Gas boycott anyone?

I have run my own businesses for a number of years. I am well aware of the difficulty in making a profit, year after year, often with many large competitors and suppliers sometimes seeming to have our economic health in their hands. However, facts are facts. So for those who are understandably frustrated, a few comments:

A "barrel" of crude is 42 gallons. If 42 gallons costs $100., then refiners such as Exxon-Mobil have to refine it, transport it, advertise it, market it, deliver it, sell it to service stations (who must pay rent, help, insurance, etc.) and, everyone must make a profit out of the residual.

$100./42 gallons = $2.38 cost per gallon of crude. Now, a gallon of crude does not result in a gallon of gas. Refining consists largely of "cracking," which is the process of fractional distillation that separates the components of crude: gasoline, light fuel oil, heavier oils, grease, paraffin, asphalt, wastes etc. So, if you erroneously assume that a gallon of crude could result in a gallon of gasoline, there is less than one dollar spread, from crude cost to retail sale. And more than 50 cents of the retail gallon of gasoline is tax. The governments keep more of the money than does Exxon-Mobil, and the gas station combined! (And then, Exxon-Mobil has to pay the corporate income tax, on the residual otherwise known as profit.)

Therefore, using the optimistically unrealistic assumptions above, refining, transport, marketing, retailing, etc., is done with less than 50 cents per gallon. That includes refiner profits, gas station profits, and all retail expenses, that come out of that less than half a buck.

The real question is, "How do they do it so cheaply?" Well, in part, the expenses have been kept low by mergers, to enable economies of scale. Exxon-Mobil is the largest industrial corporation on earth, measured by revenue. Of course, when times are good, they make high profits; that is how they stay in business. If you have a few billion spare dollars, or lots of friends, why not chip in and buy the darn company, if it is so outrageously profitable. (2007 profit on sales was 10%.) Subtract federal (35%) and state corporate income tax, for net after taxes of 6.5%. The portion that is declared as dividends, and distributed to stockholders, will be reduced by the stockholder's federal tax.

Why not check their annual report, and see how high the profit, i.e., the return on investment is? Note the billions of dollars invested. Maybe sell one's own business, and buy Exxon stock?

As some of you have pointed out, the problem is OPEC, and congress. OPEC is a cartel. Tell your friends that a cartel in the US would be illegal, in violation of anti-trust law. It is a collusive organization, the sole purpose of which is to increase prices by restricting supply. Short of war, the only answer is to increase the supply, which will cause them to lower their prices to compete, or lose business. A good start would be to drill on the Pacific Coast, in ANWR, and in the Gulf of Mexico, near where Communist China is now pumping.

The price of fuel is high because the tree huggers, Pelosi and Reid, and the rest of the Dumocrat leadership will not allow increases in American crude production. If we could do so, it would increase high paying jobs, reduce our balance of payments deficit, strengthen the dollar, increase tax revenues, reduce the Cah-lee-FOR-nya state budget deficits, and lower the price of gasoline, and all products that depend on petroleum, which is most.

It would also reduce the incentive to make ethanol, which would enable lower food prices. Doritos and milk would be more affordable, and corn tortillas in Mexico would be more affordable as well.

Is that enough reason to drill offshore and in ANWR?

~~Robert Gismondi (Reseda, California)

P.S. Petroleum, especially Diesel fuel, is used heavily in the manufacture of ethanol. Think about it.

PPS: I do not defend ExxonMobil. But, I defend free enterprise. Too bad they do not have some in OPEC. And too bad the libs in Congress only believe in it for themselves. Remember the exemption from the federal minimum wage for American Samoa, because Pelosi has a constituent with business holdings there: Starkist Tuna. Pelosi does "not want tuna with good taste"--she wants tuna packed for less than the minimum wage. Click here for the details.