En attendant Bloomberg.

[Tyrone Slothrop]

Originally posted by Mmmm, Burger (C.J.)
The economics above is faulty. If supply were fixed then price would continue up ad infinitum. It doesn't because there are marginal imports of gasoline that meet increased demand. The tax incidence depends on the elasticities of demand and supply--no tax would increase revenues for oil cos. and decrease prices for ocnsumers.

The economics is faulty if you take him literally, but it's quite easy to envision under present circumstances that eliminating the tax would benefit oil companies far, far more than consumers.

[Adder]

Originally posted by Mmmm, Burger (C.J.)
The economics above is faulty.

Yeah. You are right.

ETA: Well, maybe you aren't exactly right, but my initial response to you wasn't right either, and I am apparently easily confused today.

The writer above assumes either perfectly inelastic demand or near-instantaneous demand reactiosn to price changes (which are mostly the same thing). Neither is literally true, but probably not all that far away from it.

But I am fairly sure you are wrong that prices would rise continually if supply was truly fixed, even assuming perfectly inelastic demand.

As for increasing refining capacity, they would if environmental laws and community opposition didn't prevent it. They have every economic incentive to increase refining capacity, but can't because of various restrictions.

I was being sarcastic, but you are right. I just found it amusing to suggest that the McCain people needed any more analysis behind the proposal than, "it will make us look like we are helping people."

[Mmmm, Burger (C.J.)]

Originally posted by Adder
I was being sarcastic, but you are right. I just found it amusing to suggest that the McCain people needed any more analysis behind the proposal than, "it will make us look like we are helping people."

I think it is not unfair to say that all three presidential candidates and a number of members of congress are climbing all over each other to propose new ways to pull money from future pockets to put in current pockets.

[Mmmm, Burger (C.J.)]

Originally posted by Tyrone Slothrop
The economics is faulty if you take him literally, but it's quite easy to envision under present circumstances that eliminating the tax would benefit oil companies far, far more than consumers.

It's equally easy to envision it the other way around. Basic economics teaches that the incidence of a tax falls more upon the seller/buyer whose supply/demand is more inelastic. If consumer demand is inelastic, but has some elasticity (which even in the short run it does), whereas refiners have no elasticity of supply because of capacity constraints, then they will bear the full amount of the tax.

[Tyrone Slothrop]

Originally posted by Mmmm, Burger (C.J.)
It's equally easy to envision it the other way around. Basic economics teaches that the incidence of a tax falls more upon the seller/buyer whose supply/demand is more inelastic. If consumer demand is inelastic, but has some elasticity (which even in the short run it does), whereas refiners have no elasticity of supply because of capacity constraints, then they will bear the full amount of the tax.

What you're saying here doesn't make sense to me, though perhaps the failure is mine. Assume that producers cannot substantially increase production beyond current levels. If the taxes were to disappear tomorrow, why would they not pocket that margin and leave their prices the same? If they have limited ability to bring refined gasoline in from other countries, then maybe that affects the price a little on the margin, but there can't be much capacity there.

[ltl/fb]

Originally posted by Tyrone Slothrop
What you're saying here doesn't make sense to me, though perhaps the failure is mine. Assume that producers cannot substantially increase production beyond current levels. If the taxes were to disappear tomorrow, why would they not pocket that margin and leave their prices the same? If they have limited ability to bring refined gasoline in from other countries, then maybe that affects the price a little on the margin, but there can't be much capacity there.

Where is the tax levied? When the gas leaves the refinery, or at the point of sale?

[Mmmm, Burger (C.J.)]

Originally posted by Tyrone Slothrop
What you're saying here doesn't make sense to me, though perhaps the failure is mine. Assume that producers cannot substantially increase production beyond current levels. If the taxes were to disappear tomorrow, why would they not pocket that margin and leave their prices the same? If they have limited ability to bring refined gasoline in from other countries, then maybe that affects the price a little on the margin, but there can't be much capacity there.

Because there's competition. They no longer have to pay 20c to the government for every gallon sold. Taxes drive a wedge between price paid and revenue obtained. Oil cos. are producing all they can for revenue of market price less gas tax. So, presumably they're satisfied receiving that amount for their level of production. Put differently, if they could raise prices without a tax, they could raise prices with a tax. Yet they aren't, because of competition and consumer demand.

[Mmmm, Burger (C.J.)]

Originally posted by ltl/fb
Where is the tax levied? When the gas leaves the refinery, or at the point of sale?

Point of sale. But it doesn't matter economically.

ETA:

Paper estimates that gas taxes are paid 60-80% by consumers. Data, however, are from before days where refineries were 'at capacity", although because of imports that seems irrelevant.

[Adder]

Sort of apropos of the conversation, I wonder if Cantwell and Insleee want investigations into steel and other commodity prices too:

• April 21, 2008
  
  President George W. Bush
  1600 Pennsylvania Avenue NW
  Washington, DC 20500
  
  Dear President Bush:
  
  With Americans questioning the fairness of record high gas prices, we urge you to
  establish a new interagency Oil and Gas Market Fraud Task Force under the leadership of
  the Department of Justice to ensure that energy markets are free from illegal market
  manipulation and corporate corruption.
  
  Oil and gas are irreplaceable commodities central to our economic prosperity, national
  security, and the health and well being of our citizens. However, with prices for these
  necessities more than tripling since 2002, families, businesses, and hard working
  Americans are struggling to make ends meet with ever shrinking disposable incomes.
  Airlines are going bankrupt and truckers aren’t even getting paid enough to cover diesel
  prices that exceed $4 dollar per gallon. Families have cut back on going out to dinner or
  the mall, further exacerbating our economic downturn.
  
  Congress has received testimony from our nation’s Attorneys General, energy market
  experts, and major oil company executives that the price of oil and gas can no longer be
  explained or predicted by normal market dynamics or their historic understanding of
  supply and demand fundamentals. Earlier this month, an executive from Exxon Mobil
  testified under oath that the price of crude oil should be about $50 to $55 per barrel based
  on the supply and demand fundamentals he had observed. Yet current crude oil prices,
  and crude oil futures, are expected to remain above $100 for the next several years.
  
  In the wake of the Enron and other corporate scandals, you initiated the Corporate Fraud
  Task Force at the Department of Justice as part of your Corporate Responsibility
  Initiative. By aggressively enforcing existing laws and regulations, the Task Force’s
  actions have yielded over 1,200 corporate fraud convictions to date. In addition, the
  Justice Department has obtained more than one billion dollars in fraud-related forfeitures
  and has distributed that money to the victims of corporate fraud. We believe the
  Corporate Fraud Task Force should establish a new Oil and Gas Market Fraud Task
  Force and apply its considerable resources, initiative, and ability to coordinate federal
  agency efforts to help restore consumer confidence that energy prices are fair. We urge
  you to also add the Federal Trade Commission to the interagency Task Force.
  
  The threat of oil and gas market manipulation remains real. For example, in its
  Congressionally directed investigation into gas price increases following Hurricanes
  Katrina and Rita, the Federal Trade Commission found 15 examples of pricing at the
  refining, wholesale, or retail level that fit the relevant legislation’s definition of evidence
  of “price gouging.” In addition, last July, Marathon Oil Corp. agreed to pay a $1 million
  fine to the Commodities Futures Trading Commission to settle charges that its Marathon
  Petroleum Company subsidiary attempted to manipulate crude oil prices in 2003.
  
  As we learned from the 2000-2001 Western energy crisis, energy costs affect all sectors
  of our economy from transportation, to industry and business, to food prices and beyond.
  That electricity crisis took a serious toll on American consumers and businesses, causing
  a 1.5 percent decline in productivity that cost the West 589,000 jobs and a $35 billion
  drop in domestic economic product.
  
  How the federal government responds to the changing dynamics of energy markets is
  vital to our continued national and economic security. As members of Congress that
  aggressively sought consumer relief and accountability following the Western energy
  crisis, we learned that consumers are best protected when energy markets are subject to
  aggressive regulation and enforcement. And unless there is a cop on the beat vigilantly
  policing energy markets, sophisticated companies can fleece consumer pocketbooks
  without fear of penalty. We look forward to working with you to establish an Oil and Gas
  Market Task Force to root out fraud and manipulation in all corners of the oil and gas
  marketplace.
  
  Sincerely,
  
  Senator Maria Cantwell (D-WA) and Congressman Jay Inslee (D-WA-01)

[taxwonk]

Originally posted by sebastian_dangerfield
Our refineries are going full bore, but we only refine 60% of our gas.

ETA: I think ours are still not capable of running at true full capacity, however. A bunch got really screwed up after Katrina.

Where are you getting your data?

[Mmmm, Burger (C.J.)]

Originally posted by taxwonk
Where are you getting your data?

The reserves.

[ltl/fb]

Originally posted by Mmmm, Burger (C.J.)
Point of sale. But it doesn't matter economically.

ETA:

Paper estimates that gas taxes are paid 60-80% by consumers. Data, however, are from before days where refineries were 'at capacity", although because of imports that seems irrelevant.

In theory it doesn't matter economically, but I think it might matter in reality. I guess they could slowly raise the price? I don't really understand what is causing the high prices right now -- what RT said implies it's underlying oil prices.

I am not looking forward to refilling my tank, but I'm happy I only have to do it every 2 or 3 weeks.

[taxwonk]

Originally posted by Mmmm, Burger (C.J.)
The reserves.

I was asking Sebby. Your analysis seems pretty tight to me. I was just wondering what Sebby meant by the statement that we are only refining 60% of our gas.

I also wonedered about the Katirna damage claim, as I, too, was under the impression that the Katrina damage had largely been repraired. At least to the extent you can repair something that really needs to be torn down completely and rebuilt anew.

[Mmmm, Burger (C.J.)]

Originally posted by ltl/fb
In theory it doesn't matter economically, but I think it might matter in reality. I guess they could slowly raise the price? I don't really understand what is causing the high prices right now -- what RT said implies it's underlying oil prices.

I am not looking forward to refilling my tank, but I'm happy I only have to do it every 2 or 3 weeks.

By "they" do you mean the 20 or so companies selling refined gasoline? Or the hundreds of gasoline wholesalers who distribute that gasoline? Or are you talking about the thousands of service station owner/operators? Because I don't think "they" act as a single entity.

[ltl/fb]

Originally posted by Mmmm, Burger (C.J.)
By "they" do you mean the 20 or so companies selling refined gasoline? Or the hundreds of gasoline wholesalers who distribute that gasoline? Or are you talking about the thousands of service station owner/operators? Because I don't think "they" act as a single entity.

The 20 or so companies selling refined gasoline. I don't think they have meetings where they plot to act as a single entity, but I think they do have a tendency to follow one another.