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Wow, I really don't know what to say, Hillary. You've really dug yourself into a pretty deep hole on this one.... As you all have heard by now, Hillary Clinton has latched onto John McCain's worst economic idea yet. First off, that she would take her cues from John “I suck at economics” McCain, is bad enough, but that she would compound a dumb idea with a dumber idea is like the Lewis Black joke. “So a Republican gets up in congress and says 'I gotta really bad idea!' And the Democrat says 'And I can make it s$#ttier!'”This would be one of those ideas. You want me to explain? Alright, lets get the charts out here. This is economics 101. Here's a basic supply and demand graph from my microeconomics class. 
As you can see here, the market price is determined by two things: supply and demand. Buyers will demand certain quantities of a resource at a certain price. Sellers will sell certain quantities at certain prices. The point at which these two price/quantity combinations converge is called the equilibrium price level. That level determines the price for any given good or material. 
This chart (found here) shows what happens when external market forces (the government) try to lower the price below the equlibrium level. You create a shortage of the good or material because more of it is demanded than can be supplied at that level. As a result the price starts to go up and works its way back to the market equilibrium. So in our case, if we repeal the 18-cent federal gas tax (which if we implemented would save us all of 30 dollars a head on average) instead of cutting back on driving people would travel more because gas is cheaper, creating a higher demand for gas, which causes the price to go up, and oil companies absorb that as profit. You want the proof? I will show you using a perfect example that shows you why Obama is against the gas tax. He tried it when he was in the Illinois state senate! It turned out that the gas companies got richer off the deal and the roads, which the the gas tax money goes directly toward the repair of, suffered as a result of losing funding. He then voted against making the cut permanent because it fell flat on its face. Whaddaya know, he learned from his mistakes! Thats a good quality in a leader, don't ya think?
So why are gas prices so high? As my financial accounting teacher always says, “What is something worth? Whatever some fool will pay for it!” There are actually a number of things that have caused oil and gas prices to spike as of late. They fit into two catergories: Supply problems and demand problems.
Supply problems: No New Refineries: As reported by The Reason Foundation:
A new oil refinery has not been built in the United States since 1976. During that time, our gasoline use has increased over 25 percent. The nation's 149 existing refineries have been running at maximum capacity trying to meet record demand and, as a result, not only do we import oil, we actually have to import 10 percent of our daily gasoline from refineries overseas. Strikes in Ireland:As reported by the International Herald Tribune:
Workers walked off the job Sunday at the only oil refinery in Scotland, requiring BP to close a pipeline that supplies about one-third of Britain's petroleum needs. The strike at the Ineos refinery in Grangemouth began at 6 a.m., after workers of the Unite union and management were unable to agree on proposed pension changes. It was set to run for 48 hours. A spokeswoman for Unite, who asked that her name not be used because she was not an elected official of the union, said about 1,200 workers walked out Sunday, and that it was "highly likely that there will be further strike dates if an agreement is not reached."
Reformulating costs: Unfortunately, I don't have a citation for this one, but every summer and winter, gas companies change their mix slightly in order to help cars deal with the cold, as well as meet EPA standards. If someone who understands this process better feel free to do so in the comments section, but the major point is that it costs money to change the mix and the spring/summer/fall mix is more expensive. OPEC, OPEC, OPEC. If you want to know the real reason behind gas prices, look beyond Exxon/Mobil, BP, and Conoco. It's the single most effective legalized international cartel in the world. It is a conglomeration of the world's giant oil exporting countries (Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.) Headquartered in Vienna, Austria, OPEC nations account for 2/3 of the world's known oil reserves and control 35.6% of the world's oil production. They meet yearly and decide the amount of oil they will produce and sell. They effectively control the supply curve and can shift it around (to the right) as much as they please and there ain't a single thing we could do about it. The US companies happen to be reaping the rewards of what OPEC is giving them in artificially low supply. By the way, if you are caught doing this in this country (or any other democratic one), you would get nailed with a class action antitrust lawsuit before you could say “RAM”
Demand Problems: Summer driving season: lets face it, people, kids get out of school, we travel more often, and as a result, we need more gas. SUVs: For many years now, the auto companies have duped us into believing that we need to have 4-wheel drive and a suburban that seats 8 but is occupied by one. These vehicles of course are completely unnecessary for most people that need to commute around town, and happen to guzzle up more fuel than any other vehicle class. Even trucks get better mileage. And if you have a Hummer or an H2, you a.)deserve the “N/A” city mileage rating and b.) are melting a glacier per tank. Get a car. Just get a car.
So, with tight supply and high demand, of course the price of gas is high. This problem is compounded on top of the fact that while average worker wages have remained relatively flat since the late '90s, executive compensation has shot up by obscene amounts creating an income gap that restricts the buying power of working class Americans but lets the rich live as if there is no problem. And you are going to solve all of this with a gas tax holiday? The best part is, of course that Hillary can say all of this without having to act. This congress is so deadlocked they can't pass a minimum wage increase without adding in tax breaks, how are they going to take on big oil? And forget about Bush signing that law. He'd rather keep waving his magic wand. So Hillary gets to promote a solution that she will never implement. Solutions for America! The fact is that you can't fix the problem of high gas prices with a short term reduction. The invisible hand will continue to move prices up while regular Americans keep burning up their wallet. The solution is a multilayered strategy that requires environmentalists along with oil and auto companies to make some short-term concessions to achieve a long-term goal of energy independence.
Build new refineries. This is the concession the environmental groups will have to make. In the short-term, it is the easiest way to break the bottleneck of price spikes when a hurricaine whipes out the refineries in the gulf coast, or workers go on strike, or the million other reasons refineries close. Continue to force Detroit and Japan to raise CAFE standards. This is the middle-term solution that we have begun and that the market is already beginning to demand anyways. If cars don't use as much gas then you don't need fuel as much. The catch of course is that manufacturing processes need to be green as well. I have heard stories of materials making a trip around the world to be turned into cars. More research is needed. Maybe another blog post sometime... Ethanol. This is a VERY short term fix in my view. With world food shortages, corn is going out if style as a source of fuel. Wood chips require us to cut down more trees. That doesn't sound attractive. Switchgrass is a slightly longer-term solution though, but in the end, I don't think ethanol can take us very far on its own. It is a stepping stone though. Get tough with OPEC. It's time to go to the WTO and other international trade organizations and get OPEC nations to stop their collusion and allow the free market to do its work. This takes a president that is not complicit in matters of “free” trade. Frankly, Hillary isn't too promising to me here. The long term solution of course is to have a nation that doesn't use oil at all. That likely means cars powered on water (I have to stress, though, as someone who is closely connected to the water industry in this state(my dad has had a career in water) SALT WATER is the operative solution. Of we can't do salt water we might as well walk away from that idea now), but i'm open to suggestions. The longest term solution: ending income inequity in this country. Our top priority ought to be restoring balance in the pay ratio between executives and workers. It is the single most effective way to protect against any economic turmoil. When the middle class does well, the nation does well, and the American dream is achievable. The means to this end are enough for its own post, but suffice to say this is easily doable.
So no, I don't support a gas tax holiday.
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Here's hoping!
