Obama: '...will save $28' ~ Clinton: '...will save $70!'

[Iamme]

In regard to repeal of the gas tax for the summer months. Hmmm. Which figure is closest to being right? Obama mentioned his number during his speech last night in Indiana. Clinton gave HER figure on Fox & Friends this morning. I could not remember the figures to do the math with. I thought it was 37 cents a gallon and was for either 3 or 4 months. I did some math based on this and come up with I'd save more like $100 (if this is the case)! And Hillary said many others would see a lot bigger savings than the $70...like truckers and others. I drive about 22,000 miles per year.

[ZouPrime]

Well, it obviously depends of your milleage, so as long as the numbers stay in the same order of magnitude, they are both "right". It's not terribly important anyway.

[Bododio]

The current federal gasoline tax is 18.4 cents per gallon. (http://www.gaspricewatch.com/usgastaxes.asp). I'm not sure what the official averages are, but let's assume that the average fillup is 12 gallons, and that the average visit to the gas station is once a week. Let's also figure that the proposed gas tax holiday will last 13 weeks. Each fillup will net about $2.20 savings, and over the summer will result in $28.70 or so total savings. I'm pretty sure this kind of rudimentary math is what Obama was basing his numbers on.

In my case, I fill up twice a week at 16 gallons a pop. The math for me over the same time period would be about $5.89 savings a week, and $76.55 for the 13-week summer. At the current prices here in California, that's a little more than the cost of a tank of gas for me.

Meanwhile, when this is calculated out over the millions of fillups in the country over the summer (I read somewhere it would be in the neighborhood of 90 million fillups (sorry, I don't remember the source)), that results in a loss of almost $2.6 billion in revenues to the government, using the $28.70 average savings calculation shown above.

[Iamme]

It's not terribly important anyway.

Ummmm...where can one start with a statement like that? I guess ntohing is, as long as you have money and a bomb shelter.

[webfusion]

Do not expect any "Fuel Tax Holiday" -- the whole concept is ridiculous.

Here's what we'll do:
Drive up to pump --- pay the money --- drive on.

[Iamme]

that results in a loss of almost $2.6 billion in revenues to the government, using the $28.70 average savings calculation shown above.

And so is our gov't taking a huge hit on that tax rebate. But how do you look at a loss for the gov't?; as a good thing?, or a bad thing?, if money is transfered back from the gov't to the people? Perhaps the gov't has less money to waste?...is one way to look at it?

[WildCat]

It's a stupid idea. People will simply drive more if the price goes down, which will reduce supply, which will drive the price back up. If prices go down it would be temporary at best.

[Tirdun]

Here's my math:

22 gallon tank and my schedule is roughly twice in three weeks at about 20 gals per fill-up, so let's go with 4 times over the 3 month window, toss in one fill at the far end of summer = 100 gallons of gas. I'll save a grand total of $18.00 .

Presuming I can upgrade to my new ride before summer starts :D, I'll have to get gas once a week. I'll fill up 12-14 times at 3 gallons per fill which means I'll use 42 gallons and save $7.50, enough to buy lunch on the way home. Once.

[Pookster]

And so is our gov't taking a huge hit on that tax rebate. But how do you look at a loss for the gov't?; as a good thing?, or a bad thing?, if money is transfered back from the gov't to the people? Perhaps the gov't has less money to waste?...is one way to look at it?

The tax rebates have a more realistic opportunity to have an impact on the economy. Most adults will have $600 (plus $300 per kid) to spend where they please. The gas tax holiday is likely only redirecting where you will spend that 18.4 cents/gal -- the government or the gas companies. Initially, you may be able to pocket that 18.4 cents. It should (in theory) make gas cheaper at the pump. However, the consequence of this is a likely increased demand because gas is a little more affordable ... which will then likely cause the actual price to rise -- supply & demand. Supply (since it's basically a fixed supply) is a big factor in the price of gas now. So you likely only break even at best. If Hillary gets her windfall tax, you'll most likely be in the hole since the gas companies will likely raise their prices to offset their profit loss (anyone who thinks a business just eats a tax increase is just being naive). You're likely better off to leave it as it is.

The bigger deficit from the tax rebate will eventually come home to roost, but the goal is to stimulate spending. The rebate from earlier in the decade actually accomplished this. At some point in the future, the budget deficit it creates will have to be dealt with though if revenues generated from the new consumer spending doesn't offset it (more consumer spending, more jobs/businesses created/expanded, more payroll/corporate taxes generated).

[ZouPrime]

Ummmm...where can one start with a statement like that? I guess ntohing is, as long as you have money and a bomb shelter.
A ****load of things are very important. But asking if the tax gas repeal will save you 30 bucks or 70 or 50 or whatever is not. The amount will obviously change depending on how much you drive.

[kallsop]

The way things are heading, this could make the difference between gas selling for $4.79 or $4.99 a gallon. I don't think there will be any increase in demand due to the tax repeal to the extent that it will drive the gas price up. Nobody is dumb enough to rush out and waste fuel because it's "only" $4.79.

[Pookster]

The way things are heading, this could make the difference between gas selling for $4.79 or $4.99 a gallon. I don't think there will be any increase in demand due to the tax repeal to the extent that it will drive the gas price up. Nobody is dumb enough to rush out and waste fuel because it's "only" $4.79.

What's one person's waste is another's extra short trip to the beach. Demand will likely increase proportionately. It's a noticeable drop that will entice some to do a little extra driving. It's natural. It's why "sales" in stores work. They reduce the price a little to increase demand (sales). It won't take much of an increase in demand to cause prices to rise 18 cents/per gallon. At $5/gal, it's just about a 3.6% decrease in price. About four extra miles driven per hundred is all it would take in increased demand. Increased demand will reduce supply, and therefore raise prices. You'll be lucky if you break even (assuming Hillary's windfall tax doesn't pass -- that the gas companies will just pass on in price increases to the consumers).

Then you get the price increase shock when the tax "holiday" is over. Fun times.

[webfusion]

pookster evaluates this whole thing correctly:
...the goal is to stimulate spending.

Which leaves me with a whopping $30 extra to spend this summer.

Oh wait, let's watch as the prices of fuel rise more than 19-cents! I think we can pretty much figure that will indeed happen, so we're right back where we started.

[Myshkin]

Aren't we all supposed to get $600 rebate this year anyway. The effect of the 'gas tax holiday' on consumers, federal revenues, stimulating the economy pretty small compared to the $600 freebie.

Why aren't we arguing whether the $600 tax break is a good idea? Isn't that a far more important question?

It's all just political posturing and pandering for votes. Regardless of how I feel about him or his policies otherwise, I applaud Obama for calling ********* on this one.

[Iamme]

It's a stupid idea. People will simply drive more if the price goes down, which will reduce supply, which will drive the price back up. If prices go down it would be temporary at best.

So you know something better than a Presidential candidate and their advisors? Well nowwww. Let's have YOU run for President? :)

[corplinx]

The Clinton plan makes the gas companies pay the tax. Which means they will raise prices to keep their profit margins the same. Which means Joe Twelve-Pack gets shafted.

I haven't had time to look at the Obama plan. Does anyone have a link that really, truly describes it?

[Iamme]

However, the consequence of this is a likely increased demand because gas is a little more affordable ... which will then likely cause the actual price to rise -- supply & demand. Supply (since it's basically a fixed supply) is a big factor in the price of gas now.

My own theory: Gas does follow the general laws of supply and demand. Here is why I think so:

If demand is high, prices go up due to load on the finite supply. If the demand goes DOWN, the prices STILL can go UP because the gas companies do not want to make less money. They know people can only save on recreational driving, but have to have it for work. Therefore, in theory, if cars all ran on E-85(%), let's say, gas would be $10 a gallon because they know you still need the 15% and HAVE to have it. They've got you over a barrel because gas is not something you can discretionarily choose to have or not.

[ZouPrime]

So you know something better than a Presidential candidate and their advisors? Well nowwww. Let's have YOU run for President? :)
But Obama is also a Presidential candidate and has advisors, and yet he doesn't agree with Clinton and McCain. How could it be possible?

Which is more probable: that the vast majority of economists and commentators who have said this idea is stupid and won't work are wrong, or that Clinton and McCain are trying to win votes by going forward with a populist idea that won't work in reality but is sure to excite their credulous base?

I can't believe that i'm actually explaining this on a internet forum.

[Pookster]

My own theory: Gas does follow the general laws of supply and demand. Here is why I think so:

If demand is high, prices go up due to load on the finite supply. If the demand goes DOWN, the prices STILL can go UP because the gas companies do not want to make less money. They know people can only save on recreational driving, but have to have it for work. Therefore, in theory, if cars all ran on E-85(%), let's say, gas would be $10 a gallon because they know you still need the 15% and HAVE to have it. They've got you over a barrel because gas is not something you can discretionarily choose to have or not.

True that the prices can still go up. But typically the price of oil goes down as demand does (and therefore the price of making gas goes down without really effecting profit negatively). While they could try to manipulate their prices to take advantage of the situation, it'd be asking for a whole lot of problems with the Government that they likely don't want.

[Pookster]

The Clinton plan makes the gas companies pay the tax. Which means they will raise prices to keep their profit margins the same. Which means Joe Twelve-Pack gets shafted.

I haven't had time to look at the Obama plan. Does anyone have a link that really, truly describes it?

He's opposed to a "gas tax holiday", as he should be. It's a gimmick at best that would likely end up hurting the consumers. If you're interested in his plans beyond that, his website should have that.

[Iamme]

I'd like to learn more about the truth of what will happen to the highway repair trust fund then, designated for highway infrastructure work.

To say that the feds are simply forgoing this is way too easy of an argument to win against...to see thru... by those of you who think Hillary and McCain's incentives are merely political. Any numskull could find and berate the point that these two would be setting us back on infrastructiure work. Surely you guys must be missing something here, regarding the real truth.

*I* thought the oil companies were to pay for that foregoance.

And regarding the $28 savings? (Maybe $50 in my case? I'd have to get out the calculator), don't forget that the theory behind this plan is so not only do people have more to spend, but this will also help everyone out, on down the line. Therefore our savings at the pump could have a multiplied effect. Trucking companies ready to go under may stay afloat; companies ready to raise prices to the consumer may now not have to, etc.

Now consider this: If the fed gas tax is say 1/19th of the entire gas cost we all pay, look at how much money we are talking here, for the entire country for just one day! 1/19th! That is not small potatoes.

[Iamme]

I'd like to learn more about the truth of what will happen to the highway repair trust fund then, designated for highway infrastructure work.

To say that the feds are simply forgoing this is way too easy of an argument to win against...to see thru... by those of you who think Hillary and McCain's incentives are merely political. Any numskull could find and berate the point that these two would be setting us back on infrastructiure work. Surely you guys must be missing something here, regarding the real truth.

*I* thought the oil companies were to pay for that foregoance.

And regarding the $28 savings? (Maybe $50 in my case? I'd have to get out the calculator), don't forget that the theory behind this plan is so not only do people have more to spend, but this will also help everyone out, on down the line. Therefore our savings at the pump could have a multiplied effect. Trucking companies ready to go under may stay afloat; companies ready to raise prices to the consumer may now not have to, etc.

Now consider this: If the fed gas tax is say 1/19th of the entire gas cost we all pay, look at how much money we are talking here, for the entire country for just one day! 1/19th! That is not small potatoes.

[KoihimeNakamura]

Iamme: It is very likely they'll just stop the federal government from charging it, as it is really the only thing they can reliably do.

.. very few people understand it's not at all a good idea.

[TheJim]

I'd like to learn more about the truth of what will happen to the highway repair trust fund then, designated for highway infrastructure work.

To say that the feds are simply forgoing this is way too easy of an argument to win against...to see thru... by those of you who think Hillary and McCain's incentives are merely political. Any numskull could find and berate the point that these two would be setting us back on infrastructiure work. Surely you guys must be missing something here, regarding the real truth.


The McCain plan would use general revuenue funds to cover the short fall. Clintons plan calls for an unpassable windfall profit tax on Oil Companies which will just pass the tax on to the consumer for a net gain of zero at the pump.

And regarding the $28 savings? (Maybe $50 in my case? I'd have to get out the calculator), don't forget that the theory behind this plan is so not only do people have more to spend, but this will also help everyone out, on down the line. Therefore our savings at the pump could have a multiplied effect. Trucking companies ready to go under may stay afloat; companies ready to raise prices to the consumer may now not have to, etc.

Now consider this: If the fed gas tax is say 1/19th of the entire gas cost we all pay, look at how much money we are talking here, for the entire country for just one day! 1/19th! That is not small potatoes.

No company in the downstream is going to lower prices on goods and services because the tax holiday is only for 3 months before it goes back into effect. There is no incentive or economic reason for them to lower prices whatever very small savings just to raise the prices in September again. The raise in gas prices are not a small blip where they would otherwise stabilize at 3.00 but a long term trend of raising. The world demand for oil is skyrocketing because of the newly created wealth in Asia. There is the weak US dollar that is buying less and less oil. The major oil companies are not discovering new oil reserves in anywhere close to replacement levels. The war in Iraq, saber rattling on Iran, instability in Africa and bad relationships with Venezuela have speculators bidding up the barrel anywhere from 20 to 60 percent. None of these long term problems are anywhere close to being solved.

[corplinx]

If gas is 3 a gallon in raw cost, how much does it have to be sold for to make a 10 percent profit margin?

3.30

At 4 dollars a gallon, how much does it have to be sold for to make a 10 percent profit margin?

4.40

If the federal government makes you pay 18 cents per gallon, how much is gas at 3.30 and 4.40 per gallon?

3.48
4.58

Now, if the federal government makes the gas company pay that tax instead, how much is gas at 3 and 4 dollars per gallon?

3.18 @ 10% profit margin = 3.50
4.18 @ 10% profit margin = 4.60

Gas is _more_ expensive under the Hillary-holiday since the oil companies won't just soak the cost of the tax. It will get passed on and raise the price to keep the profit margin the same.

[KoihimeNakamura]

Corplinx: Thanks, I tried to figure that out earlier and couldn't quite figure it out.