Posted by
Dawnsblood on Friday, January 19, 2007 6:33:14 PM
Donald Sensing explains why the Democrats can not repeal the Law of supply and demand. Since they can not, removing subsidies to the oil industry will only
drive up the cost of gasoline and heating oil. Way to help the little guy there my friends. I guess we know where that minimum wage increase is going... Big Oil ;)
What the House, or at least the Members who voted aye, seem not to
understand is that the price of petroleum is completely
internationalized because the market is, too. If US oil companies can
produce oil wholesale cheaper than its retail, or spot market, price on
the international market, then they will sell the oil on the market and
make a profit. At least the oil company will sell internationally the
oil it produces that is excess to its domestic-retail capacity.
But
if the cost of producing domestic oil is greater than its price on the
international market, then companies shut down domestic production
(never entirely, of course, because the restart costs would be
prohibitive when/if the world price rose again and companies need a
retained production capacity to surge production in that case). Since
federal taxes are a major part of overall production costs for the US
oil industry, increasing those taxes by removing subsidies simply
raises the costs of domestic production. That makes it more likely that
the oil companies will simply cut domestic production and make up the
difference in imports.