Thursday, May 01, 2008
It's a gas, gas ... gas
So apparently US refineries are working at full capacity. This, much more than the supply of crude oil, whether at home or abroad, determines the supply of fuel here. This is what the boring veteran of the Reagan *and* Clinton administration's said on the PBS news hour last night. If there is a gas tax holiday, and the price of gas drops (say, to $3.25), and lots of Americans plan a farewell tour this summer, what do you think will happen? Gas stations will run out of gas. Right now, the supply of gas is inelastic, that is, it is fixed. It is fixed at the level we are getting right now. Hillary Clinton’s gas tax holiday combined with a windfall profits tax might be revenue neutral (although it may also cost money or make money, it all depends how the plan is set up). But I doubt President Bush would sign it into law, and in fact I doubt the republicans would let it get out of the Senate. John McCain’s plan may have a chance on both counts, which means we may see the price of gas rise a little slower, and yet the oil companies will get a lot richer faster. But the republicans will have done something to help the common man.