[Jamie79SC]

Peter,

It's a question of price elasticity.

I’ll pick some numbers out of thin air for the purpose of illustration.

Maybe my buying behavior does not change much until gas gets to $4.75 per gallon. My neighbor’s might change at $4.25. You might start buying less gas once it gets to $5.00 Averaged out, we could say that consumption is roughly inelastic until prices approach $4.66 per gallon. This is a gross simplification of actual pricing elasticity, but will serve for our example.

If the government put an additional $1.66 per gallon tax on our now $3.00 per gallon gas, we wouldn’t buy much less of the stuff. In fact, they could probably put a $2.00 tax and in an effort to increase consumption and maximize gross profit, the oil companies would lower the price towards a total price (tax included) that approaches $4.66.

Again, I’m pulling these numbers out of thin air; the demand/supply curve and profit maximization calculations are actually much more complicated, but you get the idea. Increasing taxes wouldn’t necessarily reduce consumption by all that much.

As for the cost of our presence in the MidEast, I was referring to the comments about everything being more expensive if energy is more expensive. I’m saying that keeping energy 'cheap' is mighty expensive too...