As I was pumping $5.96 per-gallon diesel into my pickup’s tank the other day, I marveled at how quickly the dollar digits raced by, on the pump’s display. I began to ponder what costs go into each gallon of fuel. This sent me off on a web-wandering search for some relevant data on what drives fuel prices. Most of that can be summed up in one word: Government.
Liquid fuels are some of the most highly regulated and heavily taxed commodities in the world. The reasons for this are obvious: They are highly concentrated forms of potential energy. Think of them like liquid gold or liquid dynamite. They have the power to accomplish great things. Whoever controls these fuels — and the commerce in them — effectively controls modern society. And of course, governments like to control nearly every aspect of our lives. So by controlling fuel, starting from leases and drilling through refining and distribution all the way to your local pump, they assert their control and extract their multiple “pieces of the action.” Ah, the Mafia must be envious!
Taxes
The amount of tax — state and Federal, combined — that is tacked on to each gallon of fuel is now more than the 49 cents per gallon that I was paying for fuel at the pump en toto, back when I was in high school. The magnitude of that accumulation of taxes seems both absurd and obscene to me. These tax increases were added gradually, so they largely went unnoticed by the Generally Dumb Public (GDP). As always, the GDP remains oblivious to what drives prices, the full extent of taxation, and even the nature of money itself.Continue reading“A Piece of The Action: Pricing a Gallon of Fuel”