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Archive for May, 2008


May 8th, 2008 by Rich Szabo

My take on the current gas prices is that not only is there a federal tax on each gallon but State and local taxes as well. The Federal Tax of 18.4 cents per gallon is collected in all states in addition to any state or local taxes on gasoline sales. Some of the politicos want to drop the Federal Gas Tax for the summer months. That in my opinion is a waste of time. What we must demand from them is to drop ALL the gasoline taxes and to stop exporting our domestic oil.

Gasoline taxes are levied in various ways in different states. Some states, such as Louisiana, levy a flat rate per gallon. Others charge a tax similar to a sales tax in that it applies to the monetary amount of the gasoline sold. Other states allow local communities to levy gasoline taxes in addition to any state taxes that might be levied.

So for example. In Pennsylvania the average price for a gallon of regular gas is $3.65. If you subtract all the taxes on that one gallon of gas: $3.65 – .18.4 (federal tax) – .31.1 (state tax) you would really be only paying $3.15 per gallon.

United States Oil production is down 44,000 barrels from last month. Hmmmm… what’s that all about? Now how about this figure… We actually EXPORT over 60,000 barrels per month of oil! Here’s a chart from the Energy Information Administration that breaks it down by country:

Now I ask myself what about all the oil reserves we hear the politicos talking about. I did some snooping and found this:

Thirty-one States have crude oil reserves. The top five are:

* Texas, with 4.9 billion barrels
* Alaska, with 3.9 billion barrels
* California, with 3.4 billion barrels
* Wyoming, with 706 million barrels
* New Mexico, with 696 million barrels.

Also, there are substantial crude oil reserves located in Federal Offshore fields: 3.7 billion barrels in the Gulf of Mexico and 441 million barrels in the Pacific. Offshore refers to that geographic area that lies seaward of the coastline. In general, the coastline is the line of ordinary low water along with that portion of the coast that is in direct contact with the open sea or the line making the seaward limit of inland water.

We have a law in place called the The Energy Policy and Conservation Act’s Statutory Authority for an SPR Drawdown

Here’s what it says:


SEC. 3. As used in this Act:
(8) The term “severe energy supply interruption” means a national energy supply shortage which the President determines -

(A) is, or is likely to be, of significant scope and duration, and of an emergency nature;

(B) may cause major adverse impact on national safety or the national economy; and

(C) results, or is likely to result, from (i) an interruption in the supply of imported petroleum products, (ii) an interruption in the supply of domestic petroleum products, or (iii) sabotage or an act of God.


SEC. 161.

(d)(1) Drawdown and sale of petroleum products from the Strategic Petroleum Reserve may not be made unless the President has found drawdown and sale are required by a severe energy supply interruption or by obligations of the United States under the international energy program.

(2) For purposes of this section, in addition to the circumstances set forth in section 3 (8), a severe energy supply interruption shall be deemed to exist if the President determines that -

(A) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration;

(B) a severe increase in the price of petroleum products has resulted from such emergency situation; and

(C) such price increase is likely to cause a major adverse impact on the national economy.”

(g)(1) The Secretary shall conduct a continuing evaluation of the Distribution Plan. In the conduct of such evaluation, the Secretary is authorized to carry out test drawdown and distribution of crude oil from the Reserve. If any such test drawdown includes the sale or exchange of crude oil, then the aggregate quantity of crude oil withdrawn from the Reserve may not exceed 5,000,000 barrels during any such test drawdown or distribution.

(h)(1) If the President finds that -

(A) a circumstance, other than those described in subsection (d) [above], exists that constitutes, or is likely to become, a domestic or international energy supply shortages of significant scope or duration; and

(B) action taken….would assist directly and significantly in preventing or reducing the adverse impact of such shortage,

then the Secretary may…draw down and distribute the Strategic Petroleum Reserve.

(2) In no case may the Reserve be drawn down under this subsection -

(A) in excess of an aggregate of 30,000,000 barrels with respect to each such shortage;

(B) for more than 60 days with respect to each such shortage;

(C) if there are fewer than 500,000,000 barrels of petroleum product stored in the Reserve; or

(D) below the level of an aggregate of 500,000,000 barrels of petroleum product stored in the Reserve.

If you would like to read the entire Act here is a link to the Department of Energy PDF file.

Why is the government not Releasing Crude Oil From the Strategic Petroleum Reserve?

The Strategic Petroleum Reserve exists, first and foremost, as an emergency response tool the President can use should the United States be confronted with an economically-threatening disruption in oil supplies.

The Reserve has been used twice under these conditions. First, in 1991, at the beginning of Operation Desert Storm the United States joined its allies in assuring the adequacy of global oil supplies when war broke out in the Persian Gulf. An emergency sale of SPR crude oil was announced the day the war began. The second was in September 2005 after Hurricane Katrina devastated the oil production, distribution, and refining industries in the Gulf regions of Louisiana and Mississippi. (Hurricane Katrina’s impact was so great, in fact, that SPR emergency oil loans preceded the President’s decision to drawdown and sell oil from the Reserve. The first of several emergency loan requests from refiners was received and approved within 24 hours of Hurricane Katrina making landfall.)

In addition to national energy emergencies, crude oil has been withdrawn many times from the SPR sites for other reasons. Small quantities of oil are routinely pumped from the storage caverns in tests of the reserve’s equipment. And in several instances, oil has been removed from the caverns under the legal authority to “exchange” SPR crude oil. This authority allows the SPR to negotiate exchanges where the SPR ultimately receives more oil than it released; in other words, the exchanges can be used to acquire additional oil for the SPR. The Hurricane Katrina loans, mentioned above, were conducted using the exchange authority.

The following provides a brief history of the times when crude oil has been released from the SPR:

Crude Oil Sales and Emergency Drawdowns

Twice the Administration has conducted test sales to ensure the readiness of the Reserve and its personnel to carry out a Presidentially-ordered drawdown. The first took place in 1985, the second in the months immediately preceding Operation Desert Storm.

The 1985 Test Sale
Oil has been pumped into and out of the Reserve’s storage sites many times in routine tests. But until 1985, the competitive sales process had never been tested outside of simulations run inside the government. In 1985 Congress and the Administration agreed it was time to test the full system, both the pumps and paperwork, that would be needed to release oil from the Reserve in the event of an energy emergency. When it extended the Energy Policy and Conservation Act in June 1985, Congress authorized the Department to conduct test sales for up to 5 million barrels that would involve the private sector in the competitive sales process for the first time.

Naval Petroleum and Oil Shale Reserves

The Naval Petroleum and Oil Shale Reserves (NPOSR) has a storied history beginning with its inception in 1912 during the Taft Administration, to the 1998 sale of its supergiant Elk Hills oil field (Naval Petroleum Reserve No. 1) to Occidental Petroleum under the Clinton Administration. The infamous Teapot Dome scandal in the 1920s during the Harding Administration may perhaps be the nadir in this storied history, but for the remainder of its almost-100 year history, the Reserves stood well managed to serve the Nation during times of both peace and war.

In response to the 1973 Arab oil embargo, the United States opened the Reserves to full production in 1976. Since that time, petroleum sales produced net revenues of $22 billion to the U.S. Treasury. The sale of the Elk Hills field in 1998 to Occidental Petroleum netted an additional $3.65 billion.

Today, three of the four original Petroleum Reserves (NPR-1, NPR-2, and NPR-4) have been sold or transferred to the Department of the Interior. The only remaining oil reserve managed by the Department of Energy is the Teapot Dome field (NPR-3) in Casper, Wyoming, which is now a stripper field that serves as an oilfield technology testing center.

In addition to the oil reserves, the Government also held oil shale lands in Colorado, Utah and Wyoming (NOSRs). During the early 1980s, the NOSRs were opened to oil shale development. After a brief hectic period, most oil shale development was abandoned because of a collapse in world oil prices from a high point of $40 per barrel in early 1980 to a low of $15 per barrel by 1989. Subsequently, the Government eventually transferred its NOSRs to BLM and an American Indian tribe.

Today’s high oil prices have once again renewed interest in oil shale and other unconventional strategic fuels development. Even though the NPOSR no longer controls the NOSRs, its unique experience in oil shale technology led Congress – as part of the Energy Policy Act of 2005 – to designate the Petroleum Reserves program as the lead office to coordinate the creation and implementation of a commercial strategic fuel (oil shale and tar sands) development program for the United States.

Now what about OPEC? The Organization of Petroleum Exporting Countries (OPEC) members include Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.

Look at the countries listed. These are terrorists! Give me a break!

The Organization of Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, in September 1960, to unify and coordinate members’ petroleum policies. OPEC members’ national oil ministers meet regularly to discuss prices and, since 1982, to set crude oil production quotas. Original OPEC members include Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Between 1960 and 1975, the organization expanded to include Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), and Nigeria (1971). Ecuador and Gabon were members of OPEC, but Ecuador withdrew in December 1992, and Gabon followed suit in January 1995. Although Iraq remains a member of OPEC, Iraqi production has not been a part of any OPEC quota agreements since March 1998. EIA estimates that the current eleven OPEC members account for about 40% of world oil production, and about 2/3 of the world’s proven oil reserves.

So…. making a long story longer, my take on this entire gasoline mess is that we should tell OPEC to shove it, stop exporting all our domestic oil, lose the state and federal gasoline taxes and maybe, just maybe, prices will go down to a reasonable level.

I strongly urge everyone to contact their State legislators and demand that the gasoline taxes be repealed. You can contact them here.

Two great resources for checking gas prices are:

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