Gas Taxes

How the Government Keeps Gas Prices High

Think gas is expensive? Regulations are what's really costing you at the pump.


Plan to drive more this summer? Annoyed by the price of gas? Complaining that oil companies rip you off?

I say, shut up. Even if gas costs $4 per gallon, we should thank Big Oil. Think what they have to do to bring us gas.

Oil must be sucked out of the ground, sometimes from war zones or deep beneath oceans. The drills now bend and dig sideways through as much as 7 miles of earth. What they discover must be pumped through billion-dollar pipelines and often put in monstrously expensive tankers to ship across the ocean.

Then it's refined into several types of gasoline, transported in trucks that cost hundreds of thousands of dollars. Finally, your local gas station must spend a fortune on safety devices to make sure we don't blow ourselves up while filling the tank.

And it still costs less per ounce than the bottled water sold at gas stations. If government sold gas, it would cost $40 per gallon. And there would be shortages!

Another myth: Big Oil makes "excess" profit. Nonsense. The oil business is fiercely competitive. If one company charges a penny too much, other companies steal its business. Apple's profit margin is about 24 percent. McDonald's makes 20 percent. Oil companies make half that.

Per gallon, ExxonMobil makes about 7 cents. Governments, by contrast, grab about 27 cents per gallon. That's the average gas tax. If anyone takes too much, it's government.

President Obama says, "Gas costs too much." So he announced: "We've put in place the toughest fuel economy standards in history. Over the life of a new car, the average family will save more than $8,000 at the pump."

Sounds good. But the magic of fuel economy standards is another myth.

Susan Dudley, who runs the Regulatory Studies Center at George Washington University, points out that many car buyers care more about safety, style, power, etc. than mileage.

"The problem with the government's rule is that they ignore all those other preferences … assuming that the only thing we value is fuel economy."

Fuel economy sounds appealing when it's presented as something created at no cost. But car dealers say it will make cars cost $3,000 more.

Also, as James Taylor, an energy expert at the Heartland Institute, pointed out on my TV show, fuel-economy regulations kill.

"In order to make cars more fuel-efficient, auto manufacturers make them smaller—using lighter materials, they're less crash-worthy … We're seeing thousands of people dying on the roads that shouldn't be."

You'd think automakers would strongly oppose these regulations—but if so, why, when President Obama unveiled the regulations, did the heads of 13 car companies shake Obama's hand and smile?

"Even if it is a $60 billion cost to them," says Dudley, "if  everyone has to do it, they can pass it on to consumers."

In other words, normally companies compete to do things more efficiently than rivals, in order to charge lower prices and get the lion's share of customers. But there's no need to worry about jacking up your prices when your rivals must do so, too. Regulation makes companies lazier, not more efficient.

Republicans at least talk about deregulation. But the "regulation-killing Republican" is another myth. Despite being labeled a deregulator, George W. Bush hired 90,000 new regulators. Dudley, who was their overseer, now says, "The pressure to regulate is intense."

Almost no one seems to speak up for a true free market in energy, with competition, innovation and unfettered consumer choice. People say regulation is needed to counter industry "greed."

But if anyone's greedy here, it's government—and unlike oil companies, government doesn't have to work hard and compete to give you good service at the lowest possible price. Government just sits there, telling companies to charge less, telling car companies to make smaller and more dangerous cars, mandating and subsidizing alternative fuels like ethanol—and then telling us that we benefit from the politicians' efforts.

The truth: We rarely benefit.

NEXT: German Brewers Warn Fracking Could Harm Beer Quality

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  1. This story is so last week.

    1. Start working at home with Google! It’s by-far the best job Ive had. Last Monday I got a new Alfa Romeo from bringing in $7778. I started this 9 months ago and practically straight away started making more than $83 per hour. I work through this link,

      1. You know, what caliber employee do you think you’ll get advertising in blog comments sections? I’d advise running more traditional advertisements. Like Rackvertising.

    2. my best friend’s half-sister makes $76/hour on the computer. She has been fired from work for 5 months but last month her paycheck was $17429 just working on the computer for a few hours. Here’s the site to read more Click Here

  2. It’s also how they keep Global Climate Change Warming at bay.

  3. A wise man (named L. Neil Smith) once said that without government, we would be 8 times as wealthy. The government (at all levels) takes half your income in taxes, products cost twice as much due to regulation, and cost twice as much again because the producers are paying taxes (on their earnings, on the supplies they buy, and the employer matching portion of payroll taxes).

    And what do we get in return? Roadz, wars, and a prohibition-fueled crime wave.

    1. If they would just imprison the violent, defend the borders and enforce contracts in court, I think 8 times more wealthy is a conservative estimate. Imagine if the progressive movement had never occurred.

      1. Imagine if the progressive movement had never occurred.

        The ironic part about the “progressive” movement is that it is a regression from liberty back to slavery to the state.

        1. Yes. I think there is a book to be written about how progressive is nothing but the old aristocracy asserting its power over the uppity and vulgar commercial class.

          1. Throughout the ages the rich have been viewed with suspicion because the predominant means of attaining wealth had been through force.
            Wealth created through trade, through voluntary action, was taken away by the tax man or by military conquest. So it was assumed that all accumulations of wealth came about by violence and coercion.
            Then along comes Adam Smith and the United States, and now it is understood that wealth created by peaceful exchange is a good thing for society.
            But those who would prefer to get rich the old fashioned way, by violence and coercion, objected. Those people are Progressives.

            1. I just got paid $6784 working off my laptop this month. And if you think that’s cool, my divorced friend has twin toddlers and made over $9k her first month. It feels so good making so much money when other people have to work for so much less. This is what I do, ?? Gig60.c?m

            2. ^ SO MUCH THIS.

              1. Should have been ^^.

                God damn squirrels.

        2. The Progressives have always been there. The American Revolution was a reaction to the growing British State. The “Dark Ages” ended when a particularly nasty form of big government was imposed on most of Europe.

        3. +1

          “The ironic part about the “progressive” movement is that it is a regression from liberty back to slavery to the state.”

          I just wanted to read your simple post again; I like to see things called by their proper name and nothing in the progressive movement is progressive. Irks me using the political identifier.

  4. Can we please put this story on file to be used the next time some idiot complains that the government unfairly subsidizes roads and cars at the expensive of the beloved public transportation?

    1. This will be of no use John. Stossel wrote it, so it can be immediately be dismissed. He is on the list.

      Other columnists will be dismissed too, but people would have to find out they wrote for Reason or had once written an article in the WSJ. Then they can be dismissed without being read too.

  5. But oil companies make me feel bad and green energy is good for mother earth. How could you oppose mother earth, flower child?

    1. Mother Earth is a tough old bitch who will outlive us and treats us like pests. I can easily oppose her.

      1. I’ll bet you club baby seals in your free time huh?

        1. Not in my free time. I just got paid $6784 working off my laptop this month.

          I use it to club seals.

          1. Wow! You too? I run a baby seal clubbing business at home off my laptop. Although, I made absolutely no money. In the hole actually.

            1. I have an internet idea where people can club baby seals remotely from their laptops.

              1. Looks like is available again.

                That would be cool, a big industrial robot arm mounted on a Gator, wielding a mattock.

            2. I ? Baby Seals at a loss, but I get to deduct that from my taxes for a few years until the IRS considers it a hobby.

            3. Hell, I use my laptop to club baby seals!

        2. Ironically, The Seal Hunt in Canada is subsidized by the Federal Government. Unless you are a hunting them on your own time for the meat, it’s essentially a statist enterprise.

          1. I pray to God you mean the Canadian government.

        3. Unless you are part of the one tenth of a percent of the worlds population that are vegan, shut up.We kill most of what we eat.

  6. Per gallon, ExxonMobil makes about 7 cents. Governments, by contrast, grab about 27 cents per gallon. That’s the average gas tax. If anyone takes too much, it’s government.

    If it were any other organization than government, it would be called extortion and theft.

    1. Think about it: The Government makes more than the oil company on each gallon sold. That’s insane.

      1. You didn’t build that.

      2. Not just a little bit more either.

        I pay almost fifty cents per gallon to the government. The greedy corporation gets less than a dime and the gas station might get a penny.

        1. Actually, you pay almost $1/gallon. Road taxes aren’t the only taxes collected. You get to pay LUST tax too.

        2. Yes, the business that employs people, spends resources and money on acquiring and producing the gas, and takes all of the risks to bring me the product is evil, while the parasite government is good, even though it takes far more money away from us. Yes, that’s we the people who pay for that, not the oil companies.

        3. And don’t forget where big chunks of that gas tax money is going:

          To fund mass transit boondoggles, bike paths and community centers.

          And, of course, overpriced union labor on every federal construction project courtesy of the Davis-Bacon Act.

          1. They mean the mass transit of your money to other people.

      3. Have you wondered about what will happen if enough actually people start driving electric cars and the demand for gas actually decreases appreciably? It won’t mean lower gas prices (as the law of supply and demand would predict). The tax revenues from gas will fall, and government will RAISE gas taxes even further to compensate. There is NO WAY they will tolerate reduced revenue, even if it’s the result of something they supposedly wanted to happen.

        1. They’ll just mandate a GPS chip be installed in every car that logs how many miles you’ve driven and tax you based on mileage driven. Then, once people have gotten used to the idea of having their mileage tracked, they’ll start logging where you’ve driven and how fast, and then just tack any speeding fines onto your tax bill and automatically deduct the points from your license.

          1. There’s no reason to deduct points from your license, cause then the insurance company gets your money. The government will offer voluntary mandatory traffic schools and then offer ‘safe driving incentives’ (where they give you a small portion of your own money back, and of course, tax you on it).

      4. Yes it is. The response should be an “excess government penalty”. It should involved government officials getting kicked in the privates.

    2. Per gallon, ExxonMobil makes about 7 cents. Governments, by contrast, grab about 27 cents per gallon. That’s the average gas tax. If anyone takes too much, it’s government.

      If it were any other organization than government, it would be called extortion and theft.

      I guess I cant add. Exxon gets 7 cents Govmint gets 27 cents… how does that add up to the $4 a gallon we pay at the pump. Who gets the rest.

      1. Refining is not cheap, nor is transportation. Purchase and upkeep of the station equipment, the taxes the station owner pays to the town and state, fees to those and the feds. That’s without even looking in to it.

  7. “The problem with the government’s rule is that they ignore all those other preferences … assuming that the only thing we value is fuel economy.”

    Not quite.

    What they assume is that their TOP MEN are far smarter than the general public and they have determined that fuel economy IS of more value than anything else and therefore they are going to use force to prioritize it for us whether we like it or not.

  8. Where is that fuckwit Tony to tell us that the greedy oil companies are making illegitimate profits?

    I hope bloody diarrhea is keeping him away from the keyboard.

  9. Wasn’t Shrike bragging about how his gas only cost $2.99 a gallon or something, so Obama was an economical pimp?

    Not sure where Shrike lives, but uhh, gas, the low grade gas is over $4 a gallon here. So I don’t wanna hear it.

    1. He’s in Georgia. Georgia usually has lower gas prices. Not sure why.

        1. Not surprising. The worst team cheerleaders tend to come from the other team’s states. They don’t have to live with their own bullshit.

      1. They are closer to the refineries along the gulf of Mexico.

      2. Georgia has higher gas prices than SC and AL. It’s the price we pay for being more civilized than AL or SC.

    2. Here in East TN it was $3.259 yesterday, but you can get it .05 to .10 cheaper at places with discount cards. Was a little higher in Nashville over the weekend.

  10. Can we also mention NJ where gas stations are required to hire staff just to pump the gas? Huge lines waiting on the stores idiot brother to get off his cell phone so that he can pump the gas.

    1. Also Oregon. I hate it when people hold this up as a great way to “create jobs”. While we’re at it, let’s force restaurants to hire door men, grocery stores to have valet parking, and coffee shops to have live music during business hours. If only prosperity were as easy as forcing businesses to hire more people for useless jobs….

      1. Oh, I can’t wait for the current crop of poets and failed musicians get control of the leavers of power and enact the “live bands required at Panera” act.

    2. That’s a law in New Jersey? I assumed it was just weird quirk. How in the world was that justified?

      1. Geez, don’t you know by now? FUCK YOU, THAT’S WHY!

      2. The pump nozzle looks like a gun.

      3. I guess it made since back in teh 1910s, or whatever,when gas pumps just started appearing. Now it just sucks. I was filling up our car back home in Alabama when I was 10.

        They tired to repeal it a few years ago. The two big arguments I heard were it would kill jobs and stations would just keep the extra profits.

  11. Libertarianism for Dummies

    by John Stossel

  12. I thought the main problem wasn’t the price of oil, but the limited amount of refining capacity in the domestic US. The US supposedly hasn’t licensed a new refinery in decades. So there’s effectively a bottleneck on the market that prevents supply from rising to meet demand, and as a result gas prices rise instead.

    1. That is one of the problems. However, refining capacity in existing refineries has increased (or so I recall from some article). It certainly has not increased enough to lower the price very much.

      If you check an inflation calculator, gasoline is roughly the same price as it was in the early 1970s. It would be much cheaper if government got out of the way.

      There are other factors, like various blends various places require before it can be sold in their little fiefdoms, like California and communities within CA. Plus, the taxes never seem to go down.

  13. Car companies smile and shake his hand because they need the bailouts. If they piss and moan and the standards pass anyway, they won’t be first inline to get the handouts when there competitors get to sell the more expensive cars for the same price as they can run on smaller margins due to there being no risk of running out of cash.

  14. Delays and political extortion for drilling rights/permissions and pipeline authorizations, destructive ethanol requirements, special blends for connected markets, etc. The list goes on. A lightly regulated market without confiscatory taxes and pointless regulations would likely yield a gas price of about $1 – $1.50 per gallon. With a strong dollar (not manipulated and inflated away with artificially low interest rates) we would likely be under a gallon.

  15. The problem with more fuel efficient cars is that drivers tend to drive more than they probably would meaning the increase demand for gasoline and added emissions offset the fuel efficiency. I don’t drive my ’73 Cadillac convertible as much as I used to drive it when gasoline was under $3, so I drive my Mercury Grand Marquis much more because it gets double the mileage. I imagine I’d drive even more if I owned a Honda, but being that I’m 6’4″, I wouldn’t be that comfortable.

  16. my neighbor’s step-sister makes $84 an hour on the computer. She has been out of work for five months but last month her pay check was $17822 just working on the computer for a few hours. Here’s the site to read more

  17. Certainly, taxes raise the cost of oil. But it would also be fun to to de-list crude oil from NYMEX and go to a direct market. Or just stop options from being traded and require that traders accept delivery. Oil and gas prices have many, many inputs, and those inputs are not going to be accurately reflected by oil companies’ profit margins.

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  19. Please explain why prices averaged $1.70 in late 2008. Hmmm, what major event took place in late 2008? Did oil companies just decide to be nice and give 50% off in good faith?
    Who pays your salary?

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