Kent Moors was on the KD/PG Sunday edition, which I caught from the web later in the day on Sunday (http://kdka.com/video/?id=40898@kdka.dayport.com, http://kdka.com/video/?id=40899@kdka.dayport.com). He said a couple of very interesting things, which I hadn’t heard before (although one I had suspected). He said that US refineries are currently operating at 85%, which was actually up some from earlier in the year. I had thought (and I keep reading from other sources) that the refineries were maxed out. But in fact oil companies are creating an artificial shortage, to drive the price of gas up just a bit more.
Moors mentioned that several of the big oil companies are vertical companies, meaning they control the oil fields, the refineries and the distribution of the refined oil (the gas we put in our cars). He speculated that their cost for a barrel of oil was actually around $75 (what they charged themselves). I had always thought this was the case, so it was nice to hear Dr Moors verify it. So these bigger oil companies (probably Shell, Exxon, BP, Sunoco and others) could give us a break, but they would rather make a profit now.
Moors also said that he expected worldwide demand to jump in ’08 and ’09, and the supply we see now would start to dry up. I assume that means we can expect to see a sharp rise in the price of gas. I believe Moors mentioned that he thought the Asians would be willing to pay more for gas than we would, but I don’t remember if he described what would happen as a consequence of that.
Meanwhile, Hillary Clinton literally says that she doesn’t want to listen to economists, because they give you “Elite Opinions”. More than a few people have already drawn the comparison to George Bush. Apparently Mrs. Clinton said, on one of the network morning news shows, that a lot of people don’t understand what she is proposing. I think I do, it is the gas tax holiday combined with a windfall profits tax on oil companies. I haven’t looked to see what constitutes a windfall profit, but I think Mrs. Clinton will find forty nine Republicans and Barack Obama voting against her in the Senate, leaving the tie breaker up to Dick Cheney… Hmm, wonder how he would vote? In a perfect world, the Republicans would support Clinton’s plan, just to watch it fail. But there is a chance the windfall profits tax would hurt the oil companies, so I doubt that will happen. Clinton still gets to portray herself as the champion of the little guy, the poor white trash who never got themselves much book learnin’. That must kill Obama.
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From what I understand, the windfall profits tax is a political nonstarter, even among many Democrats. So both ends of the equation are empty.
Well, I suspect the windfall profits tax might be popular with the Democrats in the abstract. However, that one vote majority in the Senate has screwed with the heads of the Democrats in the Senate, making them unwilling to even try to advance those kinds of ideas. Without the sixty votes (which is to say, without any or at least enough Republicans willing to play ball), the Democrats can't even bring their policies to a vote.
What I really wonder is how the oil companies would punish us if a windfall profits tax got passed (whether it was tied to a gas tax holiday or not). We all know the price of gas is going to rise, but how fast and how far. At some point, if the government doesn’t get its shit together and do something, we might start seeing fuel riots.
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