Wednesday, June 04, 2008

Potential Gas Price Solutions

Here's a piece on CNN with 6 fixes to high gas prices, let's take a look:

- Tax oil companies more, give the money to motorists. Bad. High prices beget more production; we want to reduce the incentive for companies to produce more?

- Limit oil speculation. Bad. If speculation drove high prices, couldn't we just cram the stock market full of speculators and we all could retire tomorrow? Speculators assume risk, don't prevent the market from functioning.

- Ease refining restrictions. Good. There are environmental issues, of course, but if the goal here is to attack high prices, let companies serve the public by increasing supply of the high priced types of gas.

- Lift the ethanol tariff. Good. The effect may be small, but it would be undoubtedly downward.

- Open the Strategic Petroleum Reserve. Good. Why we even have this is beyond me; crank that mother open and let people use it.

- Suspend the gas tax. Good. Hear, hear! As price the price of gas has increased, the percentage paid in taxes has obviously gone down, but dropping the game tax will cut the price by a nontrivial amount depending on what state you're in, or what particular gas taxes were to be dropped.


Dana said...

The only problem with suspending the gas tax, however, is that the money is supposed to pay for road repairs. So although I am all in favor of lower taxes, unless they have a backup for funding road repairs (or privitizing the roads) those taxes should stay put. Have you driven around Chicago lately? I think I got a flat tire from the damn potholes.

Matt E. Ryan said...

If I were convinced that more taxes meant better provision of roads, I may agree with you!

From this week's Economist:

"Stuck for answers, politicians have been looking for scapegoats. Top of the list are the speculators profiting from other people's hardship. Some $260 billion is invested in commodity funds, 20 times the level of 2003. Surely all that hot money has supercharged the demand for oil? But that is plain wrong. Such speculators do not own real oil. Every barrel they buy in the futures markets they sell back against before the contract ends. That may raise the price of 'paper barrels', but not of the black stuff refiners tun into petrol."