[Dog Gone]

Drill ANWR

[SunnyD1182]

How about lifting the ethanol tariff?

Increasing ethanol supply would at least prevent the cost burden brought on by this MTBE-to-ethanol change. Plus, it could result in some cooperation with Brazil that could lead to some good ethanol technology exchanges.

[NormsRevenge]

article also on the net titled

Bush Economist: Gas Tax Cut Not the Answer

[Brilliant]

Personally, I think that most of any gas tax cut would go into the pockets of the oil companies. It's not going to reduce demand, so why would it reduce the price unless it increases supply? And why would it increase supply, given the tight market conditions we've already got? It would have no short term affect on supply, and in the long run, the higher margins oil companies are already earning would be enough to motivate production anyway.


If we are going to have a tax cut, it should be an income tax cut.

[Hawthorn]

Ed Lazear is an excellent economist.

So as he surely knows, the proposed cuts in (or elimination of) retail taxes on gasoline aren't likely to reduce the price paid by the consumer, except maybe for a brief initial period.

That's because the "equilibrium" price is going to be determined by SUPPLY AND DEMAND.

So unless somebody can show me that cutting the retail tax will increase the supply of gasoline, I must conclude that the final price paid by the consumer will remain pretty much the same.

What WILL change with a tax cut is likely to be the short-run distribution of "profits" (or "rents" -- to use proper economic terminology).

Assuming that refiners are now producing at maximum capacity and that after a tax cut they don't raise the price they charge to retailers, and further assuming that government in its wisdom doesn't impose price controls, then a cut in retail taxes will mostly shift "rents" away from the government(s) and toward the retail merchants. That is, the retail price will remain basically the same and retailers will reap a windfall approximately equal to the government's lost tax revenue.

Complications:

(1) If local, state and/or federal authorities apply retail price controls, so as to force prices down to the former level MINUS the foregone taxes, then shortages and gas lines will appear. This outcome is 100% certain.

(2) Prices may begin to fall a bit after a while, to the extent that retailers and their distributors use some of their new rents/profits to bid petroleum away from foreign users -- since such an action will in fact increase our domestic supplies.

(3) Increased revenues in the hands of retailers may gradually "trickle down" to producers, in the form of higher prices that retailers may be willing to pay for fuel from high cost sources, like the Athabascan tar sands of Canada or capped "stripper" wells in the USA. But this effect is likely to take several years before it produces a noticeable increase in supply.

Bottom line: Taxes and tax cuts affect mainly the distribution of revenues between government and the private sector. Prices at retail are determined by supply and demand.

Now repeat after me: SUPPLY AND DEMAND.

[Wolfhound777]

Cutting gasoline taxes is not a good way for the country to deal with soaring energy prices, President Bush's top economist said Tuesday. “One of the things we worry about when we cut the tax on gasoline is that it basically stimulates additional use,” said Edward Lazear, chairman of the White House's Council of Economic Advisers.

What an absolutely assinine statement. This is typical Washington speak for "Screw you. We want to keep stealing your money through every imaginable tax." Any proposal that they have floated to this date has a goal: relief at the pump. Any relief at the pump no matter what proposal form it takes will stimulate additional use. This guy should be fired for being an idiot.

[Wiseghy]

A sustained high price and loosened environmental and bureaucratic regs. will bring this "shortage" to a quick end. At these prices everything; tar sands, coal to oil, synthetics, etc, it all makes long term sense.

[Wolfhound777]

That wage gap has been visible for decades and “shows no obvious signs of abating in the near future,” he said. Improving the education and skills of workers is one important way to help the situation, he said.

I also don't see the wisdom of this statement. Let's assume we have a small class of highly skilled workers making above average salaries. His solution of improving education and skills of large numbers of workers will not help the plight of anyone. If anything you'll end up with highly skilled unemployed workers since business will have the luxury of hiring almost anyone for the same few jobs. Additonally, salaries will fall to below average levels due to competition of the many competing for the scarce jobs. If his solution is to make everyone equally miserable, I guess he has a point.

[mysterio]

Hopefully the high prices will spur an alternative energy source. But I have to admit, I'm angry about the high prices, and reading about record profits rubs salt in the wound. If the free marketeers are correct, this will help an alternative to surface and cutting the price artificially will only leave us more dependent on oil.

[stylin19a]

The problem with cutting taxes or a tax holiday is, you lose any perceived ( read that as "political" )benefit as the price of oil continues to rise.

What good does giving up 18 cents a gallon for 60 days do, when that amount and more will be covered when the price of oil rises to 90,100 bucks a barrel ?

How about a compromise. Limit the fed & local tax indefinitely to an amount equal to the oil companies profit on a gallon of gas, approx 9.5 cents.

The onus then gets put back to where it belongs...supply! and the glaring weakness of having no new refineries.

[Sunnyflorida]

I'm for a flat tax the flatter the better so a gas tax is marginally better than the progressive income tax or property taxes. So if we get a shot at choosing which tax to cut I vote against cutting the gas tax.

The idea that price of gas would go down if we cut the tax on gas is somewhat complex. The price of gas is determined by the supply/demand curve. It would seem that there could be some marginal reduction in prices but it would not be a one-to-one relationship. In other words cutting 50cents taxes out a 3 dollar gallon of gas will not result in 2.50 gas.

The only way to guarantee lower gas prices is to increase marginal supply until you drive down the price. Hard to guess where that is. But for sure the equation is nonlinear.

[goalinestan]

"Democrats have promoted the idea of a “tax holiday” by suspending the 18.4-cent-a-gallon federal gasoline tax for 60 days"

Please tell me it's AP bias that the dems appear to be the ones advocating a tax break in this article...otherwise, this is just sad.