Gouged on gas by the government

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ws: Gouged on gas by the government Source: Chicago Sun-Times Publication date: 2000-08-06

Gasoline politics are very funny this year. Seeing motor fuel prices rising from last year's historic lows, many politicians are calling for government investigations into the causes. They go on to suggest that antitrust action may be needed to protect consumers from a continuation of high prices for gasoline and home heating oil. Of course, if politicians really are interested in finding the cause of high oil prices, they need look no further than the mirror. Multiple formulas for gasoline required by the U.S. Environmental Protection Agency for the peak driving season beginning June 1, combined with the already high motor fuel taxes, made the prices spike. There was already a heating oil crisis earlier in the year, concentrated in the Northeast.

The federal government is complicit in a second way because it refused to release supplies from the Strategic Petroleum Reserve. In fact, the government continued to put more oil in the reserve, thereby aggravating the scarcity of refined products made from crude oil.

Moreover, the EPA requires Illinois motorists to use reformulated gasoline containing ethanol, which is harder to mix and transport. The reason is not to ensure better air quality. Most studies show ethanol to be a mixed bag when it comes to environmental impacts. It is, rather, a political favor to Archer Daniels Midland, a major contributor to both political parties. It should not be overlooked that ADM has had a 41 percent increase in quarterly profits due to a 40 percent increase in ethanol prices in the last year.

Prodded by a reduction in motor fuel taxes in neighboring Indiana, the Illinois Legislature rolled back the 5 percent sales tax on motor fuel that goes into the state coffers, but the tax burden remains sizable.

Even without the 5 percent state sales tax, the remaining taxes come to more than 55 cents a gallon-not counting property taxes, federal and state income taxes and payroll taxes paid by the dealer, the oil companies and their employees.

The state, county and city governments in Illinois could go much further in reducing the tax levies down to, say, the levels of neighboring states. The gasoline taxes in Indiana are 15 cents per gallon excise, plus 11 cents sales tax (before the recent reduction). The motor fuel tax in Wisconsin is 25.8 cents per gallon. The gasoline excise in Iowa is 20 cents, and in Missouri it is 17.05 cents per gallon. Is it any wonder that interstate traffic tends to drive through Illinois without filling up with fuel?

Another ingredient in the Illinois tax milieu is the recent increase in vehicle registration fees initiated by Gov. Ryan to finance Illinois FIRST, and in the process channel money to favored contractors. The extra taxes for driving in Illinois have passed from being merely exorbitant to outrageous. One might even call it tax gouging.

Reducing the motor fuel taxes would bring relief in the near term. In the longer term, protection from higher fuel prices for heating and driving is available to businesses and consumer groups that purchase futures contracts or call options on gasoline and heating oil. This would go a long way toward coping with price uncertainty, including that contributed by OPEC governments. These contracts are in a real sense price insurance. They worked during the Persian Gulf War when the government stockpile strategy failed miserably.

While the benefits of reducing government's role in the energy market are obvious, I must admit there also is a downside. Think of the lost entertainment if politicians-themselves the princes of gouging oil consumers-were to stop posturing as protectors of those self-same consumers. No more crocodile tears, quivering lower lips or jiggling jowls.

If the government all of a sudden gets more sensible, we may have to fall back on the higher intellectual humor of, say, the Three Stooges.

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=12719537&ID=cnniw&scategory=Energy%3AOil



-- Martin Thompson (mthom1927@aol.com), August 09, 2000


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