To the editor:
Some prespective on the cost of gasoline.
In August 1885, Edwin Drake produced the first petroleum in the United States in western Pennsylvania. It was used to make kerosene for use in lamps and stoves. Also, it was used to make lubricants. Development was slow until the internal combustion engines and automobiles came into production.
During World War I, the United States provided 90 percent of the oil for the Allied armies. In World War II we provided 69 percent of the oil the allies used.
The United States produced all our own oil until 1948. In 1941, light crude was selling for $1.17 per 42-gallon barrel. In 1941, taxes on gasoline were 5.93 cents and gasoline sold for 19.23 cents per gallon (information taken from Encyclopedia Britannica).
As long as our source of supply for oil is from OPEC we must expect to continue to pay a high cost per barrel of oil. WE are at their mercy. The cost of gasoline can be tied closely to the price per barrel of crude oil.
We have available in the United States sufficient oil to cover our current needs if it is developed. The Alaska National Wildlife Refuge (ANWR) could supply the bulk of our needs if developed. It can be done without adverse affects to the wildlife just as Prudhoe Bay has shown.
Environmentalists block this development and say it would take 10 years for the production to make a difference. Ten years from now it will still take 10 years. We also have available the offshore areas, again opposed by environmentalists. China, however, is developing those with no opposition. Our continental public lands also have oil available under their surfaces.
We have a great many capped (dry) wells that did not pump enough oil to cover the cost of pumping and handling when the price per barrel was low. Over 40 years ago the U.S. Bureau of Mines research center in Bartlesville, Okla., was working on secondary recovery, which included flooding to float the oil out of the oil sands and injecting steam to heat and free the oil. There may have been many other innovations in the years since.
In addition to the cost of crude there are multiple other costs before the crude reaches the service station. 1.) Oil companies must go through expensive plans and filing of forms with the government prior to drilling. They must buy the oil rights. They may drill several dry holes before they strike oil. At one time oil could be found at a few hundred feet down. Now it often takes thousands of feet. 2.) When oil is found, the well must be prepared for pumping (almost no gushers are found now). 3.) then the oil must be trucked to collection points and then to a refinery. 4.) Refineries cost from $5 to $7 billion and take about seven years to build. 5.) Refineries cannot just make gasoline. They must make various blends and are subject to changes by season. Separate storage is required. 6.) Distribution of the product is not cheap. 7.) Once the product reaches the retailer they must sell it for enough to pay for the station, expensive pumps, salaries of employees, and station profit. 8.) Taxes. In Texas the combined federal and state tax is 48 cents per gallon. The government has a very small sum invested in collections of their taxes which far exceeds the oil company profits per gallon.
The proposal that an excess profits tax be levied against the oil companies, if such a tax is established, will be passed on to the consumer. We cannot selectively decide what businesses are an exception to capitalism where costs are based on what the buyer is willing to pay.
Anyone who resents the money going to the oil companies should invest in their stock and reap some of the benefit.