Tuesday, October 25, 2016

Oil Prices

by -
Putin Oil Prices

Anyone who fills up a gas tank, buys home heating oil or works in a profession like truck driving where the price of diesel could make or break the family budget, has reason to celebrate with world oil prices hovering around $47 dollars a barrel.

For the average consumer, it amounts to an annual savings $234 – a tax cut of $75 billion a year for the nation as a whole according to Matt DiLallo writing for The Motley Fool. Even then, the price of a gallon of gas accounts for only 60% of the price at the pump.

The balance comes from refining costs (6%), distribution and marketing costs (17%) and federal, state and local taxes (15%) according to the latest numbers available from U.S. Energy Information Agency. DiLallo continues:

“That will leave each American family with more money that can be enjoyed by going out to eat more often, taking a nicer vacation, or, better yet, put toward your retirement.”

International Consequences

Cheap oil is bearing fruit on the international stage with American adversaries including Russia, Iran and Venezuela.

Russia is one of the world’s largest oil producers. With the dramatic drop in oil prices, Russia was forced recently to sharply increase the interest they will pay on foreign debt to 17%. This sharply drove down the value of the Russian rouble against the dollar – more evidence of how heavily Russia’s depends on oil and gas now 70% of export income. In fact, Russia loses about $2 billion in revenues for every dollar fall in the oil price.

The consequences are many fold.

Russia may need to rethink its’ foreign adventures in Ukraine, Belarus and the Baltic states and make impotent any Russian threat to cut natural gas supplies to western Europe this winter to exact policy concessions from Germany, France, Italy and Spain.

For Iran, the picture is much the same. Iran has been able to resist western economic sanctions over its’ nuclear weapons program when oil was selling at $120 per barrel or more.

But now that oil is trading in the mid-$40’s, they have been faced with hard choices – continue their nuclear program full bore… continue subsidizing radical Islam in the Middle East… or use sparse oil revenues to quell domestic economic unrest – a choice made easier by President Barak Obama’s unilateral and inexplicable decision to ease sanctions on the Islamic theocracy.

For Venezuela – a country already stressed financially by radical socialism that has burned up its foreign currency reserves – the drop in world oil prices may spell further unrest in a nation where long lines at grocery stores for basics like bread and cooking oil have been met the violence on the food lines.

Another big loser is the radical Islamic army known as ISIS. ISIS is selling deeply discounted oil at $30 a barrel on the black market for revenues of $3 million a day – far less than they need to fulfill their ambitions as the “go to” group for a social safety net for those who tote the line on ISIS recognition and embracing strict adherence to Sharia Law. Many experts believe the income will be used to consolidate ISIS gains and only lead to new aggression once oil prices recover.

Returning to the American market, federal, state and local governments are looking at $2.00 a gallon gas as an opportunity to increase taxes on fuel. They reason that consumers are accustomed to paying more for gas and that they had better move soon to raise taxes before cheap gas becomes the new normal.

Before they do, here are the top ten states with the lowest and highest taxes on gasoline:

Top Ten Least Expensive in order

Mississippi, Louisiana, South Carolina, Idaho, Michigan, New Mexico, Texas, Kansas, Oklahoma and Missouri.

Top Ten Most Expensive in order

Oregon, Washington, Nevada, Pennsylvania, Connecticut, Vermont, California, New York, Alaska and Hawaii.



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