Wednesday, April 16, 2008

Math for the Masses, Part Tres

Would gasoline costing 18-cents less per gallon help your monthly budget?

That’s the outcome of a proposal by Sen. John McCain, who is suggesting suspension of the Federal tax on gasoline and diesel fuel this summer.

The bigger economic question that should be answered is whether the loss of Federal revenues, which fund highway maintenance, would be worth the momentary lessening of pain at the pump, and what would it take to recover the momentum lost on existing infrastructure projects that are dependant upon the Federal fuel tax for sustentance?

Remember the math exercise we went through a few weeks ago, showing how driving a little further to save a few pennies on the price of a gallon of gas was actually counter-productive?
Perhaps Sen. McCain should try that word problem on his own.

I burn about 28.5-gallons of fuel a week in my car.
That’s roughly three fill-ups each week.
In a four week month, I’ll burn through 114-gallons of gasoline.

If the cost of fuel is $3.23/gal, that’s $368.22 in fuel costs for the Silver Bullet. Lop-off 18-cents a gallon from that price, and the difference to me is a little over $20/mo.

Now if given the choice, any one of us would rather have an extra Jackson in our pocket than not…but at what cost?

Example: If a highway construction project that employs 100 workers is suspended for the summer because there’s no funding, multiply that by 48-states and you’ve just put 4,800 workers out of a job, just to save everyone else $20 a month at the pump.

The idea of suspending gasoline taxes might sound appealing, especially on the campaign trail where lots of promises are made, but this is one idea that is ill-founded. The math does not work in McCain’s favor…nor does it address the two core problems from which $3.23 gasoline has come, and from which $4/gal fuel will surely emerge: Supply and Demand.

Sen. McCain and his brethren in Congress would do better to allow more domestic production of oil and gas deposits, lessening our dependence upon imported sources from megalomaniacs like Hugo Chavez (fortunately, we don’t get that much from Venezuela…) and create incentives for expansion of current refinery capacity and ease the process for bringing cheap, clean nuclear energy on line quickly.

That would be called an energy policy…of which we currently do not have much of one in this country.

Robert Schroeder at MarketWatch.com chimes in with this column.
Thomas Kostigen also chimes in with this commentary.

1 comment:

Matt & Lauren said...

Supply and demand indeed. If gas is cheaper, people will be willing to drive more. They will need more gas to do so. Demand will go up. Prices will go up. At about the same time that the tax is reinstated.

And then people will whine about $6/gal gas and have no idea why prices are so high ... and start re-sending ridiculous emails about boycotting gas stations on a particular day ...

Sigh.