Get used to these gas prices, says the king of Saudi Arabia.  “Consumer countries have to adapt to the prices and the mechanisms of the market,” King Abdullah said on Tuesday.  American consumers don’t need to be told, apparently: June auto sales plummeted to new lows for almost all car manufacturers.

“We have nothing to do with the current sharp increase in crude prices,” said Abdullah.  He stated that if the US and other countries want to “ease the burden on ordinary consumers,” they should first lower their own taxation on oil.  This is true for many countries, but contradicts the findings of a previous study from the Saudi-led Organization of Petroleum Exporting Countries (OPEC).  The study, released last month, found that US oil taxes contribute far less to the price of petroleum products than do the costs of production.

Meanwhile, Bloomberg.com noticed that Asian-based auto manufacturers Honda Motor Co. and Hyundai Motor Corp. reported the only increases in auto sales this June.  “Demand for fuel-efficient cars boosted sales,” claims the article, quoting several industry experts who pinned the industry slump on fuel prices and economic insecurity.

On the campaign trail, the Christian Science Monitor reports that McCain and Obama “Share energy goals, not methods.”  McCain supports nuclear power plants, offshore drilling, and federal financial incentives to promote alternative sources of energy.  The Monitor also reports that Obama favors a windfall profits tax on oil and gas companies, laws to phase out inefficient energy consumers like incandescent light bulbs, and provide federal grants to encourage the development of “clean-energy technology, from hybrids to biofuels.”

Neither candidate, it seems, is really contradicting Abdullah—or American consumers.  Getting used to it has never been a particularly American trait, but there seem to be few alternatives on the table.

Here’s a novel idea: Considering the high cost of gas these days, the government should raise the gas tax. Sounds too unbelievable?

The Virginia state senators passed a resolution raising the state gas tax another 6 cents.  Though Republicans in the House of Delegates are determined to stop the resolution there, the measure highlights a continuing trend across the country. As crude oil prices spike past $140 per barrel, even the government seems unable to help the problem.

Los Angeles Mayor Antonio Villaraigosa announced Wednesday that he wants a half-cent increase for his city. West Virginia has a planned 6-cent gas tax increase scheduled for January 1, 2009. Even New Jersey, with the nations third lowest gas tax rate, is hesitantly considering a hike.

Governments claim they need the gas money to fund new transportation projects. Lawmakers blame the oil companies for the high prices, and many don’t feel government work should stop just because business “greed” has set a high price.

A look at the statistics though, shows that it’s actually state and federal treasuries who earn more—twice as much over the past 25-years—from tax revenues than the big oil companies do from their profits.  While Exxon and their bandit gang have been earning their billions, the government has been taking in trillions.

Democratic candidate Barack Obama supports the current federal gas taxes, and has called for more corporate taxes on the oil companies themselves. He said earlier this month, “I’ll make oil companies like Exxon pay a tax on their windfall profits and we’ll use the money to help families pay for their skyrocketing energy costs and other bills,” though it’s unclear how he’ll keep those companies from passing on their increased costs to the consumer at the pump.

Karl Rove countered Obama further in a Wall Street Journal op-ed June 20. He said that oil companies only make about 8.3-cents in gross profit from each dollar sale. The electronics industry’s 14.5-cent profit per dollar sale and the Microsoft margin at 27.5-cents.

On the flip side of the issue, John McCain has proposed an 18.5-cent cut in gasoline rates and a 24.5-cent cut on diesel fuel, which will bring in less money for the government and hypothetically force it to curb spending.  And ignoring its fellow states, Arkansas voted down a fuel tax increase, instead choosing to issue bonds to fund its road projects.

Offshore drilling might actually be a rather popular idea among voters.  An  article on the front page of The Boston Globe said that “whatever the merits of the idea, most Americans agree with John McCain about ending the federal ban on offshore drilling.”  Citing a mid-May Gallup poll, 57 percent of those polled responded Yes when asked “whether you would favor … Allowing oil drilling in the U.S. coastal and wilderness areas now off-limits to oil exploration?”

“Idea of offshore drilling seems to be spreading,” admitted a New York Times headline Thursday, citing several politicians who have recently made calls for “cautious reconsideration” of the federal ban on offshore drilling.  Among the several politicians mentioned are Florida Gov. Charlie Crist and the chairman of the Senate Environment Preservation and Conservation Committee, Burt L. Saunders.

Seven coastal governors pledged on Friday to protect their coasts from offshore drilling, reported Fox News, citing tourism and offshore industries as the lead causes for opposition.  “It makes no sense for states to put our important beaches, fisheries and coastal habitats and multi-billion dollar tourism economies at such risk for so little gain,” said Mike Daulton, Director of Conservation Policy for the Audobon Society.  But the vice chairwoman of the Florida Tourism Commission, Nicki Grossman, said Wednesday that gasoline prices might trump the opposition to drilling.

The heavy-hitting support for lifting the ban is new to this month, with McCain changing positions on Monday the 16^th and President Bush calling on Wednesday for exploration of 3 million acres of ocean floor off the coast of Virginia.  Both men previously had expressed official support the 26-year-old moratorium on offshore drilling.  The spike in oil and gas prices, however, seems to have become a catalyst for politicians who find themselves friendlier toward offshore oil drilling than perhaps they could admit otherwise.

Tucked away under environmental headings at Reuters.com last Friday was a story and video about a Japanese car that runs on water. Although the idea of a water-powered car has long dwelled in the margins of news reporting (albeit to no avail) the latest effort from Japanese company Genepax offers “real progress” on what has long been a fruitless dream.

Engineering specifications are in short supply for the car, though speculation is not. Genepax itself claims that their Water Energy System(WES) “produces electricity and heat from water,” and uses “on-board WES for continuous battery charging.” Unfortunately, Genepax offers no specifications to set itself apart from previous water-powered attempts (the Energy System, Mechanism, and Development links at their website are under construction). The two-year-old company runs on a reported budget of just under $400,000, with an office in Osaka and Tokyo, but little else is known about them.

Skepticism and doubt weren’t far behind the reports on Friday. Slashdot.org writes, “What’s scary is the uncritical, even serious-sounding, presentation by Reuters of such extraordinary claims quite unbacked by extraordinary evidence.” If energy from water were really possible, argues the writer, not only would the car be a bigger story, but other lines of water-powered products would be not far behind. Indeed technology to replace oil with water would be a very significant finding—worth at least front-page treatment.

However, for all the conversation about Genepax—whether hopeful or doubtful—one question has not yet been raised. Is water dependency really preferable as a long-term solution to oil dependency? Water is in vast abundance on Earth, argue the proponents of Genepax—but water is also needed in a vast variety of functions. Depleting the world’s oil supply would lead to a serious economic crunch and perhaps the decline of modern civilization, but depleting the water supply would lead to the end of life on Earth.

The U.S. average gas price reached $4 a gallon for the first time last week, stirring up new rounds of old debates about oil and the economy. Some 94 percent of Americans see the energy situation as “very serious” or “fairly serious,” and gas prices number second among people’s voting concerns. So what do the two major remaining presidential candidates have to say?

Obama says that he would impose a windfall profits tax on U.S. oil companies and devote government resources to finding a renewable energy policy. He also criticized McCain for wanting to cut taxes: “When we’re paying more than $4 a gallon for gas, the man who rails against government spending wants to spend $1.2 billion on a tax break for Exxon Mobil. … That isn’t just irresponsible. It’s outrageous.”

In a 2006 podcast, Obama declared that his long-term solution to rising oil prices was to manufacture cars with better gas mileage and invest in ethanol. “If we had taken all these steps decades ago,” said Obama of his 2006 plan, “like Brazil did when the call for energy independence was first issued, we’d be immune right now to the whims of oil-rich dictators and surging gas prices.” So how cheap is gas in Brazil? The Washington Post reported in 2006 that prices at the pump in Sao Paulo, Brazil’s largest city, were $3.74 for a gallon of gasoline–while the US national average hovered at around $3.01. Pure ethanol was cheaper, reported the Post: only about $2 a gallon.

McCain’s campaign website (under the “Economy” issue) notes that the candidate will “End policies that contribute to higher transportation and food costs.” In particular, the site claims that ethanol subsidies, tariff barriers and sugar quotas “drive up food prices and hurt Americans.” McCain also has called repeatedly for a “tax holiday” to suspend government taxes on gasoline for the summer traveling months, which would reduce the price at the pump by about 18 cents. Hillary Clinton also favored the tax holiday, but Obama has repeatedly criticized the idea as political pandering.

In this morning’s “Whirled Views,” our friend Sawgunner linked to this interesting article from today’s Wall Street Journal about problems people are having unloading their gas-guzzling, late-model SUVs. In his “Eyes on the Road” column, Joseph B. White reports:

A three-year-old large SUV today is worth about $2,000 to $3,000 less at trade-in than a three-year-old large SUV would have been in 2007, before gas prices began to soar, according to Marc Cannon of AutoNation Inc., the largest U.S. auto retailer. A three-year-old Chevy Tahoe that might have fetched $19,700 in September 2007, he says. Today, a three-year-old Tahoe might be worth $16,400 at trade-in.

What should SUV owners do? According to White, used-car experts say that “the incremental expense of driving a large SUV for another year—as opposed to buying a Ford Focus—is almost certainly less than the financial hit a consumer will take trading in a big SUV right now.” Plus, since the demand for four-wheel-drive vehicles usually goes up during the winter months, it might be to your advantage to hold out at least until the temperature starts to drop.

With gasoline over four dollars a gallon, the U.S. Senate interrogated executives from the five largest oil companies on Wednesday. At issue were record profits on the part of the oil companies, and record prices at the pump.

Patrick Leahy (D-Vt.) was perhaps the most vindictive, claiming that “people can’t afford to go to work” because of the gas prices. “The issue is simple,” he said. “People we represent are hurting, the companies you represent are profiting.”

However, Leahy’s accusations may simply be accusations among the guilty. In a 2007 study called Who Gets What from Imported Oil, the Organization of Petroleum Exporting Countries (OPEC) showed that the world’s richest countries averaged an annual income of 460 billion US dollars from oil taxes. Comparatively, OPEC claims to have made an annual average of 410 billion US$ from oil profits, suggesting that taxes form a more significant portion of the cost of oil than the industry profits. The report then partitions the cost of a liter of oil into three categories: tax, industry margin, and the cost of crude production. In 2007, U.S. taxes constituted roughly 26% of the cost, while industry profits made up less than 10%.

Another report—this one from the U.S. Governmental Accountability Office in 2007—demonstrates that gasoline price inflation is disproportionately concentrated in areas where government requirements give companies an excuse to raise prices, such as in California.

On Wednesday, CBS reported a nearly 30-cent difference across state lines—due to Illinois taxes. “It was $4.20. I can come over here and get it for $3.93,” said one customer. According to the Civic Federation, which studies political and economic issues in the Chicago area, taxes account for nearly 80 cents of a $4.00 gallon of gasoline.

In a statement released Thursday, the head of OPEC said the recent oil price surges were unwelcome to producers as well as consumers. Prolonged price increase suppresses the demand for oil and gives more momentum to the search for alternative fuels. He blamed the increase in oil prices on inflation in the U.S. dollar.

“Largely ignored was the role taxes are playing — an astounding 10 levels of taxation,” noted the CBS article on the Senate hearings. Sen. Leahy did not address the government’s participation in gas taxes, government requirements, or economic inflation, but it might have been wise to note the logs before digging for specks.

Oil just passed $109 per barrel. Run for the hills, or at least for your hybrid vehicle. The alarm mentality is thick in the air today, but everyone just needs to take a deep breath. Given that oil prices are based on speculation, the worst possible response is worldwide panic.

The more we worry out about the price of oil the higher it will go in our speculative economy. Oppenheimer & Co. oil analyst Fadel Gheit thinks high prices are giving people an incentive to sell crude oil now and restock supplies later. In theory, this should lower the price over time as supplies increase, but prices have only gone up. “It’s pure speculation,” Gheit said. “What’s changed that we didn’t know in January?”

Some blame the war in Iraq for this price spike, but most don’t understand the correlation. The intent of the war was to stabilize the region and maintain a steady flow of oil to Western nations. The United States has achieved the second goal at the cost of the first as tensions in the region have steadily pushed prices up the speculative ladder.

While the war has created instability, the alternative might not have been better. The war in Iraq has engaged the enemy on their home turf and, in effect, kept them off ours. Had we not gone into Iraq, letting al-Qaeda easily move their bases there from Afghanistan–which they were able to do even with us there–perhaps we would have suffered another major attack on U.S. soil. This would have destabilized our markets again, driving up the price of oil anyway.

We are also not the only player in the Middle East. Associated Press commented Friday that Turkey’s incursion into northern Iraq is another reason for oil’s continued price rise.

The many hypotheticals in the oil debate, along with the vast array of causes, should take us away from the blame game and encourage us to focus on solutions, like drilling in Alaska or playing hardball with OPEC. Oil is high because we are fighting a war. Oil is high because people are scared.