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High Prices Won't Curb America's Thirst for Gasoline
Seeking Alpha ^ | April 05, 2011 | by Devon Shire

Posted on 04/05/2011 8:06:37 AM PDT by Red Badger

As an investor with significant exposure to oil prices, I’m always worried about something like the financial panic of 2008 that might trigger a quick drop in the commodity. One thing I’m not overly worried about is the American public kicking its addiction to oil any time soon.

For years I’ve always gotten a big kick out of analysts on CNBC talking about how $2 then $3 and now $4 per gallon for gasoline would kill the demand for the product in the United States.

[snip]

And that is a bit strange, considering that Canadians pay quite a bit more than Americans at the fuel pump. Last week AAA’s fuel gauge report showed that the average price per gallon in the United States was $3.59. In Canada we are at $5 per gallon in many parts of the country.

You would think that $5 per gallon would change your fuel consumption habits. It hasn’t. And $4 per gallon or even $5 per gallon in the United States isn’t going to change much, either. Sure, if the price of gasoline jumps from $3.50 to $5 in the span of six months, there will be some short-term reaction. But over the long run, Americans aren’t going to be willing to significantly stray from the personal freedom a car allows.

And if you think Canadians have it bad, consider some of these prices per gallon where citizens still drive cars on a regular basis (from AAA):

Turkey: $9.63 per gallon Norway: $9.27 per gallon Greece: $8.50 per gallon Denmark: $8.42 per gallon Sweden: $8.18 per gallon United Kingdom: $8.17 per gallon

(Excerpt) Read more at seekingalpha.com ...


TOPICS: Business/Economy; Culture/Society; Government
KEYWORDS: auto; energy; fuel; gas
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1 posted on 04/05/2011 8:06:43 AM PDT by Red Badger
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To: Red Badger
Want to bet? It'll curb their appetite for many things...

Mike

2 posted on 04/05/2011 8:09:57 AM PDT by MichaelP (The ultimate result of shielding men from the effects of folly is to fill the world with fools ~HS)
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To: Red Badger

I am amazed at how passive Americans are about gas price hikes this time around. Remember when prices spiked upwards to around $4? The gnashing of teeth and the outrage! This time... just a meek shrug of the shoulder. Of course, it always helps those in power to own the media, which will dutifully tamp down passions by giving the subject minimal treatment.


3 posted on 04/05/2011 8:10:07 AM PDT by ScottinVA (Imagine.... a world without islam.)
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To: Red Badger
American public kicking its addiction to oil any time soon

The article may have some merit, but I HATE this "addiction" simile. The correct comparison is water. Oil is no more an addicting drug than water is. We need water to live. Our economy needs oil to live. There is no forthcoming replacement. The greenies need to get over it.

4 posted on 04/05/2011 8:10:21 AM PDT by backwoods-engineer (Any politician who holds that the state accords rights is an oathbreaker and an "enemy... domestic.")
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To: Red Badger

Not only will Americans continue using gas at current levels, since it’s a Democrat in the White Hut, they will barely notice that prices have gone up.

$5 per gallong gas? Bring it on, my neighbors barely notice. As long as it’s not Bush and Haliburton manipulating gas prices, it’s all good baby.

Fricken morons. I do worry that the dough heads who don’t notice such things will re-elect that POS in the White Hut now.


5 posted on 04/05/2011 8:12:22 AM PDT by brownsfan (D - swift death of the republic, R - lingering death for the republic.)
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To: Red Badger

Another economically ignorant article.

When Canadians pay $5.00 for gas, and Americans pay $3.00 for gas, the question is: How many miles does each driver drive?

If the average American drives 12,000 miles per year, and the average Canadian (because of the higher fuel costs) drives 10,000 miles per year, then the effect of the higher Canadian price is fully explained by a reduction in the quantity demanded.

Jeez. This was from Seeking Alpha?


6 posted on 04/05/2011 8:12:38 AM PDT by Uncle Miltie (0bamanomics: Trickle Up Poverty.)
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To: backwoods-engineer

The next time a liberal needs an ambulance, police car, limo, airplane, fire truck, etc. I DEMAND that they end their addiction to oil and go without!


7 posted on 04/05/2011 8:13:16 AM PDT by Darteaus94025
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To: Red Badger

High prices may not eliminate my thirst/need for gasoline, but the higher it goes, it will certainly cause me to alter my behavior in ways to reduce the number of trips I make to the well to fill my buckets.


8 posted on 04/05/2011 8:13:50 AM PDT by OB1kNOb (Solution to Libya's problem: They want a new Muslim leader, I say, give them ours...2 problm solved!)
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To: Red Badger

9 posted on 04/05/2011 8:14:11 AM PDT by Baynative (Truth is treason in an empire of lies)
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To: Red Badger

I heard Britain sells petrol after the conversion to an equivalent $9.60 US dollars. Whats ironic is that you can get high performance good looking vehicles there such as the jaguar and such with even some with diesels that get over 70mpg.

But not here in America, instead we get rubbish thats too soft, too vague, too big and too cheaply built with fuel hungry engines and a complete smothering of exotic high performance diesels.

Try watching a few episodes of Top Gear, just how many US vehicles did they like or approve?


10 posted on 04/05/2011 8:14:44 AM PDT by Eye of Unk ("These people are either at your neck or at your knees" A quote by Winston Churchill)
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To: backwoods-engineer
The greenies need to get over it.

The ignorance on the left about this topic is really stunning. Oil is used for so many other things besides gasoline/diesel/transportation it's ridiculous. Oil is so much more than fuel. Remove oil from your life and you remove many, if not most, things that make life "modern", i.e., plastics, pharmaceuticals, solvents, chemical precursors used in virtually every area of chemistry, etc. The list is endless. Not only that, but there isn't a substance on the planet that is "organic" than oil......

11 posted on 04/05/2011 8:18:07 AM PDT by Thermalseeker (The theft being perpetrated by Congress and the Fed makes Bernie Maddoff look like a pickpocket.)
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To: Red Badger

They said the same thing last time, and they were completely wrong.

So, now we’re supposed to believe them?


12 posted on 04/05/2011 8:18:54 AM PDT by B Knotts (Just another Tenther)
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To: Uncle Miltie
Econ 101 reminder: The Tax Wedge effect:


13 posted on 04/05/2011 8:19:30 AM PDT by Uncle Miltie (0bamanomics: Trickle Up Poverty.)
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To: Red Badger
Emission standards in America destroy fuel mileage to begin with.When in Europe we rented a car that got 55 MPG and in America the same car got 28 MPG due to emissions.
14 posted on 04/05/2011 8:19:49 AM PDT by taxtruth (Don't end the fed,jail the fed!)
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To: ScottinVA
Remember when prices spiked upwards to around $4? The gnashing of teeth and the outrage! This time... just a meek shrug of the shoulder.

It's because, at our core, we know we are a beaten and conquered people. I knew it in November 2008. We have no hope of any relief while the Obama regime occupies America.

15 posted on 04/05/2011 8:21:56 AM PDT by backwoods-engineer (Any politician who holds that the state accords rights is an oathbreaker and an "enemy... domestic.")
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To: Eye of Unk
Whats ironic is that you can get high performance good looking vehicles....

I was in Brazil about two months ago. I was amazed at all the interesting, fuel efficient cars (mostly of European origin) that I saw down there. There were probably at least a dozen models (Ford, Honda, Toyota, Citroen, Fiat, Mazda) that aren't imported to the USA.

16 posted on 04/05/2011 8:22:02 AM PDT by Thermalseeker (The theft being perpetrated by Congress and the Fed makes Bernie Maddoff look like a pickpocket.)
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To: Red Badger

I hate the term “addiction to oil”. It is essential - not a choice. And oil was $109 this morning. Probably not going down any time soon.


17 posted on 04/05/2011 8:22:04 AM PDT by ilovesarah2012
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To: Red Badger
The cost of gasoline caused a change in my behavior... I took my old, full-sized, high-miles conversion van off the road and replaced it with a two-year-old Hyundai Accent that gets 36 mpg on the highway.

Now that the gas prices are so high, the fuel savings fully compensates for the car payment.

18 posted on 04/05/2011 8:24:32 AM PDT by Oberon (Big Brutha Be Watchin'.)
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To: Thermalseeker
I was in Brazil about two months ago. I was amazed at all the interesting, fuel efficient cars (mostly of European origin) that I saw down there. There were probably at least a dozen models (Ford, Honda, Toyota, Citroen, Fiat, Mazda) that aren't imported to the USA.

Yeah, those models likely won't pass NTSHA crash tests, or cannot without $millions of upgrading. (The adding of weight is what is commonly done, and this sort of ruins the smallness of the car's key to being economical). Note that I am not saying this governmental involvement is necessary; Only that it exists.

19 posted on 04/05/2011 8:26:06 AM PDT by GreenAccord (Bacon Akbar!)
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To: ilovesarah2012
I hate the term “addiction to oil”

I agree, and made the same point in my #2.

20 posted on 04/05/2011 8:26:32 AM PDT by backwoods-engineer (Any politician who holds that the state accords rights is an oathbreaker and an "enemy... domestic.")
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To: backwoods-engineer
Oil is the single most important advancement to the benefit of mankind since the invention of the wheel. Without it, there would be no aviation, computers, or very little advanced technology, and mortality rates would be more than double what they are now.

Oil has advanced our civilization to heights that no other material or element ever will. It's a simple and undeniable fact. Take even a small portion if it away, and our whole way of life would change dramatically.

21 posted on 04/05/2011 8:26:59 AM PDT by PSYCHO-FREEP (Patriotic by Proxy! (Cause I'm a nutcase and it's someone Else's' fault!....))
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To: Red Badger
Unemployment as a result of high gas prices will reduce demand, guaranteed.
22 posted on 04/05/2011 8:30:23 AM PDT by E. Pluribus Unum ("...crush the bourgeoisie... between the millstones of taxation and inflation." --Vladimir Lenin)
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To: Eye of Unk

Whoa. The UK Imperial gallon is slightly more than the US gallon. The diesels with direct injection are closer to 55 mpg for an Accord sized vechicle.

Clarkson actually likes European Ford’s including the Mondeo. Ford and GM Opel actually have very good diesel technology. GM should have gone into chapter 11.

Jaguar was a pile of s**t before Ford spend billions fixing the old factories. Ford then needed the money and sold jag to Tata.

The Germans - VW, BMW and Mercedes plus Audi are among the best in diesel as they invented it.


23 posted on 04/05/2011 8:30:30 AM PDT by Frantzie (HD TV - Total Brain-washing now in High Def. 3-D Coming soon)
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To: PSYCHO-FREEP
Oil is the single most important advancement to the benefit of mankind since the invention of the wheel.

I'd second that, and add a third and fourth: the internal combustion engine, and plastics (made from oil) Upon this power trifecta (oil, IC engines, and plastics), we have built our present standard of living. Oil is the fuel of our civilization. "Drill, baby, drill!"

24 posted on 04/05/2011 8:30:36 AM PDT by backwoods-engineer (Any politician who holds that the state accords rights is an oathbreaker and an "enemy... domestic.")
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To: Red Badger

25 posted on 04/05/2011 8:31:30 AM PDT by thackney (life is fragile, handle with prayer (biblein90days.org))
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To: GreenAccord

If European standards for automobiles are anything like European standards for aircraft those European cars would probably be at the top of the list for crash worthiness. JAR standards for airworthiness are far more stringent that FAA standards......


26 posted on 04/05/2011 8:32:04 AM PDT by Thermalseeker (The theft being perpetrated by Congress and the Fed makes Bernie Maddoff look like a pickpocket.)
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To: Uncle Miltie

Yep, gasoline prices are somewhat inelastic and the gov’t takes advantage of that with taxes. They stand to benefit from higher gasoline prices. Obama also wants to push his green initiative and wants to make it cheaper than gas for that reason. It’s about $4.20 here in So. Cal and at these prices, they are Obama’s wet dream.


27 posted on 04/05/2011 8:34:17 AM PDT by rbosque (12 year Freeper!!! Combat Economist.)
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To: Thermalseeker

All the more reasons that the people that control the auto industry in America need to be bitched slapped around and pointed out that its time to offer something different other than obese-mobiles that are draining our minimal reserves of income to feed them.

Although I personally drive a Silverado dually with an 8.1 liter engine that gets HORRIBLE gas mileage its also a tool in my trade, and when I don’t need it for work I want something else.


28 posted on 04/05/2011 8:34:34 AM PDT by Eye of Unk ("These people are either at your neck or at your knees" A quote by Winston Churchill)
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To: Red Badger

Our greedy dysfunctional government is turning America into a 3rd world country at a record pace and we have allowed this nonsense to go on.It’s hard to even believe how things have changed in 20 years and my life long friends moved on to other countries for a better life and have become very successful.


29 posted on 04/05/2011 8:35:00 AM PDT by taxtruth (Don't end the fed,jail the fed!)
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To: Uncle Miltie

” Econ 101 reminder: “

High School Econ reminder: “Opportunity Cost”, which observes simply that money spent on one thing can’t be spent on something else...

In a quick search, I came up with a figure of roughly 140billion gallons of gasoline consumed in the US in 2009 (unclear if this includes Diesel and other Petroleum motor fuels - but for the sake of this demonstration, it’s close enough)...

Raising the price of gasoline by 10cents means that $14 billion is no longer available to be spent on other things - and then ya have to figure in the ‘multiplier effect’ that increased production and transportation costs causes in the price of food, and everything else....

So, a 10cent raise in gas prices may not feel like a big deal when you fill your tank, but it’s a significant hit to the economy in toto....


30 posted on 04/05/2011 8:35:33 AM PDT by Uncle Ike (Rope is cheap, and there are lots of trees...)
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To: Red Badger

Higher gas prices are causing all of us to find ways of using less gas. Look at all of the small cars and more fuel efficient cars now on the road compared with 20 years ago.

We can cut the use of gas tremendously by increased car pooling and use of mass transit. We will do these things on our own — no need for government edicts.


31 posted on 04/05/2011 8:36:29 AM PDT by frposty (I'm a simpleton)
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To: Frantzie

I agree the conversion does tend to be inaccurate at times.

But mostly they are vehicles that scavenge the fuel much better, yes they cost more especially the Mercedes. They also don’t view vehicles as disposable items like we do here in the states either.


32 posted on 04/05/2011 8:39:37 AM PDT by Eye of Unk ("These people are either at your neck or at your knees" A quote by Winston Churchill)
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To: Eye of Unk

I drive a Ford F-250 (3/4 ton) crew cab with the IH 7.3L Powerstroke. With an aftermarket chip mod I get 24-26 mpg on the highway. With my 2200 lb truck camper mounted I still get 18 mpg and pass most people going up hill, even though I’m very near gross. This truck is 14 years old with 348,000 miles on it. There ought to be diesel powered light trucks (1/2 ton) that get well in excess of 30 mpg if my old truck can do that kind of mileage. I had a VW diesel pickup in 1981 that got 48 mpg. The technology is there. We’re just not using it. I suspect bleeding heart Libs at the EPA are a large part of the problem....


33 posted on 04/05/2011 8:40:45 AM PDT by Thermalseeker (The theft being perpetrated by Congress and the Fed makes Bernie Maddoff look like a pickpocket.)
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To: frposty

Mass transit is a great way to get sick and have a pile of medical bills.


34 posted on 04/05/2011 8:41:30 AM PDT by taxtruth (Don't end the fed,jail the fed!)
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To: taxtruth
Mass transit is a great way to get sick and have a pile of medical bills.

Do not fear! Obamacare is here! Obama will pay your medical bills from his "stash"....../s (as if a sarcasm tag is even necessary!)

35 posted on 04/05/2011 8:43:33 AM PDT by Thermalseeker (The theft being perpetrated by Congress and the Fed makes Bernie Maddoff look like a pickpocket.)
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To: Uncle Ike

I already limit my driving ;the extra $2 or $3 a day mean less for everything else.


36 posted on 04/05/2011 8:44:00 AM PDT by hoosierham (Waddaya mean Freedom isn't free ?;will you take a credit card?)
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To: Red Badger

Given that our thirst for gasoline will not be quenched with higher prices, I wonder if auto sales will decrease. The money has to come from somewhere.


37 posted on 04/05/2011 8:50:16 AM PDT by Patron92
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To: GreenAccord

You are correct concerning weight of todays vehicles. MY wifes new Honda Accord is 3,600 lbs!!!! WHATTTTT? Yeah, it is a V6 and the Accord is now a larger car than before. Weight is a primary killer to fuel mileage in town, during acceleration. Weight can often times be offset by aerodynamic stlying on the highway but no offsetting can be done in town.

3.600 lbs is the approximate weight of my old 1967 Dodge Charger with a cast iron 383 engine, a car I wish I had back. My wifes V6 is ALL aluminun.


38 posted on 04/05/2011 8:52:27 AM PDT by biff
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To: Red Badger
and soon...

Cardboard in Food Won't Dampen America's Appetite

< /currency destruction is Great!>

39 posted on 04/05/2011 8:52:54 AM PDT by Justa
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To: MichaelP
That's a good point. High gasoline prices may not reduce gasoline consumption very much, but you can be damn sure that they'll reduce consumption of a lot of other things.

As one financial adviser with a radio talk show pointed out a couple of years ago, high oil prices are "counter-inflationary" in some respects because they drive down demand for a whole bunch of different things like consumer electronics, cars, new homes, college education, etc.

When oil was trading over $140/barrel a couple of years ago, we saw huge discounts on a lot of things because demand had dropped precipitously. Huge rebates were offered on new cars, home entertainment gizmos, etc. For commuting, the higher price I paid for gasoline was largely offset by a big discount offered on my monthly parking pass, as so many people stopped driving to work due to unemployment or changing commuting habits.

40 posted on 04/05/2011 8:55:18 AM PDT by Alberta's Child ("If you touch my junk, I'm gonna have you arrested.")
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To: Red Badger; All

You have to do some simple math to understand why oil use does not go down as much as you think it will when prices go up. About 28% of all oil use is non-fuel in nature. Demand in that 28% of the market doesn’t go down appreciably when the price of oil goes up.

So, using less gasoline only affects 72% of the market for oil. Also, there is a lot of fuel use that is inelastic. A certain amount of driving happens at all price levels. Local, state and federal government vehicles for example drive just at much as high prices as at low ones. Business related driving adjusts much less than the price of gasoline would suggest also.

Decrease is gasoline use starts with low income people and slowly leaks upward. As you reach higher income levels, people drive about the same miles no matter what the price (so far).

This is why gasoline use is defined as inelastic.


41 posted on 04/05/2011 8:57:33 AM PDT by SaxxonWoods (Throw away your papers, blow up your TV...and set yourself free.)
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To: Red Badger
As an investor with significant exposure to oil prices, I’m always worried about something like the financial panic of 2008 that might trigger a quick drop in the commodity

it was arguably the other way around, Einstein.

Also, America "thirsts" for gasoline about like you fat, stupid head "thirsts" for blood. America runs on gasoline, as does any modern civilization.

So your a big investor with a "significant" exposure to oil? I think youre a wannabe living with his mother.

42 posted on 04/05/2011 9:02:30 AM PDT by the invisib1e hand (You is what you am.)
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To: taxtruth
Nearly every day now I wake up and wonder what happened to America. I recently traveled to a third world country and while they are certainly not as well off financially, they are certainly much, much freer.

You literally cannot step out of bed without immediately bumping up against the onslaught of government regulations. Nearly every citizen is now a criminal some way some how because of all our inane rules and mandates.

Don't have a smoke detector in your house? You're a criminal. Not wearing a seatbelt? You're a criminal. Is you lawn mowed? Did you use the wrong fertilizer? And the list goes on and on and on.

What happened? I told my spouse that once Obama gets into office things would go fast. Her we are high unemployment, declining wages, inflation, crushing national debt, three kinetic military actions, and a country that has been transforming into a welfare state by the liberals and the corrupt MSM.

Honestly, it's hard to be optimistic about the future of this country. Everyone talks a good game about reducing the size of government and spending right up until it affects them, and then they go out in the streets and hold state capitols hostage and complain to high heaven that everyone is being cruel.

No one wants to work. No one is allowed to fail. Government is god and controls every thing and everyone, and the people are apparently fine with this.

43 posted on 04/05/2011 9:04:33 AM PDT by Obadiah (I don't mind Obama's vacations. It's his coming back that bothers me.)
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To: Red Badger

He’s like a gold bug, for crying out loud. “Oh, no, my speculative position is going to go nowhere but up.”

What would you call him, an “oil slick?”


44 posted on 04/05/2011 9:11:38 AM PDT by RegulatorCountry
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To: ScottinVA

“Of course, it always helps those in power to own the media, which will dutifully tamp down passions by giving the subject minimal treatment.”

Bingo, last time around the MSM was harping on it every night on the national news. Now its crickets.


45 posted on 04/05/2011 9:17:19 AM PDT by woodbutcher1963
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To: rbosque
They stand to benefit from higher gasoline prices.

Some states do add sales taxes to fuel costs, however, most states tax the fuel at a per-gallon rate. The fed rate on fuel has been 18.4 cents/gallon for gas and 24.4 cents/gallon for diesel for years now. So, in actuality, the higher the price of fuel, the lower the effective tax rate (again, the exception being where sales taxes are tacked on to the price).

46 posted on 04/05/2011 9:44:46 AM PDT by IYAS9YAS (Rose, there's a Messerschmit in the kitchen. Clean it up, will ya?)
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To: Red Badger
Emission standards in America destroy fuel mileage to begin with so the government can have an excuse to make profit for keeping the air clean.This is a LIE!It's designed to be a profit center for government so Americans will have to pay more fuel tax.The air in Germany was fine with our 55MPG diesel but the air in LA stunk when we landed and we rented the same car we rented in Germany which was only 28MPG and ran like CRAP compared to our Euro counterpart.Everything about government in America smells in our opinion like CRAP.
47 posted on 04/05/2011 9:47:15 AM PDT by taxtruth (Don't end the fed,jail the fed!)
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To: Red Badger

Operant conditioning.


48 posted on 04/05/2011 9:50:53 AM PDT by blueunicorn6 ("A crack shot and a good dancer")
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To: Oberon
Now that the gas prices are so high, the fuel savings fully compensates for the car payment

I've considered my own situation, and cannot foresee a substantial reward for giving up my gas guzzling SUV. I'm a city dweller, and drive around 10k miles per year. If my fuel efficiency trebled, and gas prices increase $2/gallon, I'd be saving around $1,000/year. Considering the concessions I would have to give to gain the fuel efficiency, no way.

49 posted on 04/05/2011 9:53:55 AM PDT by Mr. Bird
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To: SaxxonWoods
About 28% of all oil use is non-fuel in nature.

That sounds too high. Do you have a source for that information?

Petroleum Product Supplied http://eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbblpd_m.htm

50 posted on 04/05/2011 9:55:29 AM PDT by thackney (life is fragile, handle with prayer (biblein90days.org))
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