When a penny costs more than a cent to create

By Floyd Norris
NEW YORK TIMES NEWS SERVICE

April 24, 2006

What happens if the penny prices itself into the foundry?

That is an issue the U.S. Mint could soon face if the price of metals keeps rising. Already it costs the mint well more than a cent to make a penny.

Last week the cost of the metals in a penny rose above 0.8 cents, more than twice the value of last fall. Because the government spends at least an additional six-tenths of a cent – above and beyond the cost of the metal – to make each penny, it will lose nearly half a cent on each new one it mints.

The real problem could come if metals prices rise so high that it would be economical to melt down pennies for the metals they contain.

Appearances aside, pennies no longer contain much copper. In the middle of 1982, after copper prices rose to record levels, the mint starting making pennies that consist mostly of zinc, with just a thin copper coating.

But these days, zinc is newly popular. Rising industrial demand and speculation have sent the price rocketing. Since the end of 2003, zinc prices have tripled. Gold, by contrast, is up only about 50 percent.

“What is really new in the commodity world is the extent to which hard commodities have been converted to financial assets through exchange-traded funds and hedge funds,” said Ed Yardeni, the chief investment strategist of Oak Associates.

“In the late '90s,” Yardeni added, “my hedge fund friends were all experts in technology. Now all they talk about is zinc, lead and oil. There is a lot of money that has poured into these areas.”

That may mean that a bubble is brewing, but Yardeni thinks the run is not yet over.

Asked if the mint had a backup plan for what it will do if zinc prices rise far enough that it could pay to melt down pennies, a spokesman said that such issues were for Congress to decide. Perhaps the mint could go back to making steel pennies, as it did during World War II when copper was needed for the war effort.

Pennies, meanwhile, are in high demand. Last year, the mint made 7.7 billion of them – more than the number of all the other coins it produced. In the first three months of this year, the pace of penny production rose to an annual rate of 9 billion – the highest since 2001.

Why so many? Perhaps there is now some hoarding in expectation that metal prices will keep rising, but mostly it is an issue of sales taxes, which in most states are added to the retail price and assure that the total price of many items will require pennies to be given in change if a customer pays with dollar bills. That helps explain why the idea of eliminating the penny has gone nowhere.

So retailers demand pennies from their banks, the banks demand them from the Federal Reserve, and the Fed orders them from the mint. Many of the people who get the pennies in change throw them into a jar, where they may sit for years, requiring the mint to make more and more of them.

And, at these prices, lose money on every one.

---

me@rescam.org

Hey NA, she's making fun of your terms. You don't have to take that. :P

---

me@rescam.org

Hey NA, she's making fun of your terms. You don't have to take that. :P

What do you expect from a "Liebensborn" reject.

---

Account frozen...

Hey NA, she's making fun of your terms

My terms? You posted it!

What do you expect from a "Liebensborn" reject.

Babies?

---

Hey NA, she's making fun of your terms

My terms? You posted it!

It's a NA original!

---

me@rescam.org

But only now someone notices?

---

But only now someone notices?

I always pay attn to such things.

---

me@rescam.org

---

Account frozen...

---

Account frozen...

Looking tough - Political posturing doesn't boost oil supplies

UNION-TRIBUNE EDITORIAL

April 25, 2006

As inevitably as television cameras attract politicians, rising gasoline prices have moved some lawmakers to call for steep new taxes on the “windfall profits” of oil companies.

This is a terrible idea that would hurt consumers – both immediately, as oil companies would simply increase pump prices to make up for the new tax, and also over many years, as fewer exploration firms would bother to look for new supplies, thus ensuring future spasms of outrageous prices. The only idea that's worse would be to impose federal price controls. Alas, folks in Congress recently have called for that, too, including Sen. Dianne Feinstein, D-Calif.

So there is clearly cause for concern. Around the nation, leaders increasingly are more interested in looking tough on the oil companies than in the hard work of boosting supplies and reducing demand for petroleum.

In California, Assemblyman Johan Klehs, D-San Leandro, has a bill to levy a 2 percent surtax on the income of oil companies that make more than $10 million a year. It would raise no money for the deficit-addled state budget, because Klehs would spend the cash on prescription drugs for low-income seniors.

Perhaps Klehs has forgotten the poor seniors who fill their gas tanks. Supplies are tight in California, which means oil firms can pass along any increase in costs directly to consumers.

In addition, the state still gets about 40 percent of its crude oil from inside California. With prices topping $70 a barrel around the world, that oil is fabulously profitable right now. But many of those wells struggled to remain operating in the 1990s, when oil languished under $20 for years. A new income tax could shutter those wells in the next downturn.

It's also worth asking whether California Democrats are willing to tax their tax – 60 cents of each $3 gallon of gasoline goes to taxes, of which a whopping 42 cents goes straight to state coffers.

But this story gets worse: Gov. Arnold Schwarzenegger, who was elected in part to deliver basic economic lessons in Sacramento, conspicuously refused to rule out a special state tax on oil profits. Speaking on a Sunday talk show, he bashed the companies that fill his Hummer.

Arnold has plenty of company in Washington. On another talk show, Sen. Arlen Specter, R-Pa., said a windfall profit tax was “worth considering.” Joining him was Sen. Carl Levin, D-Mich., who called the profits “extreme” and “obscene.”

To be sure, oil companies are making a boatload of money. In just the last three months of 2005, ExxonMobil earned $10.7 billion. That's $80,842 a minute.

Less apparent is the obscenity of such profit-making. Exxon plowed $5.3 billion into exploration and new equipment in the third quarter. For years, the company had been slashing its drilling budget.

And the U.S. Treasury got a share; the industry's effective tax rate is estimated at 38 percent, higher than many industries.

The lesson here is that political posturing can't undo the laws of supply and demand. In markets, high prices ultimately create new supplies or innovative alternatives. Taxes usually do the reverse.

---

me@rescam.org

Pump prices stuck on 'up'
Increases prompt call for action in Sacramento

By Craig D. Rose
San Diego Union-Tribune
The Associated Press and Reuters contributed to this report.

April 25, 2006

Gasoline prices in San Diego continue climbing to record highs and show no sign of coming down soon.

Regional gasoline prices yesterday averaged $3.13 a gallon for regular, up 16 cents in the past week and 41 cents in the past month, according to a survey by the Utility Consumers' Action Network.

That shatters the previous record of $3.07 per gallon UCAN found in a survey just last Thursday.

The run-up prompted Gov. Arnold Schwarzenegger yesterday to call for a state investigation into the oil industry, while a state legislative committee narrowly approved a windfall profits tax on the industry.

Meanwhile, oil companies this week are expected to begin reporting another round of record or near record quarterly profits.

About the only glimmer of hope for motorists is that market watchers have at least begun speculating on when prices might fall.

Charles Langley, who oversees UCAN's gas monitoring project, said he expects a softening of prices a week from now, as some refineries now operating at reduced capacity come back to full production.

But the Auto Club of Southern California sees no reason to anticipate a break in what have become record gasoline prices.

In Oceanside, one dealer of unbranded gasoline said wholesale prices had eased from about $3.26 to $3.19 a gallon but remain at levels that make it difficult to compete.

The dealer, Mohsen Arabshahi, said his wholesale costs remain well above retail prices at some branded dealers. “Everybody says it will be a tough summer,” he said.

Karen Matusic of the American Petroleum Institute said gasoline supplies remain tight because of refinery problems.

Domestic refineries are producing at about 87 percent of capacity, compared with 94 percent at this time last year, she said. “In the summer, the refineries push to 97 or 98 percent of capacity,” Matusic said.

She said the lower output is attributable to refineries still recovering from hurricane damage, as well as reduced production from plants that had been undergoing maintenance but were called on to help fill production gaps caused by the storms.

But consumer groups, such as the Foundation for Taxpayer and Consumer Rights in Santa Monica, say the industry has sought to limit refinery output and keep gas supplies tight.

“Of the 60-cent increase in gasoline prices this year, 42 cents is entirely attributable to refiner profits,” said Doug Heller of the foundation. “That's not a supply issue or a crude issue. It's a gouging issue.”

The foundation is calling for a windfall profits tax on the industry, among other measures.

The call for an oil profits tax got some support yesterday when the Revenue and Taxation Committee of the state Assembly voted 4-3 to support a measure to levy a 2 percent tax on oil-company income of more than $10 million.

Proceeds from the tax would be used to help low-and moderate-income senior citizens pay for prescription drugs.

Assemblyman Johan Klehs, D-San Leandro, accused oil companies of taking advantage of the Gulf Coast devastation caused last year by hurricanes Katrina and Rita to increase gasoline prices.

“The only thing I can think of why prices are going up is pure and simple greed,” he said. “The way oil companies can avoid paying this tax is (by) reducing the price of gas at the pump.”

An opponent of the proposed measure, Joe Sparano, president of the Western States Petroleum Association, blamed pump prices on taxes, business costs, limited refinery capacity and the requirement that California gasoline be the “cleanest . . . on the planet.”

“The bottom line is this bill is likely to bring higher prices and no increase in energy supplies, which is the real problem,” Sparano said.

Schwarzenegger, meanwhile, asked the California Energy Commission to investigate whether gasoline prices are rising because of price gouging. He also wants the state to look into the finances of “big oil companies.”

“The citizens of California deserve a vigilant watchdog over this market and a full-blown analysis to determine to what extent the behavior of big oil companies is driving these record-high prices,” Schwarzenegger said.

---

me@rescam.org

---

Account frozen...

cheapest in my area is 3.10 and thats up 6 cents since yesterday. I bet for Tom it's even worse.

cheapest in my area is 3.10 and thats up 6 cents since yesterday. I bet for Tom it's even worse.

You are lucky ...
1 US Gallon costs US$6.67 in London

cheapest in my area is 3.10 and thats up 6 cents since yesterday. I bet for Tom it's even worse.

You are lucky ...
1 US Gallon costs US$6.67 in London

But you pay US$3.30 in Taxes on that Gallon.

---

cheapest in my area is 3.10 and thats up 6 cents since yesterday. I bet for Tom it's even worse.

You are lucky ...
1 US Gallon costs US$6.67 in London

But you pay US$3.30 in Taxes on that Gallon.

I am not absolutely sure on this, but let us say a Litre costs 98pence ..
Taxes account for something like 72/74 of those pence ...

It is totally iniquitous ... Government ought to be taken out and fed to the Lions !!!!!
;-)))))

cheapest in my area is 3.10 and thats up 6 cents since yesterday. I bet for Tom it's even worse.

You are lucky ...
1 US Gallon costs US$6.67 in London

But you pay US$3.30 in Taxes on that Gallon.

I am not absolutely sure on this, but let us say a Litre costs 98pence ..
Taxes account for something like 72/74 of those pence ...

It is totally iniquitous ... Government ought to be taken out and fed to the Lions !!!!!
;-)))))

But then all the dole blungeoners would have to get a job...oh my!

---

Account frozen...

What's the point? The last one was just as bad in different ways, the most recent ones running against them were losers. Unless you see something different on the horizon, what would be the point?