What is going on? It feels like Clinton is giving in to the notion that in order to win the midwest we have to ease their pocketbooks. That’s a perfectly respectable goal. But in economics you want to tax things that you want to discourage. We desperately need to discourage fossil fuel consumption.
A much more effective way to accomplish both goals (easing pocketbooks and reducing carbon emissions) is to decrease federal income taxes by what the average household pays in gasoline taxes: basically redistribute the revenue from gasoline taxes back to the taxpayers as income tax decreases (or rebates, after all they are in vogue these days: call it the Thoreau Rebate or something catchy). And then let the people know: if you drive less than the average person, you’ll get more money back. If you want to drive a Hummer, that’s fine, you’ll just pay more for your gas. Don’t own a car? You’d make out quite well. And then this could lead to a five year program of gradual gasoline tax increases (with matching income tax rebates). If people knew gas taxes were going to steadily rise for five years, people would have a significant long-term incentive to choose more efficient vehicles whenever the need for purchasing a car came up. An issue is that current gas tax revenues are often assigned to road improvements etc. Of course the “Gas Tax Holiday” has the exact same problem.
Back to the kneejerk reaction of Clinton parroting McCain: Clinton is giving into the notion that to win as a Democrat, one needs to be more Republican-like. Didn’t the Globe run a front page story today about how Republicans in Indiana are defecting from the Republican party?
Actually making a dent in climate change is going to take vision and leadership on a truly unprecedented scale. I’ve written previously (here and here )on this site how Gore understands the magnitude of this issue and how the issue transcends politics. Obama recently confirmed that Gore would be part of his administration. To my great sadness, this primary campaign season has successfully vilified “hope”. Yet, considering that we are already doing worse than the worst-case scenarios of just a few years ago for carbon dioxide emissions, I am cynical enough to wonder: are Obama and Gore our only hope?
Until recently I was limiting myself to $20 each time I visited a gas station. Last time I had to refuel $20 didn’t even get me to 6 gallons so I bit the bullet and put in $30. With gas prices soaring suspending taxes is an easy way to put on the brakes. I don’t think demand is so easily manipulable. I for one will still need to get where I am going. Public transit usually is not an option and I certainly cannot afford a hybrid. It’s not like I just go joyriding for the heck of it. Your income tax idea doesn’t work for those of us that already basically get all our withholdings returned anyway.
Good or bad, the stimulus package came from Congress.
That what the letter I got in the mail said. Bush’s name was prominently featured.
reveals 10 out of 10 proles “missed out” on the deductions not available in this 2007 “new and upgraded” tax code. Hence the mainstream media promoted Pentagon psy-op of “windfall” “stimulate the economy” “”tax rebates”” was in fact a government bribe to NOT do the most Patriotic thing and follow the lead of Ed and Elaine Brown and not file a return at all.
So the gas tax to be suspended is $0.18, right? With gas approximately at what? $3.50 that means $30 worth of gas is 8.57 gallons of gas. The tax you would have saved on 8.57 gallons of gas is $1.50. Sweet relief!
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p>So the holiday would last about 13 weeks? How many times do you fill up a week? Once? That means you’ll save $1.50 times 13 weeks or $19.50 over the entire gas holiday? Fill up twice? That’s still $40 bucks over 13 weeks, about 3 bucks a week. Whoop. Dee. Doo. This sounds like a way to get people to buy more gas and jack up ExxonMobile’s profits yet again. Why not call it a tax break for big oil? Because that’s who will benefit most in this deal.
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p>Let’s not also forget that 60% of the gas tax goes into our anemic highway and bridge infrastructure. So less money means that funds allocated to fix bridges and roads on the verge of collapse, like that bridge in Minnesota last year, will dry up.
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p>The gas tax holiday sounds a lot cooler than it actually is and if this sways any undecideds’ votes out there then it’s a shame that a vote can be bought for about $20-$40 bucks.
and any “tax holiday” will continue demand and likely increase base price, so most of the “savings” will end up with the oil companies.
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p>McCain and Clinton are making ludricrous comments that Obama is abandoning the poor with his position on this, whereas it is their pandering that should be the subject of our outrage. Back in the early 1990s it was husband Bill who took a similar low road to sabotage the candidacy of Paul Tsongas on the subject of gasoline taxes, and we can all see where those pandering policies have brought us to today.
the cost of gasoline has gone up again by more than the amount you’d save by suspending the gas tax.
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p>The problem is inadequate supply and a speculator’s marketplace. If you slash the gas tax, you could well see the speculators go on a frenzy that would double the price of a barrel of oil as a result, just because it would add a marginal amount of demand, enough to give the speculators another excuse to bid up price.
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p>If you want to help car owners, send them each a mass transit voucher for the amount of their gas tax. That would push gasoline demand down, and kill the current year’s speculative runup in the price of a barrel of oil. Cutting gas taxes now would just fuel the speculative fire.
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p>One man’s inadequate supply is another man’s inordinate demand.
The suspension would be paid for by an extra tax on oil companies! You know, the ones bringing in billions of dollars per quarter off the market uncertainty that’s driven up prices from 50 to nearly 120 dollars per barrel?
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p>Gas prices go up for a number of reasons, many of them in direct control of the oil companies.
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p>One of them is that the companies haven’t expanded refinery capacity in years, and haven’t built a new refinery in decades, so when weather or maintenance forces a refinery offline, supplies fall and prices rise.
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p>If her proposal of coupling a 3 month tax break for consumers comes with the investigations and tax hikes on oil companies that we need to sort out the energy market, then all the more power to her. The energy market is more convoluted than the subprime mortgage market that also threatens our economy, and we desperately need someone willing to shine a light on what the oil companies do.
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p>What’s Obama’s plan? Doesn’t look like much from where I’m sitting. Maybe it’s just to go along with Dick Cheney’s Energy plan (you know, the one he voted for!).
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p>…oh, and for those who criticize her plan for favoring a short term solution over a long term one? Take a look at her long-term solutions for investment in an alternative energy economy and for the creation of green-collar jobs.
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p>Hillary: the experience to provide solutions for the problems of today, tomorrow, and the future.
The issue of oligopolies of oil companies and their profits, while clearly important, is distinct from the climate change issue. The consumers are still buying the oil and emitting fossil fuels. A gas tax holiday is, to borrow the addiction metaphor, enabling that addiction, not providing vision to ween us from it.
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p>Although I was a Bill Clinton supporter, it was hard not to be disappointed by the lack of climate change leadership during that administration. This recent statement of the Clinton Campaign worries me that it will be more of the same. We simply are running out time and cannot afford to not have real vision here.
Hillary’s plan offers both short term relief and a long term plan to make sure we decrease our needs for oil.
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p>In so far as oil companies and their profits, they’re quite seriously connected to our current problem, and any plan that doesn’t deal with it is a plan that won’t solve all that much.
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p>Furthermore, gasoline demand is in many ways what economists would call inelastic, in the sense that it doesn’t respond to price increases in a direct correlation with consumption.
Are you saying that consumption hasn’t changed over the last year due to price hikes?
Here’s historical data on US Gasoline Consumption:
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p>ANNUAL: http://tonto.eia.doe.gov/dnav/…
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p>MONTHLY:
http://tonto.eia.doe.gov/dnav/…
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p>Note the annual increase in quantity of gasoline consumed.
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p>Gasoline consumption is inelastic.
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p>
Inelasticity implies the demand will not waver despite fluctations in price. Gasoline in the US has been so cheap so long that yes it is true consumption has not decreased (that’s the problem…). The data linked is not due to demand being inflexible but the very cheap prices. You can see it on the streets now: why not buy an SUV (in 2000 say, when gas was just above a dollar a gallon), the savings with respect to fuel efficiency is miniscule. In contrast Europe and Japan have had much more expensive gasoline for a long time (4 to 6 dollar equivalent per gallon), and people buy noticably smaller cars there. That shows demand for gasoline is elastic with regards to price. Add to that the long-term nature of the automobile purchase, and it makes it hard to see a shift in demand for fuel efficiency as quickly as the gasoline market changes. But it is happening: SUV sales were down 10 to 15% just a year or so ago, as was widely reported then. Its not showing up in the gasoline consumption data yet, cause consumers are still hoping it’s a temporary price increase (our politicans suggest it is so after all), and the average car efficiency has actually gotten worse not better over the past decade (more of the problem of cheap gas), replacing the fleet of consumer cars will take time.
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p>Hillary and McCain’s suggestion to rid us of the gas taxes reinforces the notion that prices will come down, and encourages people to not buy more efficient vehicles. To drop our consumption using existing technology (just smaller cars would be an easy start) the consumer needs to know prices will stay high for the lifetime of the vehicle purchased.
Mak, your post makes no sense.
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p>The demand curve for gasoline is not vertical, i.e., no matter what the price, demand remains the same. And it doesn’t have to be a straight line either. We’re just no beginning to explore what a 2x price increase over a short period of time will do to demand.
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p>The demand curve for gasoline is relatively steep which indicates that not matter what the price, folks still need to drive to work, pick up the kids, buy groceries, etc.
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p>Don’t forget, too, that until recently, the inflation-adjusted price of gasoline has been relatively flat. IIRC, until 2004, prices hadn’t really risen very much, or had even declined, since 1975 (in 1975 dollars.)
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p>The decline in sales of fuel inefficient vehicles is evidence of inelasticity of demand, not elasticity.
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p>Anecdotally, try driving the Mass Pike at 65 mph … you’ll get run over by Ford F350 pickups doing 80. One would think with gas prices so high, people would slow down. Not my experience.
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p>The decline of sales of fuel inefficient vehicles is evidence of the elasticity of demand for fuel guzzling vehicles and the inelasticity of demand for getting from point A to point B
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p>Gas is certainly far more elastic than our need to go to the store, school, work, and on social trips. The fact that gas consumption has been level for four years now* in spite of growth of GDP and population indicates some elasticity.
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p>The average vehicle lifespan is 7 years. Higher gas prices effect purchase decisions, and high gas prices over a number of years will result in the gradual changing out of our national vehicle stock to higher efficiency vehicles, which will allow for our consumption to continue to flat line or decline while maintaining the market’s ability to meet the rather inelastic demand of people to get from A to B.
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p>And anecdotally, when was the last time you heard of someone doing 65 mph on the Mass Pike on a clear day and getting hit from behind by someone doing 80? It’s exceedingly rare… so why not go 65 and encourage your friends to do the same? You’ll save gasoline and make the highway safer!
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p>According to EIA:
2004 3,332,579 gallons
2005 3,343,131 gallons
2006 3,377,174 gallons
2007 3,390,977 gallons
a total increase of about 0.5% per year, given economic growth and population growth that exceeded that number, indicates that consumption has essentially flat lined and that consumption per capita and per GDP has actually declined.
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p>I hear comments like this all the time, and I just don’t think it’s true. Whenever I get on the highway, I set the cruise control between 65 and 70, and drive in the right-hand lane. I’ve never been run over — in fact I find it less stressful than driving fast, because I don’t have to change lanes or pass often.
Europe also has a much more compact geography and much better public transportation systems. Much more of its people live in ancient cities that are hundreds, if not thousands of years old, without the wide streets and parking spaces required for large cars and multi-car households. Same goes with Japan. I’d argue that these factors have far more to do with the size of European and Japanese cars than the price of gas.
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p>Here’s how economics works. To show that a good’s demand is elastic, one must show it varies with price. While that may eventually be the case for gasoline, it is not so at this point. The data shows that even though gasoline costs three times more now than it did 8 years ago, demand has actually gone up! That’s the very definition of inelastic.
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p>Will the price eventually hit demand and force it down? Quite likely. But that won’t make it an elastic demand curve. Elastic demand moves at every point with a change in price. Inelastic does not move at every point, but may move at a certain point.
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p>Here’s a good wikipedia article on the subject:
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p>http://en.wikipedia.org/wiki/P…
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p>Our real disagreement though, is on what Hillary’s plan will do. [McCain’s plan is not the same as Hillary’s, and is actually a joke]
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p>Precisely because gasoline demand is inelastic, a small price cut will put more money in people’s pockets, but it will not cause them to drive or consume more. When demand isn’t linked to the price, that’s what happens.
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p>Hillary’s plan is linked to a windfall profits tax to get the money that had been generated by the gas tax from the oil companies creating and manipulating prices for extra profit [to the tune of billions of dollars per quarter].
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p>That makes sense. It also makes it painful for oil companies to keep raising the price, as it won’t generate them extra profits … now that’s smart, incentive based economic thinking.
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p>Obama voting for Dick Cheney’s Energy giveaway to special interests? That’s just politics of old. Do as I say, not as I do.
You are writing gibberish my friend. This argument that Europe is compact simply isn’t backed by the data. The US isn’t “spread out” on a macro scale — it’s true that the big square states and Alaska are, but by population density, the East and West coasts are quite dense. Does city layout matter? Sure — after all, look at car ownership in New York City, where the density and land value make owning a car in Manhattan or northern Brooklyn quite difficult.
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p>Still, to suggest that the huge prices have nothing to do with the long term trend to buy smaller vehicles is nonsense. Why do I suggest that? Because with the exception of farm vehicles, you won’t see larger vehicles in the countrysides of Ireland, Northern Ireland, Austria, Italy, England, Scotland, Spain, or Portugal — all places I’ve spent time within the past 10 years. If it was because of compact city design, you should see larger cars in the countryside, and you simply don’t.
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p>And as for your economics lesson…
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p>
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p>Now, here’s some more economics. First, you must remove inflation from the data by using real dollars [real prices]. Check out the chart of real gasoline prices.
Other than a war and an OPEC embargo, the real price of gasoline has actually declined, and therefore you can’t use long term demand increasing to argue gasoline demand is inelastic — in fact, if real prices decline and consumption increases, that makes the case that demand is elastic! But what about the past eight years, you ask? Well, given that automobile ownership is sticky both because the transaction cost of changing automobiles is high [time restrictions, asymmetric information, the general requirement of completing two distinct transactions simultaneously], and given that much of transportation demand is generated by the location of employment and housing, both also sticky, means that you simply can’t see short term changes in demand for gasoline based on short term changes in price.
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p>Between 1978 and 1982, gasoline consumption declined from 2,705,308 gallons to 2,386,824 — an 11% reduction. The US population went from 221.5 million to 233.2 million. What makes those years special? During that time period, the real price of gasoline went up about 50%. Sure enough, gasoline usage increased when the price came back down after the embargo. To me, that’s evidence that, in fact, gasoline consumption is elastic, on the time scale of half-decades.
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p>More recently, we are seeing evidence that price matters. SUV sales have declined steadily over the past 5 years, with the massive SUVs declining the fastest. Conversely, sales of hybrids have climbed steadily for each of the past five years. That’s not because American cities have suddenly become more like European cities in terms of street width and parking sizes — it’s because Americans do have an elastic relationship with gasoline, but over a longer time frame.
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p>Furthermore, there is a natural elastic nature to gasoline use that has nothing to do with travel demand or even choice of vehicle. Generally speaking, a driver can eliminate 5%-10% of demand by (a) slowing down 5 mph on highways and on city streets, which generally means violate the speed limit by less, (b) easing up on the gas and the brake by not accelerating so fast out of red lights and by predicting them sooner and coasting to the red light more, (c) making sure tires are properly inflated, (d) eliminating the extra junk in the car like golf clubs, books, or other weights, (e) making sure the air filter is clean, (f) removing unused roof and trunk racks, (g) not using those obnoxious INSERT_SPORTS_TEAM flags that attach to windows, and not idling when parked for more than 30 seconds. That means that, by definition, 5-10% of consumption is perfectly elastic.
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p>So, is gasoline an elastic good? It’s not perfectly elastic, but it clearly has elastic properties, both in the immediate term [operate your care more efficiently], in the intermediate term [choose a more efficient vehicle], and in the long term [choose home and work more closely together]. The higher the price of gasoline in real dollars, the more people will be inclined to do each of these things, on different time scales. Furthermore, the more certainty that price of gasoline will continue to hold steady or increase, the more people are likely to include the high price of gasoline in their purchasing decisions, of vehicle and home.
This argument isn’t about Europe, but if we’re going to talk about it, lets use facts.
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p>Population density, Europe: 70 [people]/sq. km
Population density, United States: 31 [people]/sq. km
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p>Look up population density of countries here: http://en.wikipedia.org/wiki/L…
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p>Article on US, including landmass and density: http://en.wikipedia.org/wiki/U…
Article on Europe, including landmass and density: http://en.wikipedia.org/wiki/E…
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p>Europe is far more densely populated. Including European Russia (which is populated like our Midwest) in terms of density, Europe has over 710,000,000 people. The United States, in a slightly smaller landmass, has a little over 300,000,000 people.
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p>That’s just the data talking. As far as cars you can see in other countries … what they have is what they sell, and European manufacturers sell mostly smaller cars. We can get into a separate discussion of WHY they sell smaller cars, but walk into a European dealership and see if you can find a Hummer, an Excursion, a Suburban, or any other large American car or another car of similar size. Since you can’t, don’t blame the Europeans for not driving them … they can’t drive what they can’t buy!
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p>I am sure that Hybrid sales have increased, but that doesn’t correlate with increased prices. Most hybrids [even considering the tax incentives and rebates] won’t save a person a dollar in costs until they drive tens of thousands of miles, at which point it would likely have been better to invest the price difference between a hybrid and a regular car, and pocket the proceeds.
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p>As far as SUV sales, you need to prove that claim with some data. Otherwise, I could argue that sales of large SUVs have declined because people who needed SUVs simply decided to buy crossovers, wagons, or smaller SUVs, and not out of gas price based reasons, but instead practicality based ones. Maybe, in 2001, when there were very few compact SUVs, the choice was between a sedan and a Suburban, and now a person can buy something that fits between the two extremes and suits their needs better. That may have nothing to do with gas prices.
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p>Also, your own points contradict each other. Between 1978-1982, price had an impact, you say, which according to you means we can see shifts in half decade spans….but in the 8 year span of 1999 to 2007, we see no difference … why again? Was anything you mention for why this consumption is sticky so dreadfully different in 78 as opposed to 99? Was it a lot easier to sell your car in 78 than 99?
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p>Look, it’s one or the other, but not both. Either the demand/consumption is sticky, which explains why it has only increased in the 8 years since 1999 as the price of gasoline has tripled, but blows a huge hole in your 4-year change of use between 1978-1982 theory, or it’s not sticky, and you’re right about 1978-1982 but wrong about 1999-2007.
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p>Lets move beyond that to my original point, which has been forgotten or ignored in this back-and-forth.
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p>Elastic consumption moves in connection with price. The last 8 years, price has increased [dramatically], as has consumption [not as dramatically]. This disproves the idea that it’s elastic.
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p>Now, I’ll repeat again. Just because the relationship is INELASTIC, doesn’t mean that there isn’t a point at which price will have an effect on consumption. My point is that we haven’t yet reached that point.
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p>As far as Hillary’s plan, since we haven’t reached that point, claims that lowering the gas tax will somehow increase consumption, these claims are simply WRONG. Consumption is what it is. Lowering the gas tax will have no impact except to shift the burden of paying for the tax from the pockets of gasoline consumers to those of the oil companies. Since they’re making windfall profits off these high oil prices, I think it’s fair.
Check out American population density adjacent to Great Lakes/Ocean/Gulf as compared to the rest of the country:
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p>USA population density map, USA.
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p>In short, don’t focus on Alaska, Idaho, or even Nebraska. Heck, Alaska alone is 18.75% of US land. Focus on where most people in America live. In those locations, America is quite dense. 13 states plus DC have a higher population density than Europe:
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p>DC, NJ, RI, MA, CT, MD, NY, DE, FL, OH, PA, IL, CA, HI. Their total population: 139 million. In other words, over 45% of Americans live in states which are each more dense than Europe. PS. Michigan would have made the list, but a significant portion of its land area lies underwater in the Great Lakes. The same may be true of Wisconsin.
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p>By looking at the entire region as one body, you’re implicitly assuming that the population is homogeneously spread throughout all fifty states. Of course, that’s nonsense. Most people live in a very small percentage of America.
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p>
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p>
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p>More precisely, they don’t drive what they don’t buy, and that’s why dealers don’t sell those autos. There’s enough choice and competition in the international automobile market that if Europeans wanted Excursions, they’d be sold. That they’re not sold is evidence that they’re not wanted.
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p>
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p>
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p>You jest. The raw data is proprietary, but here’s an article from 2005. Here’s one from 2006. here’s one from 2008. There’s no question that SUV sales are declining. None.
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p>
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p>
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p>First, check the chart. We’re really only seeing significant increases in the real price of gasoline for five years now, not eight. We’ve also seen the consumption of gasoline increase over that time period by less than population growth or inflation, and by less than it had in the latter 80s or 90s. As the real price of gasoline has increased, the growth in demand has declined [by about 30%]. That’s not contradiction — that’s evidence that there is elasticity.
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p>
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p>
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p>No, it’s both. In the 78-82 range, we saw a decline in the increase of consumption as the price went up in real dollars by 50%, and in 04-07 we’ve seen a decline of consumption as the real price went up. The decline in the 00s wasn’t as steep as that in the 70s-80s, but there was a statistically significant reduction in the increase of consumption over time.
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p>
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p>
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p>Now that’s just plain wrong. You’re conveniently ignoring that the consumption of gasoline hasn’t kept up with the increase in population. Per capita, consumption has declined over the past four years as price has gone up. That would suggest [though not prove] that consumers of gasoline were sensitive to price over the past four years, since for each averagge consumer, demand has declined as price has increased.
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p>
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p>Again, the facts don’t back that up. It is likely true that demand will become more elastic as price increases — but there is elasticity in the demand now. Consumption of gasoline hasn’t increased as fast as population, implying that folks are using less. That time period corresponds with a significant increase in the real price of gasoline. We’re just now approaching the five year mark of a significant uptick of gasoline prices in real dollars.
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p>Anecdotally, every time there’s an article on gas prices increasing, people talk about not going on that summer drive or otherwise cutting a bit. We’re not talking significant cut, maybe a percent or two overall. Still, that suggests some elasticity.
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p>
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p>But gasoline demand isn’t perfectly inelastic. It’s not very elastic in the short run to be sure, but all the evidence points to some elasticity, and there are loads of academic papers which suggest a number between
0.2 and0.3 [double real price, demand per person decreases 20-30%]. Do your own google scholar search, you’ll find ’em.<
p>Now, you are free to argue that the societal benefit on lower income drivers more than outweighs the societal cost of the additional gasoline consumption. That’s an interesting argument. However, to argue that gasoline consumption is perfectly inelastic, in spite of the evidence on this thread and in every single academic paper I’ve read on the topic [read 4, skimmed another dozen] is just crazy talk.
The data is pretty clear, that at least up ’til now, demand is relatively INELASTIC.
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p>To your analysis:
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p>Population in the US was 293.7 million in 2004; 296.4 million 2005 and 299.4 million in 2006. From 2004 to 2006, the population increased by about 1.9%.
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p>Then, quoting from you (and omitting 2007, but only because I don’t have 2007 population for comparability:
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p>2004 3,332,579 gallons;
2005 3,343,131 gallons;
2006 3,377,174 gallons;
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p>An increase of 1.3%.
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p>Evidence of elasticity of demand? Maybe but pretty weak. Keep in mind, there’s no consideration for increase in MPG which rose in the same period from 17.1 to 17.2 miles per gallon.
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p>Then, in the same time period gas rose from $1.92 to $2.64. A 37.5% increase.
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p>To reiterate: Gas increases 37.5% and gas consumption continues to increase at a rate just under the population growth. That’s elastic? You’re nuts. I know, I know “it has elements of elasticity”. What doesn’t have elements of elasticity?!
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p>But seriously, stick with the standard nominclature: demand is 1) inelastic, 2) relatively inelastic, 3) relatively elastic, 4) elastic.
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p>Gasoline? Relatively inelastic. Always has been. We’ll see what the future brings.
over the short term, and raise you
<
p>a. You didn’t make those prices real, so 37.5% is an overestimate by a few percentage points [not enough to change the conclusion though], and
<
p>b. The fact that MPG rose over the same period reinforces that demand has some elasticity. After all, people don’t drive to consume gas, they drive to get from A to B. If they can, over time, change their infrastructure so that they consume less gasoline, that indicates an elasticity.
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p>What doesn’t have elements of elasticity? Medications essential to live [heart, lung, liver, etc]. That’s about it.
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p>
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p>I suspect [but have no evidence to support] that if the public believes that the real price of gasoline will continue to increase over the foreseeable future that demand per capita will continue to decline. People are willing to buy smaller cars, but they don’t prefer them… and if they think the price of gas will come down in a few months, they’ll eat the higher fill-up costs in the short run because they know they’ll own the car for years, not months. That’s a major reason why I believe providing gas tax “relief” is a mistake — it sends the message that if gas prices get too high, the government will lower them, so don’t worry about buying the gas guzzler, the US will protect you[r wallet].
Taxing the oil companies just disincentivizes them to do business in the United States and gives them yet another excuse to jack up the gas prices even higher. Net result: even higher gasoline prices and lower supply in the United States compared to the rest of the world.
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p>And a 3 month tax holiday makes no sense unless there is certainty that the gas prices will stop being this high after that 3 month holiday. Otherwise, Americans get hit harder with a sudden price hit at the end of the tax holiday and given the general population’s inability to plan for price increases, it’d be an even bigger problem.
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p>If you really want to reduce gas prices in the United States, there’s only two ways to do it: jack up production by subsidizing refinery production or speed up the development of real alternative energy sources and stop playing around with the corn lobbyists. Either genetically modify a real sugar source like sugarcane or yams for ethanol or work with nuclear or a source that can actually produce significant amounts of energy. Short-term tax holidays just take us away from either of those goals.
both of your suggestions are supply side. It’s true, increasing supply will reduce prices.
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p>But, so will reducing demand. Reducing demand for gasoline will also curb prices. There’s lots of ways to do that, ranging from increased CAFE standards to improved access to quality public transportation to reducing the number of parking spaces available in urban areas to converting more highway lanes to HOV lanes.
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p>You can reduce price by increasing supply. You can also reduce price by decreasing demand. One of these two is terrible for the environment, the other is good for the environment. I hope we as a nation choose wisely.
I’m unfortunately a little busy too follow and respond closely (at childrens, my son just had a successful hernia op, this is my fon). From a quick read I agree with stomv. But one quick comment:
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p>The notion that gas demand is inelastic implies there’s no economic means to reduce gas consumption. We’re left with regulation and new technologies. But the technology is here now to easily reduce our gas use by at least a third. The inelastic argument if you agree with it (which I don’t) is a cop-out: gas taxes won’t change consumption so don’t bother.
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p>If there are two main tools in the gasoline policy toolbox (there’s more innovative ones, tolls for example, see London): fuel taxes and mileage standards (CAFE), the inelastic argument rules out the first tool.
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p>If the alternative is regulation: I think regulating SUVs out existence isn’t going to be particularly popular, I much prefer the pricing/tax option. Its hard to make allies for climate change with an overly didactic regulatory tone.
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p>And carbon/gas taxes are based on the idea that there is an externality of global warming, and the tax incorporates that real cost associated (although arguably very hard to determine) with fossil fuels into something the user actually pays. I like that too. Instead of you can’t drive a SUV, it becomes: if you really want and/or need to drive a SUV, that’s fine, you’ll be paying the real cost though in taxes that include the damage caused by emitting carbon, what’s it worth to you?
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p>Re europe: its well known we burn way more gas in our cars than other nations. They’re not entirely regulating their way to those lower emissions (yet). So its the small streets? Look around boston and nyc, or streets are supercrowded, but the average fuel efficiency is still much worse that rural England for example. My British family has always raved about our ultra cheap gas in the US. There’s an anecdotal data point for elastic demand for gas. What kind of vehicle might a consumer if s/he feels the pocketbook pain at pump?
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p>So to sum up my not so quick quick comment: we need to figure out a way to have major decreases in fossil fuel gasoline use very soon. Saying US gas demand/consumption is inelastic is a cop-out (and I agree with stomv’s more detailed analysis of each segment of the market).
Clinton and McCain both claim to care about global warming, but both go into all-out pander mode on the gas tax. If you will be my friend I will try to buy your vote. It makes a whole lot of sense: let’s try to stimulate gas consumption to lower gas prices. That’s apparently the logic that 35 years of experience and straight talk get you. Then-and this is the truly surprising part–they both attack Obama on the same issue for the same reason!
Oh, they must be the same because they both attack Obama, often for the same reasons!
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p>It must be because Hillary is not a Democrat (as OBamaites have said here and on DailyKos), not because Obama is fallible and makes mistakes that one seeks to capitalize on.
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p>This of course is opposed to Obama’s plan on exposure to foreign oil, which is to mutter darkly about hostile nations such as Canada and Norway which supply so much of our oil…
One of them attacks Obama and the other chimes right in in the same vein. One day its Ayres, another day its gas taxes.
If the positions were reversed, Obama and Clinton would be in chorus.
I mean Obama and McCain. I guess Obama’s attacks are starting to work even on me…he’s getting his millions’ worth.
In 2000, Obama Voted To Suspend The State Sales Tax On Gasoline. (S.B. 1310: Senate Third Floor Reading, Passed, 50-0-6, 3/8/00, Obama Voted Yea)
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p> * The State Of Illinois Suspended Its Five Percent Sales Tax On Gasoline. “After a whirlwind legislative session, Gov. Ryan signed legislation … that suspends the state’s 5 percent sales tax on gasoline. If that is passed on to consumers, fuel prices would drop by about a dime per gallon.” (Dave McKinney and Fran Spielman, “Ryan Signs Suspension Of Gas Tax,” Chicago Sun-Times, 6/30/00)
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p>I guess by your own admission Obama is not a friend of the environment.
So which current gas tax holiday do you support? The Clinton plan or the McCain plan or are they just the same?
I will hand it to you guys, you get your talking points distributed. The RNC press release with this one came out Friday, and it’s already all over the place.
But he later voted down a measure to make it permanent in 2000 as well, and he told everyone the reason why today. It’s 2008 now and I don’t see the benefit of raiding the highway fund so I can save forty bucks is really worth it.(S.B. 1867: Senate Floor Third Reading, Passed, 46-12-0, 11/15/00, Obama Voted Nay)
Over the last eight years, the urgency of the climate change issue has become increasingly clear. From the information available in 2000, that vote wasn’t all that bad. Personally, I think it was the wrong vote, but it’s not as bad as voting for it today, and I’m glad to see that he’s learned something since then.
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p>Nonsense. In 2000, the concern over GHGs wasn’t nearly as well understood. At best, you could claim that Obama wasn’t a friend, not that he isn’t.
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p>Get tense, man.
One reason gas prices are so high is because of instability in the Middle East and the failure of our fiasco of an occupation to get Iraqi oil flowing.
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p>Not to mention the developing global loss of confidence in the dollar caused in no small part by the expense and lack of any exit strategy of President Bush’s adventure. Lower dollar equals higher oil prices.
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p>Still, can you blame Senator Clinton? She didn’t win PA by enough, and it doesn’t look like she will do well enough in the coming states to finish with more elected delegates than Obama.
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p>She feels the walls closing in and is starting to say anything she thinks will win votes.
Right? That’s what he said about Kerry and Edwards in 2004. But I’d rather talk about 2008 though.
The real estate crash, urban crime, and the stubborn fungus on my big toe are all Hillary’s fault for voting for AUMF.
that she’s doing this, but mostly how sad that this sort of pandering probably appeals to many voters.
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p>Know what would really be helpful, on almost every level? A $1/gallon increase in the gas tax, with 100% of the new revenues sent directly to the states. 1/3 for infrastructure repair, 1/3 for greenhouse-gas reduction, and 1/3 unrestricted, save that it could not be used to reduce state gasoline taxes. (Cut other taxes with it if you like, though.)
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p>A candidate would have to be nuts to advance such a bold plan going into an election. Meanwhile, the price of a gallon of gas has increased by at least a buck in the last year alone.
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p>Sad indeed.
1/4 infrastructure repair
1/4 mass transit*
1/4 GHG reduction
1/4 unrestricted*
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p>* anything that can demonstrate a reduction in gasoline consumption at a “reasonable” level counts — bike lanes, changing highway lanes to HOV lanes, etc. as well as buses, subways, etc.
** with the same requirement about not reducing the state gasoline tax
50% for GHG including mass transit. Different states would have different optimal mixes of mass transit versus other GHG-reduction programs.
Do you personally know and could take up residence with a local Amish family. Hey, it’s totally green you know.
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p>Option two- Blow your brains out for humanity, with the gun you are not allowed to own in this “free” society.
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p>And it’s too late to stock up on food for the survialist compound, your purchase is limited.
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p>http://news.yahoo.com/s/ap/200…
Yes, the Illuminati news sources cited the closing of a major Austrailian rice processing plant some time ago when American corpo-media brought you lobotimized idiots the specific color of Britney’s underwear. Really, I hate to be crass and crude, but it is what it is.
Nobody, but nobody is even close to the cynical nature of the Lasthorseman.
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p>Sport, check out the dollars value against the Euro. Do the math, and then you’ll know what’s going on near term with gas prices. Also interesting that noone has brought up this farce that is Ethanol. Forget the environment, we’re causing food riots over this one right now (and they all voted lock step on this fraud).
http://www.geoint2008.com/
The ability of the government to see the results of your last colonoscopy from a series of geo-stationary satellites positioned in earth orbit in space. Your tax dollars at work. Note I didn’t bring up Halliburton or the uglyness of such projects as Cape Wind but hey the profit margins of corporate donors and their respective bought manchurians definitely come first, right.
Gas prices are the result of a weak dollar? Interesting. I doubt it, but show me a reputable economist who says that’s a significant part of what’s going on.
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p>You are completely correct on the outrageous boondoggle of corn ethanol and food prices. We need to move beyond that pronto.
Demand + Falling Dollar + OPEC.
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p>According to many oil analysts:
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This is simply retarded economics and anyone who proposes this plan is either one of two things: an idiot or a lair.
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p>John McCain has admitted he doesn’t know a thing about economics so we can easily presume he’s an idiot then.
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p>And Clinton who in spite of my dislike of her and her campaign has appeared remarkably well versed on all the issues must then be a liar.
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p>Were the gas tax to be suspended we would see a huge jump in demand for gas, we would see lines for gas, we would see people start up their SUVs again, we would see gorging rather than conservation. More importantly after a few weeks of gorging supply will go down and thus eliminating the gas tax, even temporarily, will just raise gas prices in the long run which is why its retarded.
Gasoline demand is inelastic. It does not depend on price [up to a certain point, which we have not yet reached].
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p>In April of 1999, regular gasoline sold for about $1/gallon. In April of 2007, regular gasoline sold for about $3.20/gallon.
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p>Guess what? In April 1999, the US used 255,166,000 barrels of gasoline. In April 2007, the US used 276,957,000 barrels of gasoline.
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p>Demand for gasoline does not increase with cheaper prices, nor does it decrease with higher prices.
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p>Gasoline consumption data from: http://tonto.eia.doe.gov/dnav/…
jconway is flat wrong.
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p>Mrstas is correct … the demand for fuel is relatively inelastic.
I wrote about it elsewhere on the thread, including some links and charts.
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p>Gasoline demand isn’t perfectly elastic or perfectly inelastic — but there’s enough elasticity over three different time scales [now, 5 years, 10+ years] that increased prices do reduce demand in a statistically significant amount.
The EIA data that you keep linking too only shows aggregate demand, not per capita or per GDP.
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p>Since gasoline use correlates generally with economic growth, and since a large sector of usage is individual (and the population of the U.S. has grown pretty steadily since 1945), these are both highly relevant.
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p>The EIA data are just a starting point; they don’t prove your point.
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p>Second, the elasticity of demand varies with price. A $.50/gal difference at the low end will have less impact on demand than at the high end.
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p>Third, you are failing to distinguish between short-term and log-term demand elasticities. Short term effects are limited by longer-term decisions and commitments, e.g., ownership of a low-mileage vehicle or of a house that is miles away from stores or work or trains stations. (In the really long term high enough gas prices affect land-use patterns and infrastructure, with profound implications for energy use generally.)
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p>(Note that there apparently are short term effects.)
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p>Long term effects do not begin to set in as long as consumers think the price increases are likely to be temporary. Bumping the price up and down with a “tax holiday” has exactly the worst effect.
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p>A really interesting source for analysis of this kind of data is Charlie Komanoff, an energy economist since forever. He’s got some thoughts on the elasticity of demand for gasoline at Grist. He obligingly and transparently posts the guts of his analysis online.
In this plan, fuel demand would increase on the margin … but not much.
But any uptick in demand would add more upside pressure to pricing, negating any proposed benifit that might occur.
My BIG problem with this “plan” is that it is unfunded.
Revenue that is lost from the gas tax will need to be made up from elsewhere since the loss is not offset by any spending cuts ….
I dont know about you, but I dont drive all that much, its my choice … yet others do burn fuel and businesses like UPS and shippers suck fuel like a black whole …
The governments lost revenue will be made up in a way that shifts the burdon from this plans benificiaries onto “others … ie .. you and me …
If these candidates are serious about effecting oil prices than stop the SPR madness …
The SPR purchases have been documented to be functioning as props to support speculation. Yet we continue to buy oil in bulk and dump it back in the ground?
Hillary and McCain are talking nice but their hearts obviously arent into the task.
http://biz.yahoo.com/rb/080428…
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p>
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p>Here’s the devil’s canard: in order to strengthen the dollar, Fed has to start raising, not cutting, interest rates. But do that in the economy goes into a deeper recession. However, the cuts weaken the dollar, which in turn “increases” the dollar per barrel of oil (but that increase right now is just adjusting pricing to reflect defacto Euro pricing of oil).
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p>Next time I hear any of the three candidates mention this fact will be the first.
A word of advise … OPEC ministers are practicaly drooling lately when they are commenting on the price of oil and their astoonishemnt of how prices go higher and higher despite ample supply.
What they dont tell you about is the role of thier “soveriegn” funds in market participation.
It might be wise for their part to attempt ot contain some of their delight, at least from a PR standpoint, but judging by the way that they treat their own citizens I guess they just dont give a flip what you or I think.
Rather than quoting Sheik Abu or whomever why not check out the price of oil in Euros or Yen or any other currency? Same sorry tale
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http://vps28478.inmotionhosting.com/~bluema24/s…
People in the EU must be thumbing their noses at us; what with the price only up 39% this year (in Euros)
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p>
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p>Look how happy they are and how cheap the petrol is ..
Oh .. no wait, thats per liter isnt it?
Unfortunately, his proposal is the confluence of two bad policies, the tax-cuts funded by debt and the increased incentive to consume energy. The winners – the oil companies, the losers – the dollar, the environment and ultimately, the people.
WASHINGTON (Reuters) – A gas tax holiday proposed by U.S. presidential hopefuls John McCain and Hillary Clinton is viewed as a bad idea by many economists and has drawn unexpected support for Clinton rival Barack Obama, who also is opposed.
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p>”Score one for Obama,” wrote Greg Mankiw, a former chairman of President George W. Bush’s Council of Economic Advisers. “In light of the side effects associated with driving … gasoline taxes should be higher than they are, not lower.”
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p>Republican McCain and Democrat Clinton, who is battling Obama for their party’s nomination, both want to suspend the 18.4-cents-per-gallon federal gas tax during the peak summer driving months to ease the pain of soaring gas prices. The tax is used to fund the Highway Trust Fund that builds and maintains roads and bridges.
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p>Economists said that since refineries cannot increase their supply of gasoline in the space of a few summer months, lower prices will just boost demand and the benefits will flow to oil companies, not consumers.
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p>”You are just going to push up the price of gas by almost the size of the tax cut,” said Eric Toder, a senior fellow at the Urban-Brookings Tax Policy Center in Washington