The Memorial Day weekend traditionally has been the first getaway weekend of the summer. A chance to kick back, take a road trip or hop on plane and visit relatives. Not this year.
In 2008, when the price of gasoline began to approach $4 a gallon, the Smiths complained that they had to take out a second mortgage on the old homestead just to fill up the family car. In 2011, as gasoline prices topped $4 a gallon, the Smiths are upside down on their mortgage(s). Dad is working two part-time jobs and still doesn’t make what he did at the full-time job he lost when his company was downsized. There is no more wiggle room. The Smiths, like millions of other Americans, will be staying home this Memorial Day weekend.
We’re looking for someone to blame, and Obama is pointing the finger at Big Oil. In a statement designed to make us believe that he is unhappy about the high cost of fuel, the president said, “While rising gas prices mean real pain for our families at the pump, they also mean bigger profits for oil companies.”
His Democratic colleagues quickly hopped on this bandwagon by introducing legislation to put additional taxes on oil and gas producers. They call it “ending subsidies.” If you follow that line of reasoning, any money that is left over after expenses – money that isn’t taxed away from these companies – is a subsidy. Get it? If not, you will get it in the end – the end that is up when you bend over.
“Don’t blame us for high gasoline prices. Didn’t we stimulate the economy by dumping billions of your hard-earned dollars into solar energy and windmills? Don’t forget about the windmills! The oil companies. They are the evil ones. They are the scoundrels. Just look at their obscene profits.”
Yes, let us look at those obscene profits. ExxonMobil made a profit of $10.8 billion the first quarter of 2011, but consider the size of this company! That figure represents its earnings from its worldwide operations. Its earnings from U.S. operations were $2.6 billion, which seems large until you consider that ExxonMobil payed a total of $3.1 billion in U.S. taxes.
Look at the profit margin of the oil industry as a whole. It was a mere 5.7 percent last year. Compare that to a 21 percent profit margin for the beverage and tobacco industry, 19.4 percent for pharmaceuticals and 17.3 percent for the computer industry. Electrical equipment, appliances, etc. had a profit margin of 10.6 percent.
Now, I’m not suggesting that the government start beating up on toasters or hair dryers. Far from it. All corporate taxes are passed on to consumers. In effect, corporations do not pay taxes. We do.
Gasoline is taxed at many levels, but the taxes imposed by federal and state governments may be the hardest to bear. Sure it costs money to maintain our highways and roads, but consider the billions in gas taxes that are wasted on bridges to nowhere, bike paths, water taxies, transportation museums and the like.
Many of those gasoline tax hikes were originally passed as “temporary” measures to help pave over some economic crisis du jour. What we are now seeing at the pump is an accumulation of those temporary taxes.
So ExxonMobil is making a profit of roughly 7 cents a gallon, but we are playing and average of 48.1 cents a gallon in taxes. So who is gouging whom?
If ExxonMobil cut its profit in half, the price of gasoline would drop by a measly 3.5 cents. Are you beginning to get the picture?
The price of crude oil – the biggest factor in the price of gasoline – is determined by buyers and sellers in the global commodities marketplace. We have an abundance of oil reserves, but Obama has put them further out of reach. Therefore, OPEC has no incentive to keep the price low. Also, much of the rise in oil prices is due to unrest in the Middle East and the declining value of our dollar due to Quantitative Easing – the hocus-pocus creation of money.
Despite all the political posturing by the president, his energy secretary, Stephen Chu, made Obama’s agenda clear when he told the Wall Street Journal, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” Presently, that price is around $8.50 a gallon. Hold on to your wallets!
So, who is responsible for raining on your parade this Memorial Day? It isn’t the oil companies.