Gas Goes Up

Is the sitting president truly responsible for the nation's gas prices? Rush did an excellent tv segment on oil prices and tax rates way back in 1996.

Many of you likely have filled up a gas-powered automobile of some kind and noticed that the price jumped from where it was a few years ago. You may also have noticed a rather unique-looking sticker of the current sitting president alongside the price per gallon display with the words “I did that” emblazoned on it. But is the sitting president truly responsible for the nation's gas prices? Whose fault is it that the national average as of this writing is $3.48 a gallon? And more importantly, did you notice what happened to your taxes? Rush did an excellent tv segment on oil prices and tax rates way back in 1996.

The first thing to point out is that expensive gas in 1996 was $2.29 a gallon. These days that gas price looks incredibly cheap. The national average is more than a dollar per gallon more than that and in California, the average price of gas is $4.49 per gallon. This represents a significant drop from 2021 and 22 where the average gas price peaked at $5.10 per gallon nationwide. Now obviously some of the blame for increased gasoline prices can be pinned on inflation (though the insane amount of money printed during COVID significantly increased inflation). However, some of it was undoubtedly due to President Biden canceling the Keystone XL pipeline, costing Americans jobs and billions of dollars. The pipeline would have brought approximately 830,000 barrels of crude oil per day to the US from Canadian oil wells. In 2021-22, President Biden released at least 260 million barrels of oil from the strategic oil reserve, more than every other president combined. Yet the price of gas remains high.

Here is where the oil companies get blamed. After all, it looks like Biden is doing all he can to reduce the prices. However, this argument fails to account for several things. Oil companies like making money, just like every other business. Oil is a profitable business. If they could make even more profit by ramping up production, they would. Demand is high, that’s why the prices have gone up. So why are the oil companies not ramping up production to meet the demand?

Oil companies are unable to increase production to meet the demand so for several reasons. First of all, like everyone else, oil companies face labor and parts shortages. Even if they could open new wells, they can’t get the equipment or the people to run them. Further, some of their existing wells sit unmanned or undermanned due to labor and part shortages. New wells take time to start producing oil. Additionally, environmental regulations often impact the industry. In a peer-reviewed paper published in the journal Energy & Environment, Brian Simpson put it very bluntly. “But the high prices are not being caused by greedy oil and gasoline producers. They are being caused by environmental regulations and government controls.” Simpson is correct. Government meddling is driving up gas prices.

As the Rush video clip pointed out, most Americans are completely ignorant of these facts. The “drive-by” media tells them that the greedy oil companies are to blame and they swallow it wholesale. The same message is repeated in television shows, movies, radio (except on the EIB network), college campuses, high school classrooms, and social media. The media and narrative all march to the beat of the same drum. Eventually, for low-information voters, the message takes hold. Oil companies are bad, government good.

However, it is not just the low-information voters who are not paying attention. Most voters, in fact, do not notice when the government starts taking more of their money (to fund programs an ever increasing list of things that the taxpayer has no knowledge of). As Rush pointed out, this is due to how taxes are collected. Instead of putting taxes on a credit card or writing a check, your taxes come out of your paycheck each pay period. In the era of electronic deposits, few people look at the amount withdrawn from their checks each pay period. If they did, they would get a startling surprise.

Gas prices are more tangible. You probably drive by several gas stations on the way to and from work and fill up at one of them. One website estimates from US government data that Americans use about 656 gallons of fuel per driver per year. Dividing by 52 gives a little more than 12.6 gallons per week. Depending on the make and model of your car, that’s approximately one visit to the fuel pump every week or two. At the current national gas price, Americans will spend roughly $2300 per driver this year. That means every American who drives is regularly in touch with the price of fuel. It is easy to understand, and when prices go up, everyone notices immediately.

When your taxes go up, however, you might not notice immediately, particularly as many companies give annual raises around the same time that taxes change, either at the beginning of the year, or the beginning of the fiscal year. If you are not closely monitoring your paycheck, you may not notice when there is suddenly less money deposited per pay in your bank account. Yet depending on your tax bracket, a tax code change can cost you thousands more than a rise in gas prices.

Conservatives need to take note of this. Many people on the left want to be taxed more, likely because they have no idea how much they are being taxed now. Conservatives need to find a way to make tax code changes tangible to the individual consumer. Whether that is removing withholding (unlikely), or some other more ingenious method remains to be seen but the average American needs to be in closer touch with the tax code. In the 2016 primary, Ted Cruz pitched a plan to fill out taxes on a postcard. Ideas like that might be worth revisiting. However it is done, Americans need to understand that taxes don’t just make the rich pay their “fair share”. Taxes hurt them too, far more than fuel prices.

---