Rather than continue arguments regarding oil and gas prices, my intention is to present reality so voters may make an informed decision on what and for whom to vote.
First, it is important to know that oil, while tied solely to gas prices, is an integral part of our health, safety and quality of life. Oil is used in the production of more than 136 products used daily, including heart valves, antiseptics, anesthetics, deodorant, hearing aids, motorcycle helmets, safety glass, soft contact lenses, hand lotion, shaving cream, shampoo, dishwashing liquids, toothbrushes and toothpaste, eyeglasses, insect repellant, artificial limbs, bandages, dentures, vitamin capsules, antihistamines, cortisones, and food preservatives — among others.
What does it cost to produce a gallon of gasoline? Production costs, producer profit, refining costs, refining profits, transportation costs, transporter profits, marketing costs, marketer profits, retailer costs, retailer profits, and local, state and federal taxes. We hear about the “obscene profits” oil companies make and the need for additional taxes against “big oil.” In the past 25 years, “big oil” has paid more than $2.2 trillion in taxes, excluding property taxes, state sales taxes, and onshore royalty payments. “Big oil” is paying more than three times its profits in taxes. In 2006 they paid $138 billion in corporate income tax to the IRS — more than what was paid by the 100 million taxpayers in the bottom 75 percent of income. The total effective tax rate on “big oil” is about 40 percent. Finally, between 1996-2006, U.S. oil companies earned profits of $900 billion, while at the same time spending $1.25 trillion on long-term exploration and development investment.
Any discussion about oil must include biofuels, specifically ethanol. One main ingredient of ethanol is corn. In 2005 the U.S. Senate enacted the Energy Policy Act, requiring 4 billion gallons of ethanol to be mixed with gasoline by 2006, 6.1 billion gallons by 2009, 7.5 billion by 2012, 15 billion by 2015, and 36 billion gallons by 2022. Consequently, the global market is suffering serious outcomes, including higher prices for many commodities. In some cases there has been an 83 percent increase in world food prices, causing violence and social unrest in 33 countries.
It takes 400 pounds of corn to produce 25 gallons of ethanol, which yields 30 percent less energy. With state and federal subsidies for ethanol at 51 cents per gallon, American taxpayers pay the bill — $6.3 billion to $8.7 billion annually. U.S. farmers are moving quickly to produce ethanol because of the money — the price of corn rose 30 percent in the past year. In 2008, 3.7 billion bushels of corn, out of a total crop of 13 billion bushels, will be used for ethanol. The University of Maryland calculates this corn could provide 104 million people with 2,000 calories a day for a year. If nothing changes, it is estimated the entire corn crop of the United States will be used for ethanol in 14 years.
The International Food Policy Research Institute states that between 25 percent and 33 percent of the increase in commodities prices is due to biofuels. Prices for corn, wheat and soybeans have risen 240 percent since 2006, and food prices are up 5.1 percent in the past year. The price of eggs is up 40 percent, and flour 50 percent, since last year. Science Magazine concluded that greenhouse gas emissions from ethanol “exceed or match those from fossil fuels and therefore produce no greenhouse benefits.”
There are 147 ethanol plants in the United States, with plans to build 61 more. We have not built a new oil refinery since 1975 and proven oil fields and reserves exist within the U.S. that would sustain the country for at least 50 years. The argument over environmental damage that could be done by drilling in the Arctic National Wildlife Refuge holds little in terms of reality. The footprint for that field is equivalent to a postage stamp on a football field. By drilling domestically we eliminate the need to be in the Middle East, we essentially eliminate terrorism, and enhance our economy, at the same time producing a better quality of life and safer society.
Finally, global warming — which presents no nexus to the price of oil. As with major issues, voters need to operate from an educated position. There is so little real information about global warming, and what information does exist conflicts markedly among scientists. Should global warming a) actually exist, and b) really be a problem, solutions need to be based on true science rather than politics and divisive rhetoric, remembering that meteorologists have a difficult time predicting the weather accurately 24 hours into the future. The planet is 4 billion years old and has sustained incredible change. Think about its evolution and you should get some idea what impact man has really made.
Bill Cooper was a Republican candidate for the Snohomish County Council in 2007. (Snohomish County Republican Party: www.snocogop.com.)
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