Suspending the Laws of Economics
Politicians in Texas have come up with an ingenious method of controlling rising gas prices. They intend to suspend the laws of supply and demand:
AUSTIN – Relief from soaring gas prices may soon be on the way.
The Texas House tentatively adopted a measure Tuesday that would suspend the state’s 20-cent gas tax through the summer.
That would mean an immediate 20-cent drop in the price per gallon.
“The more cars you have, the more relief you get,” said Rep. Trey Martinez Fischer, a San Antonio Democrat who added the proposal to an omnibus tax collection bill. “We’re sitting here on record savings. We used to say around here, it’s the people’s money. We ought to give it back.”
Now if that isn’t enough to make you want to rush out and buy more cars, I don’t know what will. You have to wonder, though, if demand is related in some way to price. Hmm. Something to think about. 🙂 After all, if reducing the price causes demand to come up, price will rise back to where it was, and that money will now be pocketed by the oil companies instead of the government.
But it isn’t just Texans engaged in this kind of thinking. Politicians across the country are following the lead:
Legislative Republicans said today they will try to amend as many bills as possible in the final weeks of the session to suspend Connecticut’s 25-cent-per-gallon state gasoline tax from Memorial Day to Labor Day.
“This is at least an attempt to let the citizens out there know that at least somebody is listening,” said Senate Minority Leader Louis DeLuca, R-Woodbury.
One person at least did “get it:”
House Speaker James Amann, D-Milford, called the GOP plan “an irresponsible, half-baked scheme” to “appease the public with pennies” while costing the state $120 million.
“Of course we are all concerned about the price of gasoline, but in reality any change in gasoline taxes brings no guarantee of real savings at the pump and probably only helps oil companies,” Amann said.
These schemes suffer from the same kinds of problems that various windfall profits taxes and gas gouging legislation suffer from: They do not seem to understand that price is related to supply and demand. If you lower the price, demand comes up, supply falls, and prices go back up. If you put a windfall profits tax in, you lower the amount of money available for expanding capacity (or investing in alternatives, for that matter) which means supply falls over time and prices rise. To make these schemes workable, they would need to be accompanied by rationing to keep demand in check. Otherwise, this is not a solution.
Barack Obama Doesn’t Get It
My hopes that Obama might be the kind of president who would embrace conservation are being dashed:
Obama talks hybrids, but his ride has a Hemi
Sen. Barack Obama talks a good game. He also drives a good car, but the two are not entirely compatible.
The Democratic presidential contender was in Detroit on Monday, oozing charisma and environmental awareness as he chided local automakers for building too many big vehicles and not enough fuel-efficient hybrids.
So his choice to drive a V8 Hemi-powered Chrysler 300C emits a whiff of hypocrisy along with its exhaust fumes. Obama’s choice proves once again that fuel economy is seldom the No. 1 factor when Americans buy cars.
So although owning a hybrid is politically correct for presidential aspirants — many report that they do — this week reminds Detroit that campaigning still is sometimes about doing what I say, not what I do.
Don’t these people have advisors? First we have Al Gore, preaching conservation and running up a huge electric bill. Then we have John Edwards preaching conservation while living in a 28,000 square foot mansion. Is it really too much for me to expect someone to walk the talk? Or maybe Obama’s advisors feel that he will get more votes with his Chrysler than he would by sacrificing a bit of comfort for some credibility on the environmental front.
Searching for a Bold Leader
On the theme of politics, Jesse Jenkins over at Watthead has published an open letter from Silicon Valley entrepreneur (he invented the optical mouse) and major political donor Steve Krisch:
Searching for a Bold Leader – A Letter to 2008 Democratic Presidential Candidates
In the letter, he challenges the leading Democratic candidates to pledge to a 30% reduction in greenhouse gas emissions by 2020. I strongly support such efforts, because this has the added benefit of lowering our oil consumption and stretching out our supplies. We need a long, gradual tail on the other side of the production peak in order to transition to a post-peak world without too much upheaval. If we peaked in the next few years and started to deplete at 5% a year, it wouldn’t be a pretty picture.
Is it too late to recruit Roscoe Bartlett to run for President?
Texas is sitting on a pile of cash from the boom in the Texas economy and royalties from $8 natural gas and $60 crude oil.
At least the legislature wants to give us some of our taxes back. This may be one of the least onerous ways to do it. I agree it is counterproductive and likely to raise prices elsewhere around the country.
At least the legislature wants to give us some of our taxes back.
Property taxes, man. Those are a killer in Texas. But lowering it at the pump is just going to increase gasoline demand.
Cheers, Robert
Property taxes, man. Those are a killer in Texas.
But no state income tax. Overall my taxes are less in Texas then they were in Oklahoma. Our property taxes average about 2-3% per year of your home value. State sales taxes are 8% with no tax on food or medicine.
My taxes here are nothing compared to what I paid in the UK tax. I could never figure out looking at my pay stub how much I actually made with all the allowances and tax gross-ups!
What is the UK incentive now? When I was there it was only 10%, but it was only $1.45 / GBP . I’m betting the housing and cost of living allowances are better.
Overall my taxes are less in Texas then they were in Oklahoma.
I had the same experience. Then they were higher in Montana than in Texas or Oklahoma. And now I have moved to a place where they are even higher.
What is the UK incentive now? When I was there it was only 10%, but it was only $1.45 / GBP . I’m betting the housing and cost of living allowances are better.
It’s still 10%. And cost of living and housing are very expensive here, but I think the allowances are fair. In fact, if you are a saver like me, they are more than fair. If you are a spender, then a person wouldn’t have much money left at the end of each month.
Cheers, Robert
I was a saver too. Didn’t have a car, when I needed one I rented at easyCar. I walked most places or took local transport. It was a 1 mile trek to the local Safeway. I would eat only what I could carry that far.
Over 2 years I was able to save a lot of my incentive and was still able to travel on the weekends.
To be fair to Obama, maybe he will get more votes from being seen in a 300C than a Prius.
Isn’t he from UAW country?
And to be fair, its better not to rile the electorate by preaching to them as you’re trying to get elected.
Also on the Texas rebate, I’ve been wondering if this would ever have a chance of working in the UK. (Although not likely with our chancellor)
Its worth remembering that in the UK, part of our taxes on fuel are a fixed percentage of the cost. 17.5%
As the base cost of fuel rises, the overall tax take by the treasury rises.
This gives the treasury a nice windfall, but I see it as being unfair to consumers.
Seeing as the pre tax price of petrol has gone from 23.2p/litre to 31.6p/litre in the last few months, the Treasury gets an additional 1.48p/litre.
This is approx £680 million EXTRA per year. ($1.34 billion)
Andy
It was a 1 mile trek to the local Safeway. I would eat only what I could carry that far.
Same here, although I only have 1/4 mile to walk. I sure don’t stock up on cases of beer on my walks to the store. 🙂
Over 2 years I was able to save a lot of my incentive and was still able to travel on the weekends.
I have been saving my entire incentive. We will see if I can maintain that when the family arrives next month.
Cheers, Robert
Next thing you know, they will abolish Newton. This gravity thing is way overrated, can do without perfectly fine.
richard
Obama has completely lost the plot…
Senator Obama is the lead Democratic cosponsor of the Coal-to-Liquid Fuel Promotion Act, along with Senator Bunning. It must be a national priority to improve fuel economy and expand use of renewable fuels and other low-carbon or carbon-neutral fuels, but coal is currently America’s most abundant domestic energy source and will be a critical resource for many years to come.
I had high hopes for Obama (because I think Hillary is unelectable and none of the GOP candidates inspire) but now I don’t have a preferred candidate.
I wish Schwarzenegger could run.
but now I don’t have a preferred candidate
Scrap that. Bill Richardson for President!
We need a man-on-the-moon program to end this addiction, this hemorrhage. But we need it much faster and much more boldly than people are suggesting.
When John F. Kennedy challenged this country to reach the moon, he challenged us to get there in TEN years, not twenty, or thirty, or forty.
On energy policy, we need to change fast, or sink slowly
I am issuing a call to action, for Congress, the energy industry, and the public. I am calling for a new American revolution — an energy and climate revolution.