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The Price of Oil and The Price of Your Home

Aug 5, 2008
Friday's edition of the SJR, 7-25-08, reported the increasing unemployment numbers, the falling home prices nationally, and the June home sales for The Capital Area Association of Realtors. Not much good news to be found in those articles, because that's the way it is. A reality check if you will.

Then today the headlines on page one state gas can easily return to $4 a gallon. You can connect the dots here pretty easily. High gas prices lead to higher food prices, less consumer spending, sending unemployment up, home sales down, and home prices down.

Research Professor Bob Podlasek of Bradley University confirmed what I have stated is the reason for high gas prices, to quote the professor; "We are in a short supply situation right now. When supply is down, prices go up. It's as simple as that."

I have stated here that as gas, food, and utility prices go, so goes the economy. That means everything if you are a home owner. Whether you will be able to sell your home,and what the value of your home will be.

As the professor stated about gas prices, the same is true for your home. If the supply is high, and we are at record levels of homes for sale, and demand is weak, sales have slowed to a pace not seen locally since 2002, your value goes down. It is as simple as that. A reality check.

The upcoming presidential election will have a major impact upon gas, utility, and food prices, all which will directly impact the value of your home, and the ability to sell your home.

Here are the stated positions. Barack Obama says he is against additional drilling, and nuclear power plant construction. He wants to raise taxes to fund "green industries" to develop alternative energy sources to oil. Obama has also stated he is not opposed to high fuel prices, he just wished they hadn't risen so rapidly. He would have preferred a more gradual increase.

This plan will do nothing to increase the supply, and therefore will keep prices high. The result will be diminished disposable income, as families pay a greater portion of their earnings in higher gas, utility, and food prices. This will lead to less consumer spending, higher unemployment, and inflation leading to higher interest rates. This will result in fewer home buyers with diminished buying power, and the value of your home will fall.

John McCain supports drilling offshore and building nuclear power plants.

This plan will not bring relief in the short term because it will take two to three years to see the increased supply arrive at the market. However futures traders will hesitate to drive up prices with an impending increase in the supply of oil.

The building of nuclear power plants will stabilize electric rates, and drilling where currently prohibited will access a reported 1.8 trillion cubic feet of natural gas deposits that will lead to stabilized home utility costs.

I would propose to add the following. Immediately approve all refinery expansion permits that have been stalled by environmental groups. Trim the seven year application process for new refineries to 60 days.

Open drilling in ANWR, offshore, and in the continental U.S.

Eliminate the 35% corporate tax on oil producing companies that explore and discover oil in these now prohibited areas.

Eliminate the Federal 18 cents per gallon gas tax.

Replace the gas tax at the pump with a 10% sales tax on oil producers for oil delivered to U.S. refineries. Impose a 35% sales tax on oil placed for sale on the world market.

Retain 25% of those tax revenues for infrastructure improvements now paid for by the federal gas tax.

Retain 5% of those tax dollars to provide grants to the science departments at every University and College in the U.S. for research into a viable replacement for oil as an energy source.

Keep 1/2% of those tax dollars in a pool to pay a bonus to the science department that succeeds in discovering or inventing a viable, affordable alternative fuel to oil.

The race would be on just as when Kennedy said we'll put a man on the moon. Oil companies will race to deliver more oil, and science departments will race to discover a viable replacement fuel. We all will win.

The reality is that our economy, the jobs of working families, the values of their homes, the ability to sell their homes, industry, transportation, and prosperity is dependent upon oil. Affordable oil. Like it or not, that is the reality. Oil is to the economy as oxygen is to our body.

We have the resources available to increase the supply of oil, natural gas, and build nuclear power plants in an environmentally friendly way, until the altruistic day environmentalists dream of when oil is replaced as our primary source of fuel.

This November you will get to vote. You can vote for a plan that responds to the economic reality of today, or you can vote for an altruistic plan that ignores economic reality. Your choice. You can vote for higher prices or you can vote for lower prices. It is as simple as that. A reality check.
About the Author
Fritz Pfister is a licensed Realtor with RE/MAX Professionals Springfield Illinois.
Fritz is a leader in the local real estate market and hosts a live one hour radio program, now in its' 13th year.
Fritz's website is
SpringfieldHome.com
Fritz hosts home buyer and home seller seminars that have been attended by hundreds of consumers.
Fritz provides advice that helps consumers succeed in the sale or purchase of homes.
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