Obama is right!

I’m with Obama on this one. The gasoline “tax holiday” is a stupid idea and as he correctly says, “would not solve the long-term problem”. We may have different views on what the “long-term problem” actually is, but for the moment I’m with him. <link>  

Just when American’s are starting to buy smaller cars (see New York Times story below) and starting to reduce America’s dependence on oil products, the politicians are stepping in and making it affordable to drive big SUVs.

Unfortunately Obama isn’t going to win any votes for this position. As his rival Senator Clinton says, “Senator Obama doesn’t want us to take down the gas tax this summer….” I have a sneaking suspicion that this line will resonate with voters in Indiana. Good policy, bad politics. That’s elections for you.

Here’s the New York Times on car purchases.

“In what industry analysts are calling a first, about one in five vehicles sold in the United States was a compact or subcompact car during April, based on monthly sales data released Thursday. Almost a decade ago, when sport utility vehicles were at their peak of popularity, only one in every eight vehicles sold was a small car.”

“In another first, fuel-sipping four-cylinder engines surpassed six-cylinder models in popularity in April.” Full story here. <link>

And here’s The Christian Science Monitor on why the price of petrol has gone up. <link>

“The recipe for record US gasoline prices goes like this: Take a tight oil supply and growing world demand. Add a falling dollar and lots of investment money flowing into oil and other commodities.”

“…Oil is denominated in dollars, so that if the dollar becomes cheaper relative to, say, the euro, producers need higher prices if their global purchasing power is to remain the same.

This phenomenon may have accounted for as much as one-third of the rise in price of a barrel of oil since December 2000, according to Baker Institute calculations.”

As with the price of food the falling dollar is a significant factor. Look also at just how much oil the US consumes.

“…the US consumes about 20.6 million barrels per day, or roughly 25 percent of global demand. China is the second-largest consumer, at 7.2 million barrels per day. Japan, with 5.2 million barrels per day, is third.”  

That’s a lot of oil! Which brings me back to the beginning, anything that increases the consumption of oil, like the tax holiday, is a stupid idea.

Update: “Democratic presidential candidate Hillary Clinton on Sunday dismissed the “elite opinion” of economists who criticized her gas tax proposal, using a term that has dogged rival Barack Obama in recent weeks.” <link>

Good policy, bad politics.


  1. The front page of the Seattle Post-Intelligencer today shows how many millions of dollars in transportation funding the state would lose because of a gas tax holiday, alongside the $28 dollars each motorist would save. Wow! Whatever will I do with my $28? Maybe I’ll go to the movies.

    I can’t believe this idea made it out of whatever brainstorming session it was born in.

  1. 1 Gas at $10 a gallon « The displaced Kiwi

    […] to buy smaller cars (my previous post about the Obama and the gas tax holiday covered this <link&gt it is also driving people on to public […]

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