Imprecations, CrackPots & Kettles

September 8, 2005 

Hurricane Katrina might have been packing Category 4 winds when it devastated the Gulf Coast, but its aftermath produced Category 5 blustering in Connecticut politics.  In fact, global warming (if there is such a thing) could be cured by just capping the hot air emissions hissing from political blowhards. 

The Gulf region hit by Katrina contains 25% of this nation’s domestic crude oil production and 16% of its refining capacity.  At least 75% of these resources were shut down by storm damage.  In the wake of this devastation, domestic gasoline prices increased dramatically and continue to do so.  Connecticut Governor Jodi Rell sanguinely referred to these increases as “absurd price spirals”.  If they are absurd, it is only because the politicians created the absurdity. 

For starters, there has not been a new oil refinery built in this nation since 1976.  In the current year, American refineries are operating at 95% of capacity and barely meeting domestic demand.  Hurricane Katrina took at least 12% of capacity off-line.  Do the math.  Even if OPEC gave us all of their crude oil production, America is presently incapable of refining enough gasoline to meet current domestic demand.  Part of this country’s energy dependence is dependent on the political stupidity of America’s almost non-existent energy policy. 

Not only has no new refinery been built in the last 30 years, but the Clinton administration’s Justice Department spent a chunk of time suing existing refineries that were trying to modernize and increase capacity.  At least the person that liberals love to hate, Vice President Cheney, called on the Justice Department to review the legality of the lawsuits initiated by the Clinton administration in May 2001 while convening his “clandestine” energy task force.  Things could have been much worse today in the absence of the Cheney task force.  

A political understanding of supply and demand curves goes something like this...”We demand it, so you supply it”.  Just think of an apoplectic 4-year-old in front of the candy aisle.   

Unfortunately, in the real world, you can jump up and down screaming all you want and equilibrium pricing will just smile and yawn like a kindly grandparent.  The hard fact is that if gasoline is being produced at 100% of capacity and you want more you have only two choices: (1) steal it or (2) pay a higher price.   

Pricing is the most effective constraint on demand.  Prices are used to allocate scarce goods. If you’re still not convinced, try having the government legislate a maximum price of $1 a gallon on gasoline effective Monday.  By Friday, you will be happy in the knowledge that gas costs a dollar per gallon but there isn’t any gas to buy.  It would be a replay of the 1970s when long gasoline lines and dry service station pumps traumatized the consumer. 

Of course, there is still option #1 which is to steal the gasoline.  You would probably be arrested and/or shot if you tried this.  The only legal theft in America is reserved for the politicians who steal your income and call it taxation.  That’s probably why most politicians are left with little to offer in this crisis other than absurd spirals of bluster. 

In a lucid moment, Connecticut’s Governor Rell proposed a decisive first strike against the absurd gas price spirals, “...a possible temporary suspension of state gas taxes”.  Well, there is an air of certainty to that. 

And speaking of gas taxes.  At best, most people believe that there are only two gasoline taxes...the federal excise tax of 18.4 cents per gallon and the state gasoline tax (which in Connecticut is 25 cents per gallon.  However, there is also a federal fee per gallon dedicated to the Leaking Underground Storage Tank Trust Fund.  Again, in Connecticut, there is also a Gross Receipts Tax levied on wholesalers which increased from 5 percent to 5.8 percent on July 1.  But don’t fret because that tax is increasing to 6.3 percent in 2006, 7 percent in 2007 and temporarily ending at 8.1 percent in 2013. 

In an effort to end these “absurd price spirals”, it is estimated that Connecticut will realize an extra $80 million to $100 million this year in taxes resulting from higher prices.  No wonder that when Democratic CT Congressman John Larson asks, “What's accounting for these spikes in price?” he immediately answers “Greed".  Uh Oh...a pot is calling the kettle greedy. 

What is greedier than a cabal of local, state and federal government that taxes you multiple times on the same purchase?  What is greedier than a government that creates new taxes every time they have a yearning for the candy counter?  What makes more excessive profits than relatively unaccountable and unconscionable government tax policies?  If anything needs to be regulated from making “excessive profits” it is your government.

In a shocking turn of events, CT’s Democratic “Lt. Gov. Kevin Sullivan called for Connecticut to adopt a plan similar to one in Hawaii that would allow the state Department of Public Utility Control to regulate wholesale prices by placing a cap on the price.”  Between this and CT’s Democratic Congressional delegation’s call for “a tax on ‘excess profits’ to strip oil companies of windfalls from higher prices for gas” it won’t be long until you are sitting in service station lines waiting for empty pumps. 

Always remember that when politicians are calling somebody greedy, they are suffering the shock from looking in the mirror.  Connecticut’s share of the Master Tobacco Settlement Agreement was $3,637,303,381.55.  Connecticut’s latest annual Tobacco Generated Revenue is $383.80 million.  Connecticut is currently spending about $57,500 a year for tobacco prevention.  Almost all of the remaining tobacco money is going into the pork barrel formerly known as the General Fund.  And you trust what these people say? 

Whenever the going gets tough as a result of political greed and negligence, politicians immediately start hurling absurd curses at mostly innocent parties and rely on public ignorance to sell these absurd arguments.   

When it comes to gasoline prices, look to: a political system that demands different boutique blends of gasoline for different states; supply and demand curves that necessitate either higher prices or greater supply; governmental incompetence at facilitating greater exploration and refining capacity; liberals who wish to destroy the domestic coal industry; liberals who fear nuclear power generation like primitives used to fear the sun and greedy politicians that derive vast amounts of tax revenue from the very industries they spend careers condemning. 

If we could convert the waste created by political hot air to energy, liberal policies would finally be serving a useful purpose.  Until then...welcome to the Third World.

 

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