Oil shortages will be the biggest problem for our country

While people fret about the Social Security trust fund, they are generally unaware of a much larger problem that faces us in just over 10 years.

What is the true cost of gasoline, diesel, and other oil based products?  Is it the price that we pay at the pump, or is it the total cost which includes the cost of protecting oil producing areas and pipelines that help to feed our hunger for cheap fuel? 

The Highway trust fund went insolvent in 2008; money from the general budget was transferred to the trust fund to pay for upkeep and construction of our highways, waterways and bridges. In short, income taxes and borrowed money are now being used to pay for those things.  The deficit commission has suggested a 15 cent a gallon fuel tax increase.  That may be enough to fund the Highway infrastructure, but it is not enough to pay for protecting our oil supplies.

  

In fact, the price of oil includes, the costs of refining, distributing, and selling fuel, but those costs are just the tip of the iceberg.  The federal fuel tax is 18.4 cents.  Each state has a fuel tax as well.  Those taxes vary widely throughout the United States with the lowest fuel tax in Alaska, a state with few roads and a huge amount of state revenues derived from oil production in the state.  The highest fuel tax at the pump is 32.1 cents per gallon in Wisconsin.  That tax is adjusted for changes in the consumer price index.   Pump prices are the costs that we see, and pay directly, but that’s not all, folks, there is still the cost of providing military might to protect oil producing countries.   As reported in his book BLOOD and OIL, Michael T. Klare spelled out that we have a huge military force dedicated to protecting oil supplies and pipelines in various parts of the world.

With the wars in Iraq and Afghanistan, we realize that there are huge costs for fighting wars in the oil producing areas of the world.  Afghanistan may have no oil but it is in a strategic area and has common borders with countries that produce enough oil for export.   Mr. Klare spells out the fact that our country is involved in arming friendly countries and providing training for local armed forces to protect oil production and pipelines in other countries.  Our naval forces in the Persian Gulf region are there to protect vital waterways through which oil is moved to ports around the world.  Our allies in the region, Saudi Arabia, Kuwait and others depend on those waterways to protect their shipping.  Our navy can also provide air power to protect our allies and support our troops on the ground in Afghanistan and Iraq and the region. 

The military costs of protecting oil sources and transportation add to our budget deficits.  Those costs are paid for by taxation and borrowing.  Money spent to protect our oil sources is an indirect cost of having cheap fuel for our cars and trucks as well as for heating for our homes and factories.  Oil is an important commodity that greases the wheels of our economy and controls our destiny.  Our dependence on oil is the major reason why we need to move to alternative, renewable energy resources immediately.

We are not alone in our dependence on oil.  We face stiff competition for cheap oil from the Russians and the Chinese.  They also have forces and allies in the region to protect their oil interests.  Peak oil production gets closer with each passing day.  Some experts predict that the peak will occur in about 10 years.    At that time, oil production will slow and world supplies will dwindle.  If we do not move now toward a more energy independent future, we will face serious consequences in just over a decade.

Sources for this blog are:  Blood and Oil by Michael T. Klare

Information on peak oil can be found at:  http://www.investmentandbusinessnews.co.uk/headline/peak-oil-is-less-than-a-decade-away/11863

A table showing fuel taxes by each state:  http://www.gaspricewatchusgastaxes.com/.asp   See how your state compares. 

Decades of propaganda have become "common knowledge"

From the History section of the Social Security website:
http://www.socialsecurity.gov/history/trustchart.html

REALITY OF THE TRUST FUND (This statement appeared in every Trust Fund Report from 1955-1959) Public discussion of the investment aspects of the old-age and survivors insurance program sometimes reveals a serious misunderstanding of the nature and significance of the trust fund operations. The Board of Trustees believes that it has a responsibility to correct any misapprehensions among persons who look to the old-age and survivors insurance program for basic protection against income loss because of retirement or death. The charge has been made that the requirement of existing law that the receipts of the old-age and survivors insurance trust fund which are not currently needed for disbursements of the program shall be invested in Government securities constitutes a misuse of the funds. It is suggested that this type of investment permits the Government to use social security tax collections to finance ordinary Government expenditures, and that hence such collections will not be available to pay social security benefits in future years. It is said that the securities represent IOU's issued by the Government to itself and that the Government will have to tax people a second time for social security to redeem these IOU's. The investment of the assets of the trust fund in Federal obligations, as required by law, is not a misuse of the money contributed under the insurance program by covered employees, employers, and self-employed persons. These contributions are permanently appropriated by law to the Federal old-age and survivors insurance trust fund which is separate from the general funds of the United States Treasury. All the assets of this fund are kept available and may be used only for the payment of the benefits and administrative expenses of the insurance program. When the Treasury pays back money borrowed from the trust fund, the public will not be taxed a second time for social security. If taxes are levied to redeem the securities held by the trust fund, these taxes will not be levied for the purpose of paying social security benefits. Rather, they will be levied for the purposes for which the money was originally borrowed, such as the costs arising out of World War II. Taxes would have to be raised to pay back the money borrowed to cover the cost of the war; whether the obligations were held by the trust fund or by other investors. The fact that the trust fund, rather than other possible investors, holds part of the Federal debt does not change the purpose for which these taxes must be levied. Since all the social security contributions are permanently appropriated to the trust fund, they are not available to the Treasury to redeem Federal obligations held by the trust fund. The operation of old-age and survivors insurance trust fund investment is similar to the investment of premiums collected by a private insurance company. A private company uses part of its current premium receipts for payments to beneficiaries and for operating expenses. The balance of its receipts is invested in income producing assets. Such investments are commonly limited by State law to the safest forms of investment so that policyholders will be assured that their claims against the company will be satisfied when they become due. Government securities ordinarily represent a considerable part of these investments. The purpose of investing these receipts is, of course, to obtain earnings that will help meet the future costs of the insurance and thus reduce the premiums the policyholders would otherwise have to pay for their insurance. Social security tax collections are handled in much the same way. Investments of the trust fund, however, are limited by law to only one type-securities issued by the Federal Government. There are two principal reasons for such a restriction. One is similar to the motivation of State legislation dealing with investments of private insurance companies: it is designed to ensure the safety of the fund. Government securities constitute the safest form of investment. The second reason is that it keeps this publicly operated program from investing reserve funds in competitive business ventures. Such investments by the trust fund would be completely out of harmony with accepted concepts of the proper scope of a governmental activity. The securities held by the trust fund perform the same function as those held by a private insurance company. They can be readily converted into cash when needed to meet disbursements, and the earnings on these investments make possible a lower rate of contributions than would otherwise be required. In investing its receipts in Government securities the trust fund, as a separate entity, is a lender and the United States Treasury is a borrower. The trustees of the fund receive and hold securities issued by the Treasury as evidence of these loans. These Government obligations are assets of the fund and liabilities of the United States Treasury which must pay interest on the money borrowed and repay the principal when the securities mature. In other words, the Treasury borrows from a number of sources. It borrows from individuals, mutual savings banks, insurance companies, and various other classes of investors; and it borrows from the old-age and survivors insurance trust fund. The securities held by the fund are backed by the full faith and credit of the United States, as are all public debt securities; they are just as good as the public debt securities held by other investors. The purchase of Federal obligations by the trust fund from the Treasury does not increase the national debt. The national debt is increased only when and to the extent to which the Federal Government's expenditures exceed receipts from taxes levied to meet those expenditures. When such a deficit occurs, the Treasury must borrow sufficient money to meet the deficit by selling Federal securities. The volume of the securities sold to meet a deficit is not increased by the purchase of such obligations by the trust fund. The purchase of Federal obligations by the trust fund in a period when the Treasury has no deficit to meet would result only in a direct or indirect transfer of Federal debt from other investors to the trust fund. The total amount of the public debt would remain unchanged