It IS Pandering

The proposed gas tax holiday IS pandering – and bad economics to boot. Good for Barack Obama for saying so; bad for John McCain (whom I currently plan to vote for) for proposing it; bad for Hillary Clinton for supporting the proposal even though it helps her push Obama into the "elitist" corner.

If you assume that you get the whole 18.4 cents on every gallon you buy for two months – you won't end up with a whole lot of extra money in your pocket unless you plan to do a whole lot of driving. One thousand miles/month is well over the national average; that's 50 gallons at 20 miles per gallon; over two months you could save $18.40 – barely enough to take the family to McDonald's once not even counting the gas to get there. On the other hand, assuming gas has hit $4.00/gallon by then, if you saved 10% of the gas you would normally burn either by driving slower and/or driving less, you'd save $40 and none of that is gonna end up in any coffers but yours.

Of course, the $18.40 isn't really going to get to consumers. Retail prices don't go down as fast as they go up. To some extent, we're being charged what we're willing to pay for gas. Most economists agree that much if not all of the forgone federal tax revenue will end up sticking somewhere in the supply chain – some could even get all the way back to the countries that produce oil.

I do think it's elitist to say, as some environmentalists are, that gas prices ought to be pushed up even further to discourage consumption. I was for a gas tax increase for just that purpose when prices were a $1.50/gallon less than they are today. We've had enough discouragement for now; we are responding by driving less and buying smaller cars. As important as that response is for national security (or the environment, take your pick), it isn't going to do more than slow the increase in gas prices as Chinese and Indians drive into the middle class. The cost of driving may never come down from where it is today; it won't even stabilize until it becomes an all-electric experience for many people.

Wouldn't it be great if someone would just skip the campaign rhetoric and debates about debates and pandering and spell out a real energy policy? Between those of us suffering from higher energy prices and those of us concerned about the national security and economic implications of sending money to unstable oil-producing places and out of here and those of us concerned about global warming, it really would be possible to rally a consensus around much more than band-aids.

BTW, is it just me or has anyone else noticed that gas pumps seem to be dispensing gas more slowly even though the dollars roll up quicker? It can't be that their speed is measured in dollars per minute and has reached its limit; but it sure seems that way. Makes the pain even worse.

Comments

[Ed Shull]

Tom - I'm a little late chiming in, but I agree with you 100%. As bad of an idea as it was for John McCain to propose it, it seemed like great karma that Hillary tried to leverage the idea and had it backfire on her. There is no doubt that it's pandering.

[Don Price]

Not mentioned in your notes but worthy of note to fully understand the current oil prices. The current price can not be explained solely as supply/demand. There is not yet adequate reason to support this price level, gasoline approaching $4 per gallon, on the model alone. Speculation has driven up the price. Now you can say it may have driven the price of early and that would be ok. Speculation, traditionally a great way of hedging your beats if you are a large operator in the industry, right now is playing more to them and to the operators or consumers.

If we could get some control over the dollar's fall either by expanding economy, reducing the deficit, or reducing imports, or some of all it would take us a long way of reducing the impact speculators have today.

Why is it we are so complacent with the answers from the politicians?

[John R Hall]

You are right, we should have increased gas taxes years ago. The toll on poorer drivers can be alleviated by reduced income tax on the lowest brackets.