more.

Record numbers wont bother me as much as a record percent of sales. The record numbers are partly determined by the consumer (assuming the oil company can produce it).

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3.75 1,000,000 dollar profit If a pay per gallon were applied. End of the extra money that we would pay In taxes since the oil companies Are not likely to change of pricing structure.

But i also agree that we definitely should
Increased taxes on gas to help pay for other programs. Mass transit Healthcare Electric vehicle Another green power options Should be supported With the additional revenue. I personally think we should raise it A minimum of 10 cents per gallon

Don't get me wrong, I totally want to stick it to the fat cats and stop giving money to the Bin Laden family and companies that prefer oil-battered shrimp. And I think there will be a time for this, when EVs represent a large portion of the market and more of the public realize that EVs aren't just cheaper to run, they're much cheaper to run! Then, let's stick it to Dutch Shell, British Petroleum, Exxon/Esso-Mobile, Texico, Citco and all them fat cast (yes, I am accusing Hugo Chaves as being a fat cat, but for a different reason that I won't get into here) because hopefully by then most Americans won't care if petrol hits $10 a gallon or $0.20 per mile (50 mpg) when their EVs are costing maybe $0.05 per mile or less.

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You have it backward. The gas prices need to raise before the masses buy electric cars. If instead of poking fun at Gore, America had accepted his gas tax ideas, we would be paying taxes to US Government rather than Saudi Royal family.

The anti-government rhetoric used by some politicians to get votes has poisoned the well so badly, people would rather support the House of Saud than our own government.

edit :

In an ideal world, I would agree, but without the heavy hand of government price-fixing things to force the nasty pill down the oil companies' throat, I think history shows us they will be happy to pass any extra cost down to us consumers lest they spurn the wroth of the mighty share-holder.

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The direct subsidies given to oil companies are in terms of tax subsidies. These can be easily removed with little or no effect on oil prices.

The bigger subsidy is the indirect subsidy. The question is - how do we make gas prices reflect real costs - taking all these "externalities" into account - Oil wars, health, environment etc. If those are really reflected in the price of oil, a gallon would cost more than $10 easily. A sudden increase to that level of gas price will plunge us into depression.

That is the reason why many of us prefer a slow, steady and well advertised increase in gas price. A 10 cent increase in tax every month for the next 5 years should do the "trick".

In anycase, noone knows exactly what will happen say in 5 years because of the oil demand exceeding oil supply. This would probably need heavy government intervension to regulate price and supply. So, the steady increase in tax prices would prepare everyone for the coming energy shortage.

evnow said:

You have it backward. The gas prices need to raise before the masses buy electric cars. If instead of poking fun at Gore, America had accepted his gas tax ideas, we would be paying taxes to US Government rather than Saudi Royal family.

The anti-government rhetoric used by some politicians to get votes has poisoned the well so badly, people would rather support the House of Saud than our own government.

The direct subsidies given to oil companies are in terms of tax subsidies. These can be easily removed with little or no effect on oil prices.

The bigger subsidy is the indirect subsidy. The question is - how do we make gas prices reflect real costs - taking all these "externalities" into account - Oil wars, health, environment etc. If those are really reflected in the price of oil, a gallon would cost more than $10 easily. A sudden increase to that level of gas price will plunge us into depression.

That is the reason why many of us prefer a slow, steady and well advertised increase in gas price. A 10 cent increase in tax every month for the next 5 years should do the "trick".

In anycase, noone knows exactly what will happen say in 5 years because of the oil demand exceeding oil supply. This would probably need heavy government intervension to regulate price and supply. So, the steady increase in tax prices would prepare everyone for the coming energy shortage.

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I'm not denying that' we've been screwed over by rhetoric; we all want to see us get off the oil teat. We should have done more in the 1990s to be sure, and much more in the 'aughts instead of that insidious "Energy Task-force" of Cheney's! The story of the EV-1 is apocryphal. But I think Nissan with the LEAF is making it happen because in the 90's batteries were crappy and gasoline was cheap. In the 'aughts and teens batteries are much more efficient and gasoline is becomes more expensive naturally. And by my measure, as I've said many times, it's actually cheaper in a fairly short period of time to run an electric car than it is any gasoline car, even a hybrid. Even at 20 cents per kWh you're paying $4.80 for 100 mi or 4.8 cents per mile where as with petrol at $2.60 or so a gallon, in a 50 mpg car that's 5.2 cents per mile. With appropriate TOU I think most of us can get to at least 20 cents per kWh. When the public realizes that Electric Cars already save you money, they'll be beating down all the EV manufacturer's doors.

As for taxing gasoline, I do want to tax it and remove subsidies but I also want a kind of voucher system set up so that the poor can have their fuel use subsidized. Not to the point where it's cheaper than electricity, not cheaper than it is now. Just don't punish the poor for the fallacy of the rich. Unfortunately, gasoline is one of those commodities, like coffee and cigarettes, that people will pay any price for, no matter how high it goes (there's a term for this whose name I forget). No amount of abstract math is going to change that. But, when I start posting my cost per month before and after my LEAF, when we all start sharing the real-world savings we get with our brand-spanking-new EV, we have the message and I believe the people will come, just as someone else pointed out they did for hybrids.

But if you make the cost of doing business harder on the oil companies, they will pass it on to the consumer. They can because, as I said before, people will pay any price for gasoline and it's no sweat off their back if they're gauge the consumer as long as they remain in the black. Again, I have no qualm with this, as long as the subsidies are moved first to help the poor and then to create our green economy.

EDIT: The term I'm looking for is Inelastic Good. Gasoline is an inelastic good because as prices go up, people still need it so they'll pay any price. It doesn't follow normal supply and demand and the Price Elasticity of Demand = 0. (Thank you NPR's Planet Money!)

Anytime we start talkin about taxes, someone is gonna get the short end. A 1 cents per month increase To a simple 10 cents per gallon Would increase this national Sales tax by 50 percent. The current federal sales tax Is 19.9 cents per gallon. Raising it 2 30 cents per gallon over the . Of 2 years will b a gradual enough increase gross to absorb and adjust. But businesses who rely on Controlling costs Would still be hurt. so they should be provided a limited exception it does include mass transit trucking industry excetera. But 1 thing is for certain. Our national gas tax Is pathetically low

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DaveinOlyWA said:

Anytime we start talkin about taxes, someone is gonna get the short end. A 1 cents per month increase To a simple 10 cents per gallon Would increase this national Sales tax by 50 percent. The current federal sales tax Is 19.9 cents per gallon. Raising it 2 30 cents per gallon over the . Of 2 years will b a gradual enough increase gross to absorb and adjust. But businesses who rely on Controlling costs Would still be hurt. so they should be provided a limited exception it does include mass transit trucking industry excetera. But 1 thing is for certain. Our national gas tax Is pathetically low

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Man, although not perfect, I'm so jealous you can write that with voice recognition on your driod! When I finish Tap2GoBack for the iPhone, I should really consider a droid version!

Anyway, back to the topic. My main concern with this economics problem is unlike gasoline, which is inelastic, the choice to switch to an EV does have a supply and demand type nature. In other words, you can shame people through taxes to buy EVs and other alternate fuel vehicles until you're blue in the face, but it there's no EVs available on the market, all you're doing is making people suffer. In other words, it's too soon IMHO to start turning the screws of taxes on the gasoline consumer. I think this needs to wait for the day when I can walk up to a Carmax in Duluth, MN and buy and EV right off the lot. Hopefully, when this point arrives, we'll have another "Cash for Clunkers" program to get people into their EVs.

Believe me, I've long advocated $5 or more per gallon of gas in my day. I very much wanted to see it happen. But now I feel we need to be more cautious with such sweeping, unilateral changes. The other thing is EVs in MN are rather inefficient. It's one thing to pre-heat your car before work -- people do that already to keep their gasoline from freezing. But after 8 hours on the job, you need to use all that energy to reheat your car from well below freezing and keep it heated as you brave the freeways and that's going to do nasty things to your range.

I agree we need to make the price of gasoline match reality. But baby steps, my friends, baby steps.

TimeHorse said:

As for taxing gasoline, I do want to tax it and remove subsidies but I also want a kind of voucher system set up so that the poor can have their fuel use subsidized.

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That sounds complicated. A simpler idea would be to use the revenues to reduce the social security payroll tax (a very regressive tax) for low income earners. That is, make it tiered like income tax.

TimeHorse said:

EDIT: The term I'm looking for is Inelastic Good. Gasoline is an inelastic good because as prices go up, people still need it so they'll pay any price. It doesn't follow normal supply and demand and the Price Elasticity of Demand = 0. (Thank you NPR's Planet Money!)

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Gasoline better not be purely inelastic, because then raising gas taxes won't have any effect on consumption.

Cheers, Wayne

First of all Speech to text on this phone Is totally awesome

Second of all I also agree that Creating Pain by raising taxes Is also a mistake That will most certainly De rail what little Economic recovery we have Achieved so far.

Third of all, You are right It would be very nice To have a program Like c 4 c To help pay for that new electric car But money does not go roll on trees. Increasing the gas tax Will help pay for that program.

But most of all Need to start redistributing Money needs to start Immediately. And changing the tax structure and rates is exactly what that does.
Which is the reason why i Recommend a slow increase. A penny per gallon tax Is an additional 4,000,000 dollars Per day in revenue.
How fast we increase the tax Should be He dated (lol...repeated "debated" 3 times!!) But the question
Of when should not. Make it one penny per quarter or whatever we think the economy can handle but it really needs to start the day

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TimeHorse said:

In other words, it's too soon IMHO to start turning the screws of taxes on the gasoline consumer.

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Actually it is very late. Peak oil is upon us - I'm guessing you are either unaware or ignoring it. If the govt doesn't push the oil prices up - China & India consumption will do it for us.

edit : I'll yank off the oil tax subject into its own thread.