What's 10% Between Friends?

If I were in charge, I'd bring down the cost of gas to what it was when I was a kid when they used to have "gas wars."

Memory is not the best testament to the truth, particularly when it is a memory so distant; however, when I was about 12 or so, I remember seeing gas on sale for 8 cents a gallon when the usual price was around 20–21 cents a gallon. It sticks in my mind because I had recently started learning to drive. But that's another story for another day.

Now that would make it truly affordable and would bring down prices across the board. Wouldn't it?

The trouble with this scenario is the fact that it is merely wishful thinking. For the sake of our argument, let's say the cost of a gallon of gasoline were to suddenly drop to $1.00 — just so the math won't tax the minds of too many government school graduates.

Out of that greenback, want to venture a guess as to the profit the oil companies in this country make? Interestingly, the profit margin and the profit would be equal in number in our little quiz, though they use different units. If you went to a government school, you might make note of that.

The profit on that gallon of gas would be less than one thin dime. Therefore, the profit margin would be less than 10 percent.

How much is the government's take on that gallon? Funny you should ask.

A very quick search led me to the Energy Information Administration's website. According to their numbers, "From 2000 to 2007, taxes averaged about 24% of the retail gasoline price." This doesn't include county and local taxes, they go on to say. (A downloadable PDF is available here.)

Now, if my math teachers in the government schools I attended taught me anything it is that 24 is a larger number than 10. So, let's add county and local taxes and very conservatively call it 25 percent, though we both know that misses the mark widely.

The sundry costs of that gallon of gas amount to about 65 cents. That's 65 cents that the oil companies must PAY for the crude that makes the gas. The oil companies don't own the oil; they must buy it on the open market and they must compete with other oil companies, speculators, and the emerging markets of China and India, which are consuming vast quantities of oil in order to grow their own economies.

OPEC, which is not the friendliest of cartels in the world, say that the supply is adequate for the world and only, occasionally, will offer the tiniest of bumps in production output, which tends to keep the price of crude rather high. They rake in the cash while the world's economies experience an extreme case of "pucker-factor," tightening everything up.

If we say that the average price of oil for 2007 was $70 (it was actually $72.32) and that world oil consumption was 80 million barrels of oil per day (it was upwards of 82 million), then the roughly 2 trillion dollars spent for that oil seems to look like "real money," to quote the late Sen. Everett Dirksen, compared to the US oil industry's profit of 120 billion dollars.

My point is, If I only made a profit margin of 10 percent. . . Me? I'd find another line of work. There are plenty of investments out there that pay much more than 10% and of which anyone of almost any means could take advantage.

What do we do to reduce the impact foreign oil has on our economy? The most logical answer seems to lie in accessing our own resources; resources that, even today, are illegal to touch. Dare I mention it? ANWR by any other name would smell as sweet as the crude beneath its frozen soil. There are offshore sources in the Atlantic, the Gulf, and the Pacific that are out of bounds only because of environmental crazies who are afraid of huge oil spills — that simply haven't happened in significant quantities — and harming the caribou or snail darters or some other B.S. Drill here. Drill now. Pay less.

It's time to shove these idiots out of the way and head to the oil fields — wherever they are. Even the oil locked up in the shale of Colorado, Montana, and Utah cannot presently be tapped because of moronic laws passed by a Congress overly intimidated by these environmental weirdos.

Should we be good stewards of the earth? Absolutely. Should we invest in new, renewable sources of energy? Of course. Should we engineer new, more fuel-efficient automobiles? Kewl! Should we use the resources provided to us by Nature to improve and enhance our lives on the planet? Damn right!

If the oil companies turn a tidy 10 percent profit while providing a product upon which the world's — and particularly the United States' — economies heavily depend, good on them. That's what capitalism is all about.

When fools like Richard Beller of Summit, New York call for more regulation of the economy in an op-ed on the Times Union website and he doesn't have the vaguest understanding of the difference between profit and profit margin, nor any idea what costs make up that gallon of gas (above) you can bet your gas money on Congress listening to him.

Why? Because it's an election year and the squeaky wheel gets oiled. And the rest of us get lubed.