Welcome to my blog! While North Carolina is a Red state, the metro Charlotte area is a Blue outpost dominated by liberals and RINO's. I have established this Conservative bastion to provide me with a creative outlet to express my views about local, national and world events. Feel free to chime in.

Tuesday, April 18, 2006

My Perspective on Gas Prices

Anyone who knows me knows that I am a believer in Capitalism and so I don't subscribe to the notion that because oil companies are enjoying huge profits that they ought to pay a windfall profits tax. After all during times when they're losing money, do you ever hear anybody offering to help them? Many politicians, mostly Democrats are pushing hard to levy this tax against big oil. They claim that the money would be used for rebates to Americans and to help low income people who struggle paying for gas. In other words, this would be just another income redistribution scheme. If these politicians really cared about how gas prices are impacting lives of Americans, they would move to reduce the amount of tax we pay on a gallon of gas. So while I don't fault the oil companies for their profits, I do feel that their business practices are a contributing factor to skyrocketing gas prices. Yes oil is hovering at or above $70 a barrel and that has a direct impact on what we pay at the pump. And yes liberal politicians and radical environmentalists are keeping us from drilling for oil off our coasts and in Anwar. But big oil is playing a critical role here in the U.S. which is dramatically impacting the supply and demand curve which has a more direct impact on gas prices. They're not using their profits to build more refinery infrastructure. Why? No money in it for them. Yes there is more regulation but that's not the main issue. It's not in their best interest to build more refineries and that is killing us at the pump. We in the southeast saw how fragile our gasoline delivery systems are when Katrina devastated New Orleans and crippled our refinery capacity. We also saw how little tolerance people have when delivery of gasoline is interrupted. Long lines at gas stations, panic and eventually fighting each other. Even with all of our refinery capacity running at 100%, we are not able to refine enough oil to keep up with demand. To fill the gap, we import gasoline from places like Canada. So any disruption in our capacity to refine oil into gas means we must import more gasoline to fill the gap. This is what we experienced last fall. And despite all that we learned last year about how vulnerable we are, nothing has changed to improve our situation. To be fair, oil companies are pouring millions of dollars of profit into discovering new sources of oil and improving the oil extraction process and that's great. But they must also build more refineries so that we are less vulnerable to an interruption of refining capacity. So how is all this impacting today's gas prices? Oil financial experts have already been speculating about what will happen if another hurricane were to interrupt our refinery capacity this year. The speculation alone is enough to trigger fear in the markets and cause the price of gas to soar.

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