Saturday, March 17, 2012

A redacted FB education on the economy...

GayCynic: (status update) "end subsidies for big oil" = "drive up fuel prices as newly inflicted costs are passed through"...seems like a simple enough if/then bit of logic for most folks to understand.

Yet, our President seems to think this will lower gas prices how?

Other Conversationalist: Gas prices are a red herring. We can't really affect them here because the market is global.

GayCynic: Oh, we can affect them in MANY ways. A couple of the more direct ways is "increase expense at any link in the distribution chain" and everything downstream of "point of tweak" gets more expensive to end-consumer.

Thus...increasing taxes, "removing subsidies", imposing mandatory environmental measures, requiring the use of decades obsolete refining equipment (by refusing to permit construction of new refineries), and restricting development of new and geographically closer (thus lower transport cost, and risk) supplies...

All drive fuel prices, and are all well within the control of (variously) Congress, legislatures, and even town and municipal councils...and let us not forget the various "special governmental districts & entities".

We can and do affect end user fuel prices. It's just that other folks (i.e., each person/group along the extraction/refinement/distribution chain) *ALSO* affect those prices...

But for a quickie look at how much we affect end user pricing...take a look at the percentage of the per gallon price is made up of fees & taxes imposed by the governments we elect. For good or ill, a quick look shows WA grabbing $.375/ga at the pump and the Federal .gov snapping up 18.4 cents/ga for a total of 55.9 cents/ga before we figure in sales tax (which is also collected on gasoline). The kids in Olympia can raise, lower, or suspend those taxes.

No, it's not beyond our control...and that is only addressing one of the variables we actually can affect.

My point is that it "we're going to end subsidies to big oil" will translate almost immediately to "we're going to raise the end cost of fuel to consumers" as the increased costs will be passed right down the supply chain, and shortly after we'll weather another inflationary wave as the cost of delivering goods of all sorts (including workers to their workplaces) impacts the economy.

One could do a better job of sabotaging the economy, but it would take work.


Old NFO said...

You are correct Sir... sigh

davidc said...

Absolutely right on !