 - Last login: 3 hours agoVousDeux
- the one you were warned you about is a 44 year old guy from Cadillac, Michigan, USA.
- Likes 817 pages, 1 video, 3 photos • 189 fans • Received 52 reviews
- Member since Sep 18, 2003
I'm just a busy guy who occasionally has something I want to say. Now, whether anyone is interested or not may be another story (while viewing this blog, you may want to make certain that you have selected the "Entire Blog," or "His Blog" setting.)
Favorites » His Blog
-
-
It's not a big secret that rising prices are usually the result of an imbalance between supply and demand. As it goes for the rising cost of oil and gas, demand has risen dramatically in recent years. China, for example, has been exponentially increasing their demand for oil and gas.
This increase in demand puts pressure on worldwide producers of oil to increase the supply. In turn, this would also mean that new people need to be hired, new equipment needs to be bought, and development in the areas of exploration and refinement must be funded. Of course, this all adds to the cost.
The biggest of these oil producers will inevitably be able to produce oil at lower cost than a smaller company who may not have access to the best grade of crude. As the demand continues to grow beyond the capacity of these larger companies, so do the prices of finished goods.
Now, in order for a smaller company to be able to profit from their higher cost of production, the price would need to increase to a level that would afford them the opportunity to contribute to the worldwide supply of oil. This, in part, is because lower grades of crude are much more expensive to refine, and smaller companies may have much more overhead cost than do larger ones.
While these price increases do allow smaller companies to help meet the rising demand, they also allow the larger companies to become more profitable simply because of the increase in market value of gas and oil. This would make it seem, to many of us, that the larger companies are unfairly stuffing their pockets at the expense of the consumer.
I'm sure you have probably heard about the proposed "Gas-tax Holiday" that has been added to the list of campaign issues for all of the presidential candidates. This proposal suggests that our government should suspend the collection of about .184 cents-per-gallon worth of tax this summer in order to give us all some relief at the gas pump.
It would seem to me, however, that perhaps only one of the candidates even has a clue about the economics of supply and demand.
McCain wants to approve the tax relief, but has yet to offer any means of paying for it.
Pay for it, you say? Yes. It's the old guns-n-butter scenario all over again.
The government depends on revenues from taxes to pay the interest on the massive debt that has accumulated. So, the absence of revenue from gas tax would either need to be replaced--in order to meet the budget requirements--or they would need to come up with the revenue by some other means (perhaps by giving up something else that relies on tax revenues).
Clinton at least seems to have the idea that the budget must be balanced, but I'm not sure that expecting the big oil companies to foot-the-bill is really going to go over very well. In order to be fair, they would have to also demand that the smaller oil companies contribute, but then the smaller companies may not be able to afford to continue with their contributions to the worldwide supply of oil; which would send prices skyward again.
On the other hand, Obama has said that the proposed Gas-tax Holiday is nothing more than a campaign trick. Perhaps he does understand the laws of supply and demand better than the other two.
Here's the scenario. If they suspend the tax, the price at the pump will go down, but only temporarily. Why? Because the lower price will lead to an increase in demand. The increase in demand would start the vicious cycle all over again. Prices would have to go back up so that smaller companies could afford to contribute even more to the worldwide oil supply.
In the end, the price at the pump would inevitably rise (again) to the meet the demand. However, when the tax is restored, the total cost will have risen by a factor no less than the amount of the "tax relief."
The cure? Higher prices. Higher prices will encourage us to find other means, besides oil, to meet our energy needs. Not pretty, is it?
|
Add him as a friend >
VousDeux's blog