Old Fuel Tax Suggestion

Yes, buy your gas from a company the barely breaks even or better yet, loses money. The price will be the same, but the tanks are probably dirty, service non-existant, and staff underpaid.

In case you missed it, Toyota is by far the most profitable car company, and also produces the best cars. They have enough cash to buy both Ford and GM, if they wanted to. I'm sure you are buying from the least profitable company, such as Chrysler Ford or GM.

The sad truth is that oil companies, whether you like it or not, are extremely efficient at finding and prosessing oil. If the entire oil industry was nationalized, as done in many countries, the cost of producing oil and fuels would be so much higher and the state oil company would not make any profit, but employ twice as many people.

So, oil companies need to make a profit, just as Microsoft, Walmart and other "sinfully profitable" companies need to make profits to reinvest and provide a sustainable, growing business. The only issue I have at present is that oil companies do not have enough areas to explore and develop new resources. But many are now sinking billions of those "sinful Profits" into heavy oil, oilsands and other unconventional areas.

Well I don't know what % of the cost of a gallon of gas is profit, but take this example - say it's %10 When Gas was $2:00 a gallon they took 20 cents per gallon - now it's $3.00 a gallon and they are taking 30 cents. What have they done since it was $2.00 a gallon that offsets the %50 increase in profit? I think that would be nothing. So when the economy is on the edge and people are being stretched thin the oil companies dig deeper and give nothing in return. That's why I call it Irrationally high profit.

The oil companies have us over a barrel (pun intended). We cannot stop using their product - we are too dependent. So when the cost of fuel rises rapidly - I don't believe their dollar per unit profit should rise equally rapidly.

But hey - this is the great market capitalism that America is so proud of so we should be proud of our oil industry....right???

For what it's worth, refining margins, the profit refiners make after paying for the crude oil, have been very slim until recently. This difference has the unglamorous title of "the crack spread". For 20 years it was so slim that oil companies did not invest in new capacity. The shortfall was made up by imports of refined fuels, which are now 13% of the total. Companies like Valero are refiners only and now make a suffucient return to be able to renovate and expand their refineries.

Oil producers need margins to explore and develop new reserves, lest they go out of business eventually. This has been a major problem, since there are not enough places left to explore; 75% of all oil bearing areas are in the hands of state oil companies. and independent oil companies often have no acess to these lands; Mexico, Venzuela, Saudi Arabia, to mention a few. As a result, oil companies have now a lot of cash on hand, and are starting to invest in alternate sources such as oilsands in Canada, green energy, etc., or buying back their own shares.

They are also now making major investments in new refineries to handle heavy crude oil and oilsands products.

For what it's worth, refining margins, the profit refiners make after paying for the crude oil, have been very slim until recently. 

I don't consider $1 million/day PER REFINERY to be SMALL PROFIT MARGINS. Those were the figures 3 years ago BEFORE they REALLY STARTED TO MAKE A LOT OF PROFIT.

You are probably referring to gross profit rather than net profit. Also, 10% or so of the crude oil going in cannot be turned into salable products or is used as fuel.

Refineries also need to set aside 2-2.5% of their replacement value for maintenance and repair, as well as 2-5% for technological upgrading, such as lowering the sulfur content, better quality, etc.

Taxes, taxes and more taxes. I geuss if we need common sense a hammer is one way to do it. I would prefer less advertising of high profit low milage vehicles my self. A tax on fuel use does either hit at car purchase or in fuel sales. I would think that a consistent policy to encourage people to understand their fuel use would be better. Possibly a floor price on fuel that would tax the fuel up to a set cost regardless of market swings lower. Sounds harsh but the reality of a weak dollar buying rare gas is going to sink in one way or the other. The bad news is the floor price may need to be 4.5 to 5 dollars per gallon. Just my 2c.

For the last 34 years no mount of jawboning by governemt or environmental groups has made a dint in PER CAPITA fuel consumption. By all international measures, the US concumption per person is about twice what it SHOULD be, and COULD be even without going to more mass transit.

As Craig pointed out, only the price mechanism, a tax on both thirsty vehicles and gasoline, will make the public come around. This is much more preferable than shortages and rationing.

Since cars last 20 years or so, the place to start is to tax thirsty cars heavily, as well as hold the manufacturers' feet to the fire by jacking up the CAFE standards.

The $6/gallon gas scenario will come even if we do nothing, but it will hit us like a brick wall if we do not make an orderly transition.