President Joe Biden and his economic advisors are dreaming up ways to fight rising gasoline prices. The steps they are reportedly considering would not just be worthless, they would be counterproductive. Here are some of the ideas, according to the Washington Post.
Sending out gasoline rebate cards to millions of Americans. Apparently, the idea is that since Americans are struggling to pay record high prices for gasoline, then the government would send them taxpayer-funded rebate card that wouldn’t reduce the price of gasoline, but offset part of the out-of-pocket cost.
Excuse us for asking some relevant economic questions, but wouldn’t lowering the effective price people pay for gasoline encourage them to use as least as much if not more gasoline? And wouldn’t that increased demand push the price of gasoline higher, perhaps negating any rebate cards’ reduction in the out-of-pocket cost?
For years progressives have called for much higher gasoline taxes to arbitrarily raise the price of gasoline in order to decrease demand. Wouldn’t arbitrarily lowering the out-of-pocket cost increase demand?
And speaking of gasoline taxes, Team Biden is also considering encouraging states to lower their gasoline taxes. The federal gasoline tax is currently 18.4 cents per gallon. At the state level, California has the highest gasoline tax, 66.98 cents per gallon, followed by Illinois, Pennsylvania and New Jersey, according to the Tax Foundation. Alaska has the lowest, 14.98 cpg, followed by Missouri and Mississippi.
So, yes, limiting or suspending a state’s gasoline tax would lower the price. But like Biden’s rebate idea, lowering the price might encourage more consumption, putting upward pressure on gasoline prices again.
The third idea is for Biden to invoke the Defense Production Act to help process diesel and other refined fuels. But refining oil and natural gas is a very specialized process. One can’t just flip a factory or manufacturer to a refinery overnight. And then you have to get the oil or gas to the refinery, and Biden has done everything he can to limit new pipeline construction and other mid-stream processes.
In addition, the progressive left’s long war on fossil fuels has reduced the number of active refineries and generally discouraged new ones from being built. That situation can’t be changed immediately—even if Biden had a mind to, which he doesn’t.
The point is there is NOTHING in Biden’s plans that would actually address the problem of inflation and rising gasoline prices, and would, if anything, likely make inflation and rising gasoline prices worse.
June 21, 2022