Ever heard that water is an incompressible fluid? Well, that is an approximation, and it is reasonable in freshman physics classes.

However, water compresses plenty. All matter will compress. An increase in pressure on the matter will compress it. This compression is work. This work is lost (used up) and unavailable for other purposes. The work typically heats the material, increasing its temperature.

I don’t know about you, but I’ve had many arguments about this bit of oversimplification throughout my years. It is one of those situations where a little knowledge (an inadequate amount of knowledge) is dangerous. Fortunately, it is only the kind of danger that is annoying, not destructive.

My point is when we consider a hydraulic system, we generalize and simplify, and we say that a force acting on the water or hydraulic fluid within an enclosed system will act on all surfaces equally. Yes, kinda. Nature will not let you get away with the approximation.

Applying 1 pound-force on 10 in2 allows us to calculate 10 pound-force on a 1-in2 ram, but not all the 10 pounds-force is actually there on the ram. Some of it was lost in work compressing the fluid, and some more was lost in friction acting on the liquid moving through the ram channel to push against the 1-in2 ram.

Accountants make up all kinds of formulas and rules. Each has its purpose and use, and some are limited and not usable in all situations. No amount of accounting can eliminate cost incurred. Obfuscating it somewhere other than final price is sleight of hand.

When a petroleum company incurs cost, such as gross production or severance tax, and every other tax they incur, the petroleum company must account the cost, and somewhere, they must pay it. Revenues must be higher than costs, or the company goes bankrupt (and all the employees become unemployed). Sooner or later, in all circumstances, increasing costs, even gross production taxes, increase the price the petroleum company must charge in sales or fees.

Refiners will pay more. In turn, they must cover the costs with revenues, and the end result is a rise in the price every poor sod pays to fill his vehicle so he can get to work and feed his family. If fuel costs increase, and his paycheck doesn’t, he will have less with which to feed his family.

Real life, be it accounting or physics, never lets us get away with anything. Everything has its costs. To do anything, one must expend time and energy. For anything to happen, time and energy are used up. (That is the purpose of the universe, to use up all time and all enthalpy.)

We all know these things when we pay attention. Pay attention. One can never be so poor as to be unable to pay attention.

In physics, if work is done, it is used up. We have to get energy from somewhere again to do more (or just to do it again). The same goes for money and costs. If we had to pay it, it is gone. We have to get money from somewhere else, or we fail. In the world we live in, you and I, the end consumers, pay that extra money. It doesn’t come from anywhere but us (in general, the business owner, even an oil baron, is one of us; not so the government; they don’t make money; they only take it). Everywhere (like a bank or the government) that has money got it from us. We paid. To the bank, we hope we get more (in interest or intangibles) than we put on deposit. With the government, we can only hope they don’t waste it all, and we live in fear they will only keep coming for more.