By Robert Hardaway

Few politicians can resist the urge to exploit consumer angst over gasoline prices, and thereby deflect where the blame certainly lies — with them.

Here are 10 things the politicians won’t tell you:

1. At over $3.00 a gallon, the U.S. inflation-adjusted price for gasoline in May 2007 is now less than it was in 1981, a remarkable decrease in price over a 25 year period during which real prices in other sectors, such as health and education have tripled and quadrupled.

2. This decline in the price of gasoline since 1981 is enjoyed almost exclusively in the U.S. In most other developed counties in the world, the price of gas is at least double what Americans pay. Consumers in the Netherlands now pay an average of $7.77 gallon, while those in Great Britain pay over $7 and consider it a bargain.

3. The gross profit margins of the major oil companies is far less than that for many other sectors, such as beverages, electrical equipment, chemicals, and computers.

4. At present gas prices, the major oil companies make a profit of between 10 cents and 12 cents a gallon. (If you really think that’s a lot, buy the stock; but most people feel investing in oil companies is a pretty risky business-witness the devastating losses oil company investors lost during the 1980’s).

5. At present prices, combined federal and state government profit (i.e. taxes) on each gallon of gas is 28-68 cents a gallon, depending on which state you live in. Pelosi’s San Francisco enjoys tacking on an extra 26 cents bite.

6. As a result of gas prices in the U.S. which are less than half that in much of the industrialized world, gasoline consumption in the U.S. increased dramatically during the last year.

7. Oblivious to, and largely insulated from the $7-8 per gallon consumers in other industrialized countries now pay, energy-greedy Americans continue to buy such gas guzzling behemoths as Hummers and SUV’s at a feverish pace.

8. If government singled out oil companies for a confiscatory 50% profit surcharge, it is tempting to think that the price of gas might decline by up to 6 cents a gallon, say from $3.38 a gallon to $3.31 a gallon; in fact, gas prices would soar, as investors would no longer capitalize oil companies (turning instead to industries with higher profits, such as beverages and cigarettes). The oil companies would then either have to cut back exploration (Exxon alone has invested $15 billion in new capital investments) or go out of business, thus causing supplies to tighten and prices to skyrocket.

9. Crude oil prices, which make up 90% of the total cost of running gas refineries, are set by the international market of supply and demand, which fluctuates hourly, and not by private companies; while the major oil producing countries can form cartels (such as OPEC) which can set prices at higher than a free market, these countries are not subject to U.S. antitrust laws.

10. If government is serious about both curbing oil company profits as well as curbing U.S. reliance on foreign oil, the only way to do it is the way the Europeans do it: a gasoline tax that raises the pump price of gas to about $8. And that’s one thing you can be sure the politicians will never, ever tell you.

Rocky Mountain News