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Dien Rice
July 6, 2008, 12:32 AM
As I mentioned in a previous post... Australia has Many capped oil wells around the country and exports oil to 40+ countries. YET, we pay prices for oil as dictated by Opec.

This will NOT change because... the Govt gets too much tax money from the high fuel prices. And they aren't going to shoot that Golden Goose.
Hi Michael,

I agree with you that the government has an incentive to promote high prices, since they get more tax dollars as a result. (This is true of everything with a sales tax or a GST [goods and services tax] put on top, since the higher the price, the more revenue the government gets - as long as sales volume doesn't decrease significantly.)

However, I think the main reason Aussies pay the same amount for oil that others do is because of the free market. Oil producers are private companies, and if Aussies won't pay the same prices, they'll ship the oil overseas. The only way for Aussies to pay less than everyone else is if the government subsidized the price of oil - I think a few countries actually do this. Alternatively, the government could restrict the export of oil. But with a free market, Aussies would pay the same as everyone else.

Having said that, I think Aussies actually pay more, because I think the tax on fuel in Australia is higher than in many other places. Though I could be wrong about that...

However, I think you bring up an important point. If people are rewarded for something, they'll do more of it. The government is "rewarded" for higher prices by having a sales tax/GST. So, it follows, that they'll "encourage" higher prices. Higher prices = higher tax revenues = more money for them to spend.

The same goes for what I've heard of many US government contracts with companies like Halliburton and KBR in Iraq. Many of these contracts are apparently paid as "cost plus percentage". So, let's say they get paid cost plus 50% (I have no idea what the figures are, this is just for illustration). If they can build a hospital for $10 million, they'd make $5 million. BUT... If they can "inflate" the price to $50 million, they'll make $25 million. Which do you think they'll do?

These "cost plus percentage" contracts "reward" them for inflating the costs!

These are all the tax dollars of US citizens which are being siphoned away to these private companies. The "fault" as I see it is with the cost+percentage contracts - since companies are then "rewarded" for inflating costs as much as possible!

Finally, why do politicians accept this? Apparently many politicians - after politics - get jobs with these companies. So, if politicians allow these kinds of things to go on, they are "rewarded" with multi-million-dollar jobs later on. What do they care? It's not their money they're spending.

Okay, my rant is over! :)

The point is, the "reward" system explains a lot... People will do what they are "rewarded" to do.

- Dien

P.S. Psychology Professor B. F. Skinner wanted to use a "reward" system to create a "utopian" society, by carefully rewarding the "right" things you wanted more of... With some controversy. (He argued against the existence of "free will", for example.) Here's an article about that, for those who are interested! http://www.time.com/time/magazine/article/0,9171,909994,00.html

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