Okay, I just read my last post again, and I think I am going to be sick. I can’t believe I actually wrote that garbage. That is more like something you would read in the New Times or the Sun. I feel like I’ve been sucking fumes from my now regularly-empty-due-to-high-gas-prices gas tank. Let me go have a few saltines to keep from rolfing and I will be back with you in a minute……
Okay, that’s better now. I just won’t go back to that one for a bit. It is more like a journalistic piece or advertisement. How about your vote? Is it a) garbage b) trash c) junk d) fit for publishing in some pathetic local paper or magazine? Maybe I should add e) all of the above.
Okay, enough about my shortcomings. The only reason I am leaving it there is because I think it serves a purpose for our community. That is what this blog is all about. I may seem full of vinegar and bitterness at times, but how else are you going to get people interested in anything? For instance, what about the local impact caused by gas prices?
We are a tourist area, which means things this summer will be dead. Well, not dead, but wheezing from those cheap non-branded cigarettes they carry at the local gas stations. Those things are nasty. What is going to happen to our local economy when people have to fork out $250 in gas to get here just for a weekend? Then the motel rooms at $100 a pop, dinner at $25-40 each, then beer for $10 at the AM/PM. Wow, now that I look at it, maybe I can’t afford to vacation here, and I live here already!
I would say that the gas prices are going to deal a huge blow to the tourist industry in our area. Maybe that means a gift shop or two will close down, or maybe that sunglass shop in Pismo. Does anyone else ever see any customers in there? How do they make any money there? I wonder how the kite shop will do with the rent they pay in that nice building. Maybe it’s time for a kiosk at the beach. Oh, wait, you’ll have to pay for a parking space for it. Oh yea, the wise elders in Pismo decided to charge for parking now, too. Let’s get back to gas prices before I get nauseous again.
I hear people ask a question about gas prices over and over: Why does the price go up all of a sudden when I don’t see a gas truck there delivering the higher priced gasoline?
Here is what I understand from gas station owners.
First, let’s lay out some general information. I do not have a gas station, nor does my family. This explains why my children are not enrolled in a high priced college, as I work just like any other Joe out there. I have no connection to any gas stations nor their owners, although I have known some in the past and have actually spoken with many. Here is the information I think they would like you to have.
When you see a truck deliver gas, it is paid for immediately. This payload is at the new price. The station has to charge an appropriate price to cover the higher rate they are paying with this new load. If the new load is 10 cents per gallon (cpg) more, then the gas station has to charge 10cpg more. Make sense? The problem is that the station pays the new price while you have been paying the old price. They need to average this out somehow. This may mean charging a couple cents more before the truck gets there to help offset the new cost. Then when they get delivery, they may keep their price down a couple cents from what it could have been so they sell more gas.
For instance, cost may be $3.80 per gallon when they had paid $3.70 per gallon with the last load. Tack on the taxes and you have about $4.50 when the prior price was $4.40. A few days before the shipment, maybe they brought their price up to $4.44 in anticipation of the new load. Then after the load they increase their price to $4.48, perhaps 2-4 cents less than their competitors, until their pricing averages out based on number of gallons sold. Then their price goes up to $4.50 where it would have gone anyway with the new load. Does that make sense?
So if you see prices going up, either they have just received gas, or they are about to receive gas and are getting ready for the increased cost. It isn’t about squeezing out another penny from you. They make a consistent amount with each gallon, and depend on volume to make it worth their while. That is why their kids are not in that high priced college either, and they can’t afford to replace that cracked toilet. Who’s kids are in that high priced college and have nice new toilets? Politician’s kids, that’s who.
Gas stations don’t make much per gallon. You have heard those windbags in Washington (the DC one, not the cold home of Starbucks with coffee that is more costly per gallon than diesel) that they want to drop the tax so we get a few cents reduction in price:
http://www.nytimes.com/2008/04/29/us/politics/29campaign.html?fta=y. Yeah, that’s really going to help us afford to travel on our next vacation. “Let’s go to Disneyland, kids! We are going to save $10 on our gas that now costs us $120 more than it would have last year!” Yay, Daddy, let’s thank our government for helping us! Our teacher says we should send them a thank you letter!
In reality, federal taxes take less than 19cpg on gas, and less than a quarter per gallon on diesel. On a purchase of 8-10 gallons, we are talking less than $2 per purchase. Would that ease your travel costs and help you at the grocery store? Senators McCain and Clinton think so. Obama says no. Wait, is that a good thing? Maybe Obama says no because the federal government makes more profit off the sale of gasoline than the oil companies do! Wait, read that last sentence again. That is why it is BOLD. You need to understand that before we go on. Ready now?
When the gas tax was implemented in 1932 it was a temporary levy of a penny. In 1941 the Revenue Act increased it to 1.5 cpg. A loaf of bread was about +/- 15 cents (cplob) or slightly less, and bread is now about $1.50 for the stuff that is all puffy with air. Did you know they call that balloon bread? Have you noticed some loaves are light and fluffy while others are thicker? That is because the light and fluffy are loaded with air. You actually get less bread for your money if you compare it by density.
Anyway, back to our comparisons. This means it is roughly in line with inflation and cost of living in general for increases. Some people complain about the increases, but as long as they are along with the increase in the cost of living, I don’t see it as a foul. The government is really good at making sure they get their cost of living increases, while Social Security can fall behind 4 or 5 years and they don’t care.
Okay, so at $4.50 a gallon, feds get about 19cpg. What about the other $4.31? Ah, let’s see what the states do. Did you know that your gas tax pays for more than oil and roads? The gas tax was put on to pay for wear and tear on roads, interstates, and highway projects. Yep, good stuff. If you buy more gas, you are using more roads, so you pay more for repairs. Bikes use roads and pay no road tax by gasoline because they don’t cost much in road maintenance. They just complain about pebbles in the emergency lane where they ride their bikes. Get brooms mounted on the fronts of your bikes.
Of course, each state sets their own taxes. You have the state gas tax, sales tax, excise tax, county tax, local tax, and whatever tax they want to add to it including highway project taxes. Parts of Mississippi pay a 3 cpg seawall tax. Here in California, we average 45.5cpg, well more than double the federal tax. That brings us up to about 63.9cpg to the government. Wait, Californians pay 63.9cpg in taxes? We can’t be the highest paying, so let me look at the charts and see…..
YES WE ARE! http://www.californiagasprices.com/tax_info.aspx shows us what each state pays, and we are the lucky ones! Yeah, we are finally #1 in something! We are not #1 in schools, we are not #1 in employment, we are not #1 in environmental issues, we are not #1 in border controls (I think Iowa is), and we are not #1 in health care, but we ARE #1 in gas taxes. I am so relieved that we are finally #1 in something. I was starting to feel like our state was inferior, but this reinstates my confidence in our great state. Does that make you feel better too?
That explains why AAA says the average price of a gallon of gas is $4.30 when I see the pumps at $4.55. Sites like http://www.californiagasprices.com/, Gas Buddy http://www.gasbuddy.com/, MSN http://autos.msn.com/everyday/gasstations.aspx?zip&src=Netx, Gas Price Watch http://www.gaspricewatch.com/new/default_V3.asp, and even Mapquest http://gasprices.mapquest.com/ have special gas price comparisons. How often are they updated? Who knows, but they are there anyway. Even AAA put together a list of places to check prices http://www.aaa-calif.com/corpinfo/fuel/. Also check their main page for gas news. Oh no, this is starting to read like my last piece. Quick, get some vinegar in here, STAT!
Okay, then let’s look at the “help” we get from the state. The good news is that you can actually get a refund of your CA gas taxes. This is the 18cpg figure they give that are actually a motor vehicle fuel tax. You can get a refund if you use gas for certain off road uses, or special uses like construction, farming, commercial fishing, golf course maintenance (are you kidding me? Let me go dig some holes in my lawn and get a bigger riding mower), Driving a vehicle on a military base, or paratransit operations (transporting disabled and elderly).
You don’t get it for your ATV or dune buggy, even if you don’t drive them on the roads, or for driving grandma around, but you can get a refund for a boat if the vessel is operated by its owner on waters located on “private property owned or controlled by the claimant.” Have a huge pond you own? Get a tax refund for your gas, you need it.
We are the government, we are here to help you. Jump through our hoops and we will consider what we might do. Here is something that puzzles me about this, then I will get back on track here. Airplanes and boats can’t use the streets, but they are not included in the refund unless you operate your commercial boat 3 miles off shore. What is the difference? And now, back to our show…
So what does this tell us? California is genuinely interested in being fair by offering you a refund if you use the gas for something other than streets. Right. They don’t make it known unless you read the fine print when filing your taxes. I am sure most people that are entitled to a smaller refund don’t bother because it is such a hassle to deal with the state.
Does that money really help us maintain and build roads? Nope. They play a game of hopscotch with our money. Let’s assign gas tax money to highway projects and maintenance, then we will get the best services possible with a higher budget, right? Nope, and quit asking me all these stupid questions. Instead, let’s put THAT money into the funds, and use our OTHER money for something else. Here is how the whole thing breaks down.
Have you ever wondered why we never get increased services when the federal government gives extra money to state, county, and local governments for specific purposes? I’ll explain how the hopscotch game works, for people who don’t know how it is done.
Let’s say you get the feds to give $70k toward police protection in an area of town that needs extra protection. They say that the city should hire another officer for a year to accomplish this. The city budgets $60-80k per officer salary. They send the money to the city, and the city provides more protection, right? Maybe not. The city usually pays a budget amount to cover a certain number of officers each year. They know this $70k is coming, so they can actually pull $70k from the police budget, and there is no net change.
Let me explain that more clearly. The city budgets $70k to the police department. The feds give the city $70k and say it MUST go to the police department. The city gives that $70k to the police department, but then take back the $70k the city had budgeted for the police before the extra funds came. That frees up the $70k for other uses like councilman raises, while still complying with the mandate by the federal allocation.
Of course, I am not saying that our government leaders would EVER do anything so underhanded. This is purely fictional and hypothetical, and could only happen if we had diabolical and conniving city council members, which we do not have anywhere in SLO County.
So now you understand that none of this gas tax money adds anything to the pot, it just readjusts the pot so our government can shuffle funds around wherever they want them and then charge us more taxes. Let’s look at the meat of what goes on with profits in gasoline.
If you look at http://www.taxfoundation.org/publications/show/1139.html you will see their argument that the federal and state government treasuries profit more from the sale of gasoline than the oil companies do. Can that be true? Well, a Walmart store may average 3% profit per item that they sell, and they are the biggest retailer in the world, so maybe there is something to this idea of quantity. After all, the gas station owner only makes 3-4cpg on sales, or maybe 7-10 cpg if they have a good contract. It depends how much they have to pay the company to franchise the name, like AM/PM etc.
Then you have the oil companies that are turning over this quantity, and making record profits. Well, sorry, but that is what a business does. It makes profits. If there is no profit, they charge more. If they charge too much, they don’t sell. If they don’t sell, they go out of business or sell to some British company that is subsidized by their socialist government. Anybody catch a plane lately? Who is still in business there? It seems like one of the big ones is usually in bankruptcy every few years because of regulation and competition. Now for fuel costs. Ouch. Let’s just pass that along to the consumer as an extra charge when they book a flight. They will think they are still getting a good fare, until we tack that on when they get their tickets. But I digress. Oil companies have to make money to provide jobs and pay back investors.
That’s what businesses do. They add costs to the consumer to protect their bottom line. If you penalize the oil companies and make them pay the government billions of dollars, the government looks like they are protecting us, the oil companies look like they are slapped, and everyone feels vindicated. Oops, the price of gas just went up 5cpg to make up the cost of the fine your politicians just got from them and the legal fees involved. They are an easy mark. The truth is, those profits don’t go to the company.
Yes, the CEO and officers make their salaries and bonuses. They get to make more money. But what about stockholders? Who are these mysterious stockholders that depend on profits made by the oil companies? Many of them are retired teachers and grandparents that invested in something that was a slow and steady place to put your money for the long term. They are the people who invested to have a retirement fund. Let’s take money away from them. Again. Maybe your own parents or grandparents are benefitting from this profit. Penalize the oil companies, and all your relatives will be hit with it.
So we already determined that the oil companies are teflon. You fine them, and they pass it along. You tax them, and we pay. You control them and they cut back on production. What do you want to do about it? Let them get more oil. That is the key. All of this is part of the grand plan of environmentalists. Yep, you read it, a conspiracy theory. I’ll deal with that below, but let’s get back on track again.
Some of you may be thinking that I lied above with investors. No, I didn’t cover the whole picture. I left that for this paragraph. Traders. Not traitors, traders. Investments are made by traders that are speculating in a market when they anticipate a surge in prices. Banks and other investors are guilty because we are greedy. Buy low, sell high, right? Buy high, sell higher. What are futures? You gamble that oil will be selling for $180 a barrel so you buy it at $170 at a certain point in time. If you are right, you just made a killing. If you were wrong, you got hosed. They drive up the price of crude oil. Yep, short and sweet. Next?
If station owners make so little on gas, why stay in business? The service station is gone. It used to be that you had gas in addition to your auto repair shop, but that was not as profitable as people became wary of gas station mechanic ripoffs and high prices. Mechanics got away from the stations, and found new places to rip people off. That left gas stations with nothing else, so they added soda, beer, and cigarettes. Then along came food and snacks.
Now you can even buy Tshirts and keyrings at your local gas station, or have a sandwich and wash your car at others. They became creative. Now it is a mini market that just happens to sell gas to get you to stop in there and buy their other stuff. You also pay for the convenience. $6+ for a pack of ciggys? Yikes! I’m glad I don’t smoke. To heck with lung cancer, that $6 a pack would kill me first.
Wow, we have almost come full circle. Now let’s get into the crux of this whole thing. How did we get into this fix? Environmentalism. Yep, let me put it out there and you can stick your tongue out at me. I don’t care.
Environmentalist: We need to add MtBE to the gas to make it green. Oops, who knew it would make people sick? Oh, that’s okay, people are expendable as long as we protect the environment. But it polluted the environment, too.
Environmentalist: We need to stop drilling off the coast, it causes leaks and is bad for the environment. Don’t tell people that without the drilling there may actually be MORE seepage of oil, tar, and natural gas by nature that ends up on our beaches.
Environmentalist: Don’t put a pipeline in Alaska, it will impact the environment. Don’t tell people that the impact is that caribou like the pipeline and birth rates have gone up.
Environmentalist: Don’t drill in the ANWR (Arctic National Wildlife Refuge), you will damage the environment. The truth is, the Indian tribes are more concerned about the way they are treated, and protection of the caribou and whales they depend on. These issues can be resolved for the additional 700,000+ barrels of oil produced each year by this resource. The areas being looked at are in a very diverse area, but is actually only a very small percentage of the whole refuge.
Environmentalist: Let’s go solar, not nuclear. There has not been a major incident at an American nuclear plant in at least a couple decades. The Swedes blew it a couple years ago, but that is a different situation. I am not a proponent of nuclear power (and actually have a letter from the Whitehouse to show that I protested it in the 1970s) due to spent rods. I say we fine Mexico by sending them one spent rod for every 10 illegals we catch (or shoot ~ I will deal with that in another post) crossing the border. That would get rid of all our spent rods, and provide jobs in Mexico. In fact, as the first batch of workers dies from radiation exposure, you can hire a whole new batch, providing jobs for many future generations (if they don’t get more birth defects from the radiation).
Environmentalist: Let gas get more expensive, then people will have to ride bikes. Are you putting your grandmother on a bike yet?
Environmentalist: Make cars more efficient. They already have cars that run on air. Where does the air come from? Pumps made by electricity. Where does the electricity come from? Oil, nuclear, coal, dams? Just add a politician for enough hot air to drive your family to Disneyland for free.
Environmentalist: Solar power is the way to go. Yes, in the sun belt, add it to the grid. However, you realize that this is the least efficient use of land, and you are actually harming the environment by mounting panels in the dessert. Windmills in Mojave?
http://www.city-data.com/picfilesc/picc5384.php Impressive, but efficient? Geothermal power is only found in sensitive environments and places that are difficult or expensive to build in. Cool the planet from the inside out.
Environmentalist: Let’s use a renewable additive in our gas like corn. Yep, everything in the stores is made with corn, why not gas, too? That has driven up the cost of all foods because it is such an additive in everything.
Environmentalist: Let’s scare the public and they will follow us anywhere. Yep, it has worked.
Before I close this out, I don’t want you to think I am protecting big business or big oil companies. Let me give you an example of a travesty here locally that a big oil company pulled. There was a national name gas station here in SLO that was doing really really good. The volume in sales was high, people loved the station owner, he gave back to the community, had variety and maintained his facility. He did great business and looked forward to keeping his franchise and the station going.
Oops, sales are strong so you just got noticed by the oil company. Hey, here’s a hot location, why don’t we own it? Because he rents it from us. Oh, then stop renting to him. Don’t renew his agreement. Well, there he goes. Now the volume goes down, they remodel the station, and it still isn’t busy. What went wrong? They didn’t factor in the personality and people principle. Too late, it’s already ruined. It is just marginally busy, and maintains itself for the employment opportunities some local Joes have.
This was wrong, and should not have happened. They shot themselves in the foot and hurt the community. They don’t care because they don’t live here, but we do. No, I don’t protect big oil, I just have a realistic perception of the big picture. Do you? So I ask you again, are we being gassed or hosed, and who is doing it?
Well, I can’t end this post until I have EVERYONE mad at me, so here we go. WHO is really responsible for the high price of gas? YOU ARE! All of us. Drive faster, drive bigger, drive more, don’t turn things off, vote for the wrong politicians, sign petitions that scare you, follow the flock, baaaaaaaa baaaaa baaaaa! YOU did it. Now what do we do? Ride the wave, baby, it’s out of our hands. You’ve done enough already.
The Opinionator
Here is a government publication on gas prices
http://www.eia.doe.gov/bookshelf/brochures/gasolinepricesprimer/
Highway industry info on gas taxes
http://www.artba.org/economics_research/reports/gas_tax_history.htm
See the game being played from the top
http://gov.ca.gov/index.php?/speech/9208/
