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Saturday, August 16, 2008 11:24 PM MDT

MARK LARSON
Perspective

An economy struggling under the weight of record-high oil prices is forcing families and businesses across the Mountain West to take unprecedented steps to balance their budgets.

It is no surprise that individuals are driving less and opting for "staycations" over traditional summer travel. But farmers, ranchers, grocers and restaurateurs are also struggling to cut corners and endure shrinking profit margins. Meanwhile, manufacturers are cutting jobs and producing less, driving up the prices of consumer goods. Even school districts are examining scheduling options, busing routes and fuel expenditures to find new ways to make ends meet.

While most of us are hurting, somebody is profiting from our pain. And it is only natural for motorists standing beside their vehicle watching their totals at the pump climb over $75 or even $100 for a fill-up to look across the lot to the station attendant or owner in frustration. They can’t help but think: Surely they are scoring a jackpot by enjoying gas prices north of $4 a gallon.

But gas station owners and operators are not to blame. In fact, we are hurting as much as consumers by these outrageous gas prices. According to data from the National Association of Convenience Stores, last year the average gallon of gas was marked up 14.3 cents by owners. The net margin currently is only about 1.5 cents per gallon after all overhead and operating expenses are considered. Each gallon of gas sold typically generates more revenue for refiners, wholesalers, state and federal tax agencies, and even credit card companies than it does for gas station owners. Our main source of profit is not from gas, but from sales in our convenience stores.

The real culprits are oil speculators who have artificially driven prices through the roof by aggressively trading oil futures. Historically, futures markets were an important way for businesses in industries that depend on fuel -- such as shipping, tourism or agriculture -- to ensure some amount of price predictability. But in the last five years, the amount of investor holdings in commodity index funds has skyrocketed from $13 billion to more than $260 billion. Currently, 71 percent of the commodity futures contracts are owned by speculators, up from 37 percent in 2000. These investors trade oil on paper -- often changing hands dozens of times -- which drives up the price without ever having the intention of actually taking possession of the oil.

For this reason, Republicans and Democrats in Congress need to work together to correct this market manipulation and bring more transparency to the pricing of oil. The Colorado Wyoming Petroleum Marketers Association supports legislation that would empower the Commodity Futures Trading Commission to more closely monitor the trading of commodities and take reasonable measures to reign in oil speculators. We need to close overseas loopholes that encourage speculation and set limits on certain speculation practices, especially those of foreign traders who are able to operate virtually unchecked.

With hundreds of billions of dollars changing hands in futures markets, immediate action is needed. We urge Congress, upon its return in September, to pass legislation that will help address both short-term and long-term problems related to rising fuel costs.

Gas stations owners across Wyoming and Colorado would be as relieved as consumers to get some relief from skyrocketing prices.

Mark Larson is executive director of Colorado Wyoming Petroleum Marketers Association.


Don't do the crime		More to wilderness than profits

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Comments to this story.

BULL wrote on Aug 17, 2008 8:24 AM:

" Consumers who are paying a lot for fuel only need to look in the mirror for the real problem. The oil companies are only providing a product. Look at the gas hog 4x4 you are filling up , do you really need that tank year around to run the hot dry asphalt ? I see it every day. Americans have a lot of nasty habits , and driving gas slurping SUV,s and jacked up pickups is one of them. You dont like the TV channel , change the channel. You dont like high gas prices , quit driving so much. The oil companies are not going to feel sorry for you, at least as long as Bush & Cheney are still in office. "

Dewd wrote on Aug 17, 2008 9:51 AM:

" There are many Skunks in the Oil Price Escalation woodpile. It isn't all due to the market speculators. Perhaps the biggest and most odiferous Skunk is none other than John McCain's economic adviser and strategist, Senator Phil "Heartless" Gramm of Texas who created the Enron Loophole. Although recently chastised and forced to take a less prominent role in McCain's campaign , Gramm is still calling the shots on policy for the old man. Gramm is reason enough to totally not vote for McCain. But there are other factors in the oil price runup that have not been given the space and time in the media they deserve. The most obvious is the Bush-Cheney Fear Factor...that W. and Richard B's so-called "Foreign Policy " of Guns and Stutter has caused economic anxiety worldwide . And please don't forget our old friend Vlad" the Impaler" Putin of Neo-Czarist Russia who isn't afraid to use heavyhandedness in manipulating large tracts of the global energy markets. The CEO's of the big oil corps are not to be excused , either. They are huge enablers of the problem, and profit obscenely at every turn . Greed, after all , is why oil that would otherwise be selling for $ 75 / bbl in these trying times was edging towards twice that recently before All the Above decided to cool their jets for the American election season ( wait till after January 20th for resumption of Oil Spiral ). The currernt drama and high prices in the global oil markets are shocking, but not surprising. No one should be surprised at any of this. But you should be doing your part to reduce your consumption of hydrocarbons---whether as fuel or manufactured product--- as much and as soon and affordably as you can. We spoiled arcane Americans need only look to Denmark to see what a comprhensive, national energy policy looks like and how in the long run it becomes a self-sustaining New Economy. As much as I utterly detest Phil Gramm , he is brutally honest when he says Americans are a nation of whiners. Just not for the reasons he was alluding to when he made that utterance. Take heed, Wyoming...our state is far more a part of the problem than any forseeable national energy solution. "

keith r wrote on Aug 18, 2008 12:04 AM:

" I sometimes trade oil futures. Remember for every buyer there is a seller. People like to blame "speculators' when prices go up------do I get (and other traders) get any credit when we SOLD unhedged oil contracts a 5 weeks ago and help drive down the price?

Most "speculators" are John Q. Public----they started to keep an extra 2 gallons of gas in their tank than usual because they expected the price to go up. Multipy 2 gallons times 400 million (plus) cars (worldwide)---you have a LOT of "speculative" buying. "

MoreBS wrote on Aug 18, 2008 5:36 AM:

" Of course there is always the possibility that drilling for our own oil in our own country just might help the situation. Of course that might take some of the control over the people out of the hands of the enviros. "

BillInGRR wrote on Aug 18, 2008 1:11 PM:

" People like Bull and Dewd are the problem. Does everything have to be bitter partisan politics. Why not have a civil conversation and solve the problem? "

Evelyn Stier wrote on Aug 18, 2008 2:17 PM:

" This should be read by every citizen even thinking of voting for a Republican.They are and have been against regulations for their philosophy is, if the rich get richer it will TRICKLE DOWN. Reagan had dreams that didn't come true, why did Bush believe it would work for him? When the rich get rich, most are not willing to share and the poor get poorer and ultimately we have a two class society. Read History, it was called the Lords and the Serfs. "

Fred wrote on Aug 18, 2008 3:38 PM:

" Where is the data to back it up Mr Larson. It is a well written opinion piece but lack substance. Many airlines are speculators by hedge future oil prices. So they are to blame for their own demise? "

Disgusted Wyomingite wrote on Aug 18, 2008 7:32 PM:

" The same speculators who loved
playing with the oil are doing it
with the foods we eat. Like grain
and cattle. "

keith r. wrote on Aug 19, 2008 3:45 PM:

" to "disgusted Wyomingite"----trading futures/puts/calls/swaps require a BUYER and a SELLER. ---you can NOT say speculators are just buyers----when I "speculate" many times I'm a seller (naked/unhedged) "

Exactly wrote on Aug 20, 2008 8:51 AM:

" This article is exactly correct. Put the regulations back in effect that existed before the oil barrons came into power and enacted the Enron loophole and oil and gas prices will go right back down to where they were before we began this insane artificial bubble. Oil and gas prices have gone up more in the last few years than they had in all of time prior to the deregulation. That's what we get for putting oil people in charge of the government. It's time for change! "

Whatever wrote on Aug 20, 2008 11:38 AM:

" This is absolutely nuts. It is absolutely crazy and nonsensicle to blame "speculators" for the price run up. A group like "speculators" is an easy boogeyman to blame because we don't really know who these speculators are, and they are probably just greedy ruthless people anyway. Some faceless anonymous groupd is easy to blame instead of really understanding the market.

Then you mix in the irrational scribblings of BULL, Dewd, Evelyn, and Disgusted Wyomingite and it gets difficult to even have a meaningful discussion.

The fundamental driver in the oil price is supply and demand. Demand, up until very recently, was far outstripping increases in supply. Oil companies be they state owned(Really Really Big Oil), Majors (traditional Big Oil), or independents were and are doing everything they can to find and produce all the oil they can. With historic high prices like this every oil company in the world is trying to produce as much as they can. They are not having to shut in or curtail production because prices today are very good. This is simple economics that should be easily understood. The supply side of the equation is increasing as fast as companies can possibly do. The simple fact is worldwide demand was far outstripping the ability to increase supplies.

This leads to increasing margin of what the world demands, and what the market can supply is increasing. Therefore each and every barrell of oil is much more valuable because there are more people that want it then can have it. People are therefore willing to pay more to get that oil. Again this is simple economics. This is what is fundamentally driving the price of oil right now. That is why the price is currently going down because for the first time in a long time demand is decreasing instead of increasing. Supply is being allowed to catch up with demand....which means each barrel of oil has less people demanding it.

Speculators simply try to follow the market. During the run up in prices speculators were trying to get their money into oil and out of financials to protect themselves from inflation. Which is very rational because we are seeing increasing and accelerating levels of inflation.

Fundamentally though speculators are market followers not market drivers. To blame them for the rise in prices is like blaming a doctor for your sickness.

Supply and Demand are what move and drive the price of oil....it is NOT speculators, George W. Bush, Richard Cheney, some sort of cartel by oil companies, or any other boogeyman. "

Vlad wrote on Aug 20, 2008 1:42 PM:

" Evelyn Stier, You are darned near as dumb as BULL, Dewd and their partisan idiot buddies.

Not ever problem is a conspiracy.

Not every problem is due to one political party or the other.

The cost of fuel is impacted by many, many factors within the US and outside of the US. This is true of all commodities and consumer goods.

I realize that you feel the need to cry and are angry. But your unfounded allegations and baseless accusations will do nothing to solve this.

In fact, your careless finger pointing is part of the problem, and many be the biggest part.

Political gridlock caused by polarization created by dolts that think like you creates a massive road block to any hope of success.

I suggest that you read but don't write and listen but don't speak for a while. May be you'll smarten up some for it. "

Sophia wrote on Aug 20, 2008 1:44 PM:

" Where oh, where is Nancy Pelosi's long ago promised gas plan that she and the democrap controlled congress were going to roll out to save the American consumer? Where I ask, where?

For that matter, where oh where is the US congress right now? What are they doing to work out a reasonable solution to this problem? "

Economics wrote on Aug 20, 2008 2:41 PM:

" Speculating on commodities originated with the Chicago Board of Trade for grains. That is because we are a grain EXPORTER. We have producers (in the same country as the market) that can actually respond to the speculative demand, year to year. So the whole thing stays in check, and works for the most part. More recently, Wall Street extended this practice (under a newly-created loop hole) into the oil market. Bad idea. Since we are an oil importer, we do not have the capability to meet our own speculative demand. No way to crank up enough supply here to keep the futures in check. The result is a 'magnified' scarcity. The actual supply-and-demand price for a barrel of oil right now is around $70. The futures markets have driven that up to about $120. So the futures are actually interfering with the free market in this case, because there is no feedback in place. Never a good thing. "

The Mysterious and Sudden Drop in Demand wrote on Aug 20, 2008 2:52 PM:

" Whatever, the price of oil has dropped 20% in two weeks. No new supply from OPEC or West Africa during that time. No new offshore drilling. Are you saying that global demand dropped off 20% in two weeks? Two weeks that also happen to fall in the peak driving season? Yeah, that happened. Idiot. It's probably just a coincidence that we have an election coming up too. Keep an eye on those prices. What do you want to bet they are lower than $4.00 / gallon come first week in November. And what do you want to bet that 'demand' goes mysteriously back up shortly after that. "

Actually wrote on Aug 20, 2008 3:47 PM:

" Futures markets are not controlled by supply and demand, but on speculation about what will happen in the future. The problem with the energy markets is that the ones who are doing the speculating are the same people who have control of the flow of the energy. If the demand goes down, rather than the price going down, the oil companies shut down pieces of their production for "scheduled maintenance" or whatever to keep the supply tight. They are not increasing refining capacity so they can keep the supply tight. As long as they keep the supply tight, the speculators in the futures markets can use that to justify raising prices every time there's a thunderstorm near an oil facility or some problem anywhere around the world where they produce oil, even though it rarely ever actually affects the supply. The price spikes with each excuse, then comes back down a little afterward, but never goes back down as far as it went up. I'm not big on government regulation, but energy is too important to our economy to entrust it to the speculators unchecked; it's a national security matter! We need to get some regulation back in place to protect us from our own greedy capitalists. For a small group to be making record profits while putting the economic well-being of the nation at risk due to record high prices is unacceptable. This country belongs to all of the people; not just the wealthiest. "

Thank you wrote on Aug 20, 2008 10:41 PM:

" It is comforting to see that so many Star-Tribune readers are both aware and enlightened. Unfortunately there are still a great many fools out there who believe anything and everything that has been spoon fed to them by people who do not have thier best interests in mind. Oil was around 10 dollars a barrel less than a decade ago. Are we to really believe that worldwide demand had increased by 1500% when oil peaked a few weeks back?

Strange how oil has dropped 20% amidst a Russian invasian of a European nation vying for NATO inclusion. Oh, I forgot...Beijing has been idled to illuminate the Olympics. That must be the reason for the decrease in demand. "

The Bush Economy wrote on Aug 20, 2008 11:22 PM:

" The dollar will continue to weaken and oil will continue to climb in the long run, beause oil is becoming a global alternative currency. As more foreign investors quit wanting U.S. cash (because it is worth less than it used to be, due to our deficits), those investors will look for something safe like oil to put their cash into. Don't expect any real relief from this.... unless you are moving to China or Dubai. That's where the cash is now. "

And Then We Became Argentina wrote on Aug 21, 2008 9:46 AM:

" When ever you have people on Wall Street (who got their MBA's from Doug's Online Degree Emporium) trading in things they don't actually own.... and have no way of producing themselves.... you've got another Enron situation on your hands. There is a whole class of people in this country who never learned any skill except how to turn on a computer and make fake money look like real money (to themselves). That party can't last forever. If you think the economy is soft now, just wait until we have a few more years of 'oil futures' trading without regulations or any experience. "

Whatever wrote on Aug 21, 2008 10:55 AM:

" to Mysterious,

Demand has decresed for the first time since the 1970s. This is a major development that was not expected, and is still quite suprising, especially as it comes during the peak driving season. It is because the demand drop came during the American summer that the price drop has been so significant. If this drop in demand had ocurred during the winter I don't think the prices would have dropped this much. Most people thought that the rate of rise in demand would slacken but not reverse itself. This is going to make people want to start revising their outlooks on oil dramatically, and lead to a drop in price.

Couple this with the recent strengthening of the dollar furthur drops the price of oil because the spectre of inflation is lessened. This is the simple explanation for the recent drop in prices, and could signal a change in the pricing climate.

I don't think this is the case, but some people do. I think it is a short to medium term correction in price. I think fundamentally that demand worldwide will continue to outpace supply increases. We're not going to see a permanent reduction in the price of crude oil until China, India, and the other overheated third world economies go into a significant economic correction. Only then will you see demand weaken and decrease enough to bring oil back below the $90, $60, or $40 or wherever that lowpoint in prices is.

It is not some sort of backroom political deal by some shadowy group that is manipulating the price of oil. The logistics and amount of organization to even do this would be staggering, along with the impossibility of covering all of it up and keeping it absolutely secret is preposterous. I know paying $4 a gallon gas is no fun, and we need to do anything we can to bring those prices down. Blaming it on conspiracy and boogeyman "speculators" will only exacerbate the problem, and do anything but help solve it. "

Eddie wrote on Aug 21, 2008 11:26 AM:

" Hmmmm? Quote: "Demand has decreased for the first time since the 1970s." Supply. Demand. Add in market factors to include wide spread, high volume speculation, war, extreme political rhetoric, negative press, an economic slow down. What do you get? Volatile, unexpected price changes. One company alone held options worth 11% of the US market during June 2008 (look it up, the name starts with a V). That is a huge options market share and can easily swing prices all the way to the consumer level. Lot's of you anti-capitalists and general purpose Bush haters truly are demonstrating your ignorance and blindness caused by hate. I'd bet that your lives just s_ck! "

Exactly wrote on Aug 21, 2008 1:38 PM:

" Eddie, you can thank your buddy Bush and his right-wing extremists for almost everything on your list of factors there. There is a reason why there are so many Bush haters; he and his cohorts have trampled all over the constitution, damaged America's reputation worldwide, and driven our economy into the dirt with their misguided economic policy. No matter how much money you give to the rich, it does not trickle down. The only way to trickle down is by force. Bush lovers are the ones who are demonstrating their ignorance and blindness by following the misguided policies of their leaders to their own detriment like lemmings. I feel very sorry for you. "

Eddie wrote on Aug 21, 2008 2:33 PM:

" Exactly, You are just another one of the blind haters reading from the DNC's talking points. How is Michael Moore these days anyway since you're one of his ditto heads? Bush, like Clinton got some things right and he got some things wrong. But the President does not act alone. You seem not to know that. Your welcome for the lesson. We're looking for solutions hate monger, not more useless rhetoric from the uninformed and ill informed. By the way, I made no mention of any personal political affiliations of mine. Take the blinders off and start thinking. Gridlock and name calling aren't solutions. Neither are blind party affiliations. "

Cannondale wrote on Aug 21, 2008 2:49 PM:

" Demand went down 20% in two weeks? So Al Gore was right. Conservation has far more impact on price than additional drilling ever will. Good to know. "

Realist wrote on Aug 21, 2008 4:23 PM:

" Yeah, global demand for oil dropped 20% in two weeks. And Cheney's pace-maker is now solar-powered. I can't believe that's the fairy tale they are going to stick to this election season. When oil prices took a sudden drop before the 2006 Congressional elections (around a 30% drop), the line at that time was, 'Chevron just found a bunch of new recoverable offshore oil reserves in their leases in the Gulf of Mexico. Biggest ever found.' So where has that oil been for the last two years the prices climbed back up. Way up. Anyone who still believes these GOP election-season market stories is just choosing to be simple at this point. "

It Dont Add Up wrote on Aug 21, 2008 4:40 PM:

" I have to agree with realist. You can only stretch the truth so far before it becomes transparent. In two weeks' time, a 20% drop in global oil demand.... during the peak driving season for the U.S., Candada, Europe and Asia? 20% drop in oil demand during that time? Because fuel only accounts for roughly half of the end-uses for oil, that means you would have to actually reduce fuel demand by 40% around the world in two weeks to achieve a 20% drop in oil overall oil demand. So the world, in two weeks' time dropped its fuel consumption by 40%? That's the story, and the cartels are sticking to it, sounds like. We'll see about all this, come December and the elections are over with. "

The Shadow wrote on Aug 21, 2008 4:48 PM:

" Obama and Clinton have been using George Soros's money in the futures market to make the prices go nuts. This is all a grand leftist anti-establishment conspiracy. "

Binary Encryption wrote on Aug 21, 2008 6:47 PM:

" Shadow, now you are starting to make some sense. Finally. Never assume incompetence, when a simple conspiracy will suffice. Welcome to the Matrix. "

AM Radio wrote on Aug 21, 2008 9:54 PM:

" The price of oil has fallen 20% in two weeks. Has nothing to do with the upcoming election. The oil market can not be rigged. It is too big. Just ask OPEC and the Saudi Princes in that silk tent over there with Vice President Cheney. On second thought, bad idea. Let's talk about Britney Spears and her latest mischief. After we take a commercial break. "

Just maybe wrote on Aug 21, 2008 10:02 PM:

" Realist Maybe everyone finally Went out and put air in their tires. I know i was running around with 4 flats before the great one informed me of this. man were so lucky to have this Great mind amoung us. Talk about simple "

OTR wrote on Aug 21, 2008 10:16 PM:

" Anyone who seriously thinks that the world just suddenly started using 20% less oil in the last two weeks has got their neck bolts cross-threaded. Even a simple middle-aged truck driver from Rock Springs (with a route that hasn't changed in six years) can tell you there's something goofy with THAT story. "

Beyond the Wanna-Be Rich wrote on Aug 21, 2008 11:44 PM:

" If the United States continues on this GOP path of cut-taxes and spend-more, the current deficit of 50 trillion dollars will likely triple in four years, based on current projections. This will weaken the dollar further, send foreign capital elsewhere, exacerbating deep economic vulnerabilities within the United States. -Warren Buffet, world's richest person. August, 2008. "

keith rolland wrote on Aug 22, 2008 3:37 AM:

" talk talk talk...put your MONEY where your big mouth is! If you think something is too high SELL an unhedged future contract or buy a put. Many of you bad mouth New York traders---if think you are smarter then TRADE. (As I write this I'm trading.) "

In to deep wrote on Aug 22, 2008 9:08 AM:

" John Kerry and Madona are also using Al Gore's company to work the futures markets all in an effort to discredit capitalism and make the Bush administration appear to be helpless in controlling the global oil trade and world economy. "

Voice of Reason wrote on Aug 22, 2008 9:13 AM:

" You are all blind. This is Nancy Pelosi's long ago promised gas plan in motion. Don't any of you get it! They want all of you off the roads, not owning homes or land, poor and disenfranchised. Then we will all be at the mercy of the central, socialist government. His supreme Excellency Chancellor Obama will make all of the collective decisions for the drug addicted proletariat. Why do you think that most democrats are for legalizing drugs? We're easier to control if we're all stoned! "

Behind Closed Doors wrote on Aug 22, 2008 9:21 AM:

" The Arkansas Mafia and Resco (sp) are pulling the strings in the Obama machine. Pull back that green curtain and the truth will be revealed! This economic slow down and the price of oil is all part of their master plan to undermine America and weaken us for the socialist take over. Beware! "

Irene wrote on Aug 22, 2008 12:47 PM:

" Al Gore is using his considerable wealth obtained selling phony carbon credits to manipulate the oil market via derivatives. He is determined to create a cataclysmic shift in the US energy sector from fossil fuel to the alternatives he has been preaching to prove himself right publicly. This is all about Al Gores giant ego (nearly as large as his midriff)! He has not one care in the world about the US's future or the impacts of his action on the working class or our national security. "

Utica wrote on Aug 22, 2008 2:07 PM:

" Cannondale, Good to see that you smartened up and now are a believer in supply side economics. Now you have to also embrace the sweeping leftist conspiracy that is in fact in operation now and has been slowly fomenting since the democraps took control of congress with der furor Nancy at the helm. "

Cannondale wrote on Aug 22, 2008 5:09 PM:

" Utica, I think you mean demand-side economics. We didn't have a 20% increase in supply over the last two weeks. It was a 20% reduction in demand, remember. Demand apparently has more pull in the oil market than supply. That is if you subscribe to the notion that the 20% price drop in oil over the past two weeks was market-driven. If you believe that it is a pure supply-and-demand market, you have more faith than I do. "

keith r. wrote on Aug 23, 2008 3:42 AM:

" It is not the actual change in supply/demand that causes large changes in the futures price of oil (or many other commodities) it is the change in FORECASTED supplydemand or the difference between the actual vs. forecasted supply/demand.

For example, when Goldman Sachs changed its FORECAST for the price of oil, the spot and futures prices soared on the news. (this was late in the spring)---it forecasted oil would to to $150 ----at the time I think it was at $117. "

just maybe wrote on Aug 23, 2008 7:27 AM:

" Well if you want to believe in conspiracys the one about the left wing is more believable then the oil companys and the gop. Lets see the price of gas went up $1 in 6yrs of the 2 oilmen and a gop congress The dems take over and we see a $2 rise in just 1.5 yrs. thats odd! who wins here Well the left gets people to start conserving energy and looking to "Greener" alternatives to save the planet. ( now our pocket books). A good reason to put a large tax on any buisness with a profit margin higher then 8%( you realy think theyll stop with the oil companys?) To support more welfare programs. A pi*sed off american public that will automaticly blame the "oil men" in office( that worked like a charm) giving them a better chance to win the election. Now what do the oil men gain from their consperacy? 2yrs of good proffits. higher prices forcing the move to "Greener" alternatives.(puts them out of buisness) lowering their proffits . And A pi*sed of nation that wont vote for them. Yep thats a good plan. Maybe its just the way it works and nobody can really controll it! Just maybe "

Bored wrote on Aug 24, 2008 10:38 AM:

" I am the wife of an oil field worker. For thirty years I have listened to people blame the "oil people" for anything they could think of that was going downhill at that moment. Although, when things are going well do the "oil people" get the credit? If oil and people in the oil business are so horrible then quit using the product that they produce. "

Must Be wrote on Aug 24, 2008 2:49 PM:

" Just maybe.... it's all an optical illusion. The pump actually says $0.59 instead of $3.59. All a simple misunderstanding and mass hallucination. Just maybe. "

US Taxes wrote on Aug 25, 2008 8:54 AM:

" Bar Stool Economics

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.

The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers, he said, 'I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?'

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by a graded procedure, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to
drink for free. But once outside the restaurant, the men began to compare
their savings.

'I only got a dollar out of the 20,'declared the sixth man. He pointed to the tenth man,' but he got $10!'

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I!'

'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!' The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax
system works. The people who pay the highest taxes get the most benefit from
a tax reduction. Tax them too much, attack them for being wealthy, and they
just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.

David R. Kamerschen, Ph.D
Professor of Economics
University of Georgia "

Read My Lips No Nude Texans wrote on Aug 25, 2008 1:53 PM:

" US Taxes, you're a windy son of a gun. Your canned post reads about like the tax code itself. "

AM Radio wrote on Aug 25, 2008 3:06 PM:

" Price of gasoline the month before two oil men took office: $1.29 / gallon.

Price of gasoline the month those same two oil men will leave office: $4.02 / gallon.

Probably Jimmy Carter's fault. "

Armed wrote on Aug 25, 2008 6:09 PM:

" US Taxes, who is talking about taxes? The article was about speculation in the oil futures markets. Sounds like you were itching for a place to cut and paste this internet tax anecdote.... whether it fit or not. We get it. Taxes are lame. Foreign wars should be funded by a series of well-organized car washes and cookie sales. And the police only give YOU speeding tickets. No one else. The world is unfair. Any other new information? "

US Taxes wrote on Aug 26, 2008 11:53 AM:

" Armed and company; the point of my post is this; everyone is always looking to blame someone else or the opposition for every bump we hit in the road large or small. If it is not gas prices, it is water availability or who is or is not paying their share of taxes or anything else. No of this blame game is going to ever solve any of our problems now or in the future. Let's find out if anyone is guilty of any wrong doing using facts not the lynch mob posting here venting, learn from that and create answers to problems that really work and are affordable. "

So True wrote on Aug 26, 2008 2:16 PM:

" US Taxes post may be out of context with the subject, but he/she has a point and for that matter that post is a great tutorial for those that always complain that the rich and big companies are not pulling their weight...definitely not true, but also a huge urban legend perpetuated by the democrats as they wage their class warfare battles to secure votes. We really need to bring ethics back to politics and the press. "

Weve Already Lost wrote on Aug 26, 2008 7:49 PM:

" There is a growing divide in this country between the rich and the poor, the haves and the have-nots. And unfortunately that divide is along ethnic lines. Minorities are taking the brunt of the economic hits in this country. -John McCain, Republican Primary Debate, 2000.

Don't blame me. I don't vote for liberals. Good luck with all that class warfare stuff. "

Question For Refineries wrote on Aug 26, 2008 8:12 PM:

" Crude oil price has dropped 20% over the last month. Gasoline price has dropped only 5%. Earlier you were blaming the high price of gasoline on on the high price of crude. Which does make sense. But you track upward with crude, much faster than you track downward. In other words, a 10% increase in Crude price results in a 10% increase at the pump nearly overnight. However, a 20% decrease in crude price results in a 5% decrease at the pump.... over the course of a month. What is the explanation for that economic principle? "

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