Fools for Fuel

Numerous factors affect gasoline prices, despite many of them have no direct correlation to the actual commodity at hand.

In order to break even, a refinery needs about $70 for a 42 gallon barrel of crude oil reflecting the cost of exploration to end sale.  Today, Crude reached $60 for the first time in 6 months.

Meanwhile, we are told that stockpiles of fuel have reached unprecedented levels not seen in 20 years.  This is not a result of continued massive refinery production, but more a dramatic cutback in worldwide end user consumption, be it commuters, truck, airline, ship and rail traffic.  

Furthermore, some see an end to the recession, and the stock market is rising, dragging with it base commodities such as fuel, obviously a vital resource during economic growth.

Another key factor in Crude Oil pricing is the US dollar.  As the Dollar declines, reflecting our horrendous financial dilemmas, money moves into solid commodities, specifically Crude Oil.

Additionally, several major Oil Companies think we are near maximum production, meaning our crude oil resources will become scarcer, resulting in less product and higher prices.  These same companies are shedding their retail stores and their fuel transport operations.  They see the future, and it is not rosy.

Even I find these numerous points overwhelming, and the steadfast experts are, as usual, consistently wrong.

Ironically, the Federal Government squanders well over $10 billion a year supporting the Ethanol industry, a dubious ingredient in our gasoline, with numerous producers recently going bankrupt. Huge subsidies do not justifying the benefits.

Ethanol significantly reduces your vehicles mileage, your emissions are more polluting and vast amounts of water and fossil fuel are required to produce Ethanol.  "Renewable Fuels" are the behemoth of the future, a "Pork Funding" if ever there was.

Turning the Corner

President Obama's announcement of significant increases in vehicle fuel efficiency in a few short years are extraordinary.  Presidents Carter and Reagan sought similar initiatives, and failed miserably.  President Carter's "energy crisis" predictions of 30 years ago are today a grim reality.

I applaud and endorse these new standards and would expect even more, but there is a dark side to these new fuel economy standards, not yet publicized.

When you buy a gallon of gas, there is a Federal Sales Tax of 0.184 cents, funding Highways and Infrastructure building and repair.  It does not even come close to meeting current or projected expenses.

Federal and other Governments are reeling from the dramatic fall of tax revenue from all sectors.  Quick calculation shows the Fed will be the end loser in lower fuel consumption.

There will be but one way to supplement or replace the huge loss of tax revenue from lower fuel consumption and more efficient vehicles.  

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