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To: Hawkmoon who wrote (2576)	9/12/2000 10:45:59 AM
From: Henry Volquardsen	Respond to of 3536

I guess what I don't understand is that if basic fuel prices continue to rise, that will put even more long-term pressure on oil producers as alternative fuels become more competitive, as well as additional exploration for, and exploitation of, additional reserves. Absolutely. Thats why they want energy taxes reduced. To simplify lets say that there is a point, 'x', at which alternative fuels and conservation become attractive. In the current hypothetical the tax man gets .5x leaving .5x for the producers and processors. The producers goal is to increase their revenue. They also want to prevent a loss of market share to alternative fuels. So x becomes a cap for the end price. The only way they can then increase revenue is to get a greater share of x. The only way they can do that is to get taxes reduced. So if taxes are cut 20% then the basic fuel cost can rise 20%. Btw the basic fuel price is not a direct impact on the market since it is so heavily burdened with taxes. The price the market sees is the blended price (product plus tax). The search for alternatives is a response to the blended price. The basic fuel price could rise right to the level of the blended prices without impacting market preference if taxes were declining in an offsetting fashion.