Oil and the economy

So my car weighs a little more than 3,000 pounds, while a fully loaded 18-wheeler can weigh 80,000 pounds and more if they get special permits.

For the extra wear and tear they generate to America's roadways, truckers have to pay anywhere from a nickel to a dime more in fuel taxes.

The reality is that the trucking industry should be paying more in taxes. Given the damage they cause to the road system and the need for constant and expensive repairs.

 

Where do you think those extra cost, in which they already pay are going to recouped?

 

Yeah, but ...

An 18-wheeler gets around 5 mpg, which could be substantially less than your vehicle. So the per-gallon tax differential plays out across a lot more gallons per distance traveled. It's not perfectly proportional, mind you.

 

Let's see ..... us?

 

Just as I posted. I agree with you, including about the Saudis, though their goals are broader than you mention.

 

Truck mileage varies based on the terrain being driven. Flatland mileage is around 10 while hill country drops between 4 and 5 miles a gallon.

J.B. Hunt, a publicly traded trucking company, reported 2014 revenues at $1.6 billion with a profit of $102 million.

Best I could find given the short amount of time, they had $115 million in fuel costs. And back of the napkin calculations would indicate $18 million annually in fuel taxes or a little more than one percent of total revenue. I welcome corrections for those more math inclined.

More interestingly, I found one article that said when fuel costs go down, expense goes up for trucking companies which would be completely contrary to conventional wisdom and is a bit of a mystery to me.

But I think that partly it is because the trucking companies negotiate long-term deals for fuel, to keep their expenses to a budget and not go up or down based on the whims of the market.

But to answer the question, who would really end up paying? Most likely the drivers would make a little less money since the majority of them are independent contractors as the trucking companies remained hugely profitable. They would also bump up fees, and some of that cost would, eventually, be passed on to the consumer.

It would be worth if I didn't have to dodge pothole after pothole on my daily commute.

 

Beat me to it.

 

You did. But, we've got a lot of drilling already going on.

And, it doesn't mean new wells won't continue to get drilled at this price either.

If you're an oil driller, and you drew up the plans to drill, based on geological studies, when oil was $100 a barrel, and you've purchased (or leased) equipment, and hired people, you might have also hedged your investment by selling oil futures to lock in a profitable sale price.

Lot's of current operators are likely hedged at much higher prices than the current spot price of oil as well.

And, even if you didn't hedge, if you want to make back any of your investment, you're likely to go ahead and drill.

 

All I know is I'm sick and tired of having to go to the tire shop every few weeks because of all the potholes. If I have to spend a nickel extra a gallon to fix the roads, I'm perfectly fine with it. Sure, it doesn't have to be a gas or diesel tax. It could be a tax on soda pop or toothpaste or blowup dolls. Whatever.

 

I'd need to first understand what, if anything, you were trying to imply by noting that states with the highest gas excise taxes also have the worst roads. That's why I said "may" have a causation vs. correlation problem.

It makes sense to me that Northeast states and California would have costlier roads and bridges and tunnels to maintain based on age, usage, population, weather, etc.

 

Hedges depend on financial muscle. Many drilling rigs are shutting down, as reported in almost daily announcements by various companies.

This is a very complex issue which will have prfound effects, not all of which are clear yet. My column went as far as my reporting and economic theory warranted in my judgment.

Goldman Sachs predicts, as I did, that oil will drop below $40 per barrel for a spell. In the long run the up to nine layers of oil and gas locked in ever deeper layers of shale are not going anywhere. And as my column noted there is not a single example in history of a current generation sacrificing its economic well-being for generations yet unborn so the likelihood that we will never tap those reserves is small but it will depend on prices of which recoveries profitable.

 

Man, we have an oil expert on here!

Now if only we could get a gold expert!