4 thoughts on “The Economic Genius In The White House”
Easy, peasy. Stop selling gasoline and diesel, which cuts the price to $0! Most of the profit from mom & pop gas stations is in the snacks and beverages anyway, so it goes from “Gas Station” to the “Corner Market”. You also get to stop paying federal and state taxes on fuel sales. It’s genius I tell ya….
I doubt the independent gas stations thing is really true, only technically true. If you own a Shell station franchise, it’s still a Shell station. I live 20 miles from the nearest town, but there’s a real independet gas station 3 miles down the road owned by some guy named Wasseem. He sells spot market gas I wouldn’t put in a nice car, but is fine for a mower, a tractor, or my beat up old pickup. Also, the girl at the grill will put a nice, very thick slice of sweet onion on my burger. These are scatter around the county, but in town and in the nearest excuse for a city (50 miled away) there are few, if any.
The brand-name gas stations are franchise operations. Tied to a sole distributor. The source of the fuel is the refinery it comes from with in many cases branding happening by the sign painted on the trucks that transport from the refiner. Sun Oil was somewhat unique in that it used to refine gas to multiple octane standards, but no more. The corner station is locally owned but a lot of the price fluctuations between stations of the same “brand” have to do with two things: a consistently higher price at a station in one town vs another is likely a local tax difference. The other is the spot price the distributor charged the station franchisee for its last buy plus taxes plus that 10-15% constant profit.
OK, OK, don’t “dogpile” me for suggesting this.
Just how I learned economics at Father Sarducci’s Five-minute University.
“Economics? Supply and demand!”
Our president informs us that crude oil sells for “only $120/barrel”, suggesting that with the gas tax and a “reasonable” markup, gasoline should sell for just under $4/gallon at the pump instead of what, $4.50, $5, $6 or more.
The major oil companies responding to Mr. Biden admitted just as much, that they are profiting handsomely from this price spread, just as they were “eating the loss” with the much lower gasoline prices during the Pandemic Lockdown. What they also explained, which told me something I did not know was that the bottleneck is domestic refinery capacity. Owing to their business decisions to close refineries when demand had collapsed, strongly encouraged by governmental policies to encourage our own Energy Transition to Net Zero, there are simply not enough refineries with enough throughput to meet current demand. Supply and Demand, just like Father Guido Sarducci explained economics means high gasoline prices.
OK people, work with me. Suppose Mr. Biden implemented his “fix” of a “gas tax holiday.” Based on my educations at the Five-Minute University, that would not reduce the gasoline price set by demand in relation to the restricted supply. The price at the pump would not budge, but the profits of the oil companies would be even higher.
Suppose on the other hand, Mr. Biden proposed higher gasoline taxes to support the many ways in which to Build Back Better by spending much more Federal money? By Supply and Demand, the oil companies would “take a haircut”, but gasoline at the pump would not change either?
All of this, however, is short-term thinking. Were the current high earnings of the oil companies combined with the Biden Administration doing a 180 on environmental policy, say, to aid the battle against the evil Ruskies, the oil companies will build more refineries or increase the capacity of existing ones. Were the gas taxes increased to recapture some of the money the oil companies are making, there would be a reduced incentive to both increase refinery capacity or drill for more oil, making the gas price increase a permanent feature of our economy. Yes, this would inflict economic pain, but what is paying a few more bucks for gas for the car, heat for your house and food for the table in relation, or even losing 50 seats in the House of Representatives to the Republicans when what is at stake is letting the Earth burn up?
Easy, peasy. Stop selling gasoline and diesel, which cuts the price to $0! Most of the profit from mom & pop gas stations is in the snacks and beverages anyway, so it goes from “Gas Station” to the “Corner Market”. You also get to stop paying federal and state taxes on fuel sales. It’s genius I tell ya….
I doubt the independent gas stations thing is really true, only technically true. If you own a Shell station franchise, it’s still a Shell station. I live 20 miles from the nearest town, but there’s a real independet gas station 3 miles down the road owned by some guy named Wasseem. He sells spot market gas I wouldn’t put in a nice car, but is fine for a mower, a tractor, or my beat up old pickup. Also, the girl at the grill will put a nice, very thick slice of sweet onion on my burger. These are scatter around the county, but in town and in the nearest excuse for a city (50 miled away) there are few, if any.
The brand-name gas stations are franchise operations. Tied to a sole distributor. The source of the fuel is the refinery it comes from with in many cases branding happening by the sign painted on the trucks that transport from the refiner. Sun Oil was somewhat unique in that it used to refine gas to multiple octane standards, but no more. The corner station is locally owned but a lot of the price fluctuations between stations of the same “brand” have to do with two things: a consistently higher price at a station in one town vs another is likely a local tax difference. The other is the spot price the distributor charged the station franchisee for its last buy plus taxes plus that 10-15% constant profit.
OK, OK, don’t “dogpile” me for suggesting this.
Just how I learned economics at Father Sarducci’s Five-minute University.
“Economics? Supply and demand!”
Our president informs us that crude oil sells for “only $120/barrel”, suggesting that with the gas tax and a “reasonable” markup, gasoline should sell for just under $4/gallon at the pump instead of what, $4.50, $5, $6 or more.
The major oil companies responding to Mr. Biden admitted just as much, that they are profiting handsomely from this price spread, just as they were “eating the loss” with the much lower gasoline prices during the Pandemic Lockdown. What they also explained, which told me something I did not know was that the bottleneck is domestic refinery capacity. Owing to their business decisions to close refineries when demand had collapsed, strongly encouraged by governmental policies to encourage our own Energy Transition to Net Zero, there are simply not enough refineries with enough throughput to meet current demand. Supply and Demand, just like Father Guido Sarducci explained economics means high gasoline prices.
OK people, work with me. Suppose Mr. Biden implemented his “fix” of a “gas tax holiday.” Based on my educations at the Five-Minute University, that would not reduce the gasoline price set by demand in relation to the restricted supply. The price at the pump would not budge, but the profits of the oil companies would be even higher.
Suppose on the other hand, Mr. Biden proposed higher gasoline taxes to support the many ways in which to Build Back Better by spending much more Federal money? By Supply and Demand, the oil companies would “take a haircut”, but gasoline at the pump would not change either?
All of this, however, is short-term thinking. Were the current high earnings of the oil companies combined with the Biden Administration doing a 180 on environmental policy, say, to aid the battle against the evil Ruskies, the oil companies will build more refineries or increase the capacity of existing ones. Were the gas taxes increased to recapture some of the money the oil companies are making, there would be a reduced incentive to both increase refinery capacity or drill for more oil, making the gas price increase a permanent feature of our economy. Yes, this would inflict economic pain, but what is paying a few more bucks for gas for the car, heat for your house and food for the table in relation, or even losing 50 seats in the House of Representatives to the Republicans when what is at stake is letting the Earth burn up?