Why a Gas Tax Holiday Is a Bad Idea | Hacker News Reader

Why a Gas Tax Holiday Is a Bad Idea

gregmankiw.blogspot.com

34 pointsmooreds30 comments

If you're going to discuss the current energy inflation crisis in the United States, it makes no sense to ignore the export picture:

https://www.cnn.com/2022/01/05/energy/us-lng-exports/index.h...

> "US producers have responded by boosting LNG shipments to Europe, where prices are now higher than in east Asia. Prices in both regions far exceed those in the United States, suggesting that US LNG exports will continue to increase in 2022."

https://oilprice.com/Latest-Energy-News/World-News/US-Fuel-E...

> "Citing Vortexa tracking data, Bloomberg said that up to 2.09 million bpd of gasoline, diesel, and jet fuel shipped out of the Gulf Coast last month. That rate represents the highest volume since 2016 based on known data. And it wasn’t destined to help Europe out of its energy crisis. Instead, the report says that most exports went to Latin America, and that is not expected to slow in the near term."

If you want to lower US energy prices to combat inflation, impose a cap on exports.

That won't happen because it throws the Europeans under the bus hard. The US would be seen as an extremely unreliable ally during a time when our alliances are as strong as ever.

You think Americans don't need that gas more. Untold suffering will result if prices go any higher. How will they afford drive alone in a 6 litre 5 ton trucks an hour to their dialysis treatments while their empty house maintains a crisp 65f.

If we don't sell it, they'll be forced to buy from Russia. The global community is all suffering because of the war.

"Untold suffering... " of Americans vs the suffering of the Ukrainians? Really?

Apologies, the comment was meant to be sarcastic.

> If you want to lower US energy prices to combat inflation, impose a cap on exports.

Energy (and oil) isn't fungible. Weird as it may sound, US refineries weren't set up to handle US crude, so it's incredibly wasteful to process it in-country.

And US LNG exports are unlikely to increase in 2022, because exporting infrastructure is already at the limit.

Refiners can be adapted to process more sour blends when a longer term issue is seen or it can be routed through a 3rd party who can supply the service.

If that wasn't the case you wouldn't see contracts for off grades just written up as a static per barrel cost to TI or Brent. Of course it isn't frictionless though.

US crude actually tends to be sweeter than average. It's just more efficient to export the sweet crude and import the more sour crude than recreate the refineries outside the US to handle the sour.

Damn, if only I could fill up my car with natural gas.

That doesn't work in a global market. Never has. It merely shuffles who sells to who an who starts holding . Give that it could actually drive the price higher domestically and abroad and invite retaliatory actions, this is a Great Depression style bad idea.

The energy markets are global. You the product flows between countries easily, and the the only real differentiation is on grade, and plants have been and will be refitted for to match.

So you don't want to sell to me, fuck off the I'll go buy from this other guy who's been trying to sell to me anyways. Now, that other guy doesn't have enough, but I don't care because he doesn't look like me. He's able to buy from your neighber. And you've been nice to him selling to him when he needs it, but now you start to wonder if you're natgas that you invented is really just indirectly winding up with that Brown family. hands? So you cut everybody else of 100% . Then you noticed your family is also out of that good taqsting lng. In you son's and daughter's rooms you find out they're just storing it.

You ask them about it and they said if it was a little lower priced they'd use it themselves, but at this price, they want to sell to the Brown people. Its like the price of lng was at some magic equilibrium where is was perfectly balanced between price and marginal utility. So now you have less lng than before, and it is even more expensive for what you get.

You've had it. The're going to do what they should morally be doing anyways and sell some to this family unit at the price I demand they should sell it. You march into their rooms, grabs their supplies and congrats on taking anothher important step towards socialism. And all because you just didn't want the Browns to have any of what you had.

There was a ban on crude oil export from the United States from c.1975 to 2015 (when Obama and Biden lifted the ban in cooperation with Republicans, as I recall). How does that play into your 'it never worked' concept?

https://ballotpedia.org/Crude_oil_export_ban

Notably, opponents of lifting the ban argued doing so would jack up domestic gasoline and diesel prices...

A 4th point missing in this blog post is the simple fact that producers and gas stations can easily start adjusting the price up again, wiping out the 18-20 cents per gallon consumers would be saving in an effort to gain that as new profit. Then when the tax holiday ends, gas prices would jump back up to an even higher price with no guarantees that prices would decrease to pre-tax holiday levels.

Congress can specifically address that point if they choose to pass legislation on this topic.

Can they though? Is congress allowed to control how much profit a company can make on the market?

Yes, why wouldn’t they be?

One of Congress's powers is to regulate interstate commerce. The scope of that power has been stretched to be commically large; but profit controls in the gas market clearly fall within that power.

Price/profit controls have been done numerous times in the US to verying degrees of success.

That's the 2nd point, about a gas tax holiday primarily benefitting producers because the supply of gasoline is largely inelastic. The mechanism by which it benefits producers is that they raise prices to capture the former gas tax, which consumers can do nothing about because there is no more gas supply to be had.

And there’s a natural experiment in New England. Connecticut has suspended it’s gas tax until the end of the year - that’s $0.25/gal less in fuel costs. Rhode Island and Massachusetts have not.

In April when this first happened, gas prices in CT dropped fell quickly from being $0.05/gal more than MA and $0.10/gal more than RI to being $0.20/gal less than MA and $0.15/gal less than RI. Basically, there was a $0.25 drop in prices.

But, over time, that difference has whittled away to the point where gas in CT is about $0.05/gal cheaper than both MA and RI.

Looks like they knew people were looking for the discount at first and now that’s slowly ebbing away and CT will be in for a shock on January 1st. And much further down the road as the state has sacrificed its transportation coffers for nothing.

data were eyeballed from a graph on gasbuddy.com - https://charts.gasbuddy.com/ch.gaschart?Country=USA&Crude=f&...

They can just not change the prices and pocket the tax holiday.

(assuming that the holiday legislation doesn't actually institute direct price controls)

Giving some anecdata. I've observed in Texas that people still drive with a lead foot, and use a 400HP pickup truck and a gallon of gas to get a gallon of milk. IMO there is nothing structurally wrong with a specific solution to a need (such as a gallon of gas) being expensive, so long as the market functions well enough to allow its alternatives to compete.

I'm excited to hear more people are buying bicycles, motorcycles, and may even consider carpooling.

Instead of a gas tax holiday, use the gas taxes to give people in large cities 50% (or even 100%!) rebates on eBikes.

If you especially focus on delivery drivers in large cities, you can reduce millions of daily trips and gas use dramatically, which would have a larger impact on the price of gas, especially since it would also materially impact the expected future demand and price of gas.

Top 10% of gas consumption is done by gas consumers in the US in rural areas who can’t afford EVs but are also driving pickup trucks.

Use economic incentives to move them to EVs faster (EV credit at point of sale, higher petrol taxes, bring back home charger tax credit as a point of sale credit with the installer), or allow these folks to continue to have the economic exposure to a fungible global oil market. Those are the options.

https://www.coltura.org/gasoline-superusers

https://static1.squarespace.com/static/5888d6bad2b857a30238e...

I don't think EVs make sense for a lot of rural use. Slow charging, and they need a lot more torque. The Ford electric truck makes a lot of sense, but they can't be rolled out quickly enough.

They would be great for moving around workers for harvest and some limited pickup, but there's a reason pick-ups are the most common vehicle in rural area.

EVs are 30-40 times more expensive than an eBike. Manufacturing, shipping them, etc. is also harder and ramping up production will take more time.

To get the same gas reduction bang for the buck those top 10% would need to be consuming 30-40x more gas.

And as others have pointed out, those high gas users are probably not great markets for current EVs anyways. Current EVs work because most people don't need to use too much energy in 1 day, so they can fill up enough for a days worth of driving overnight. High gas users, almost by definition, will be using up a lot more energy, which can likely only be sustained by using gas cars, which can refuel the energy in minutes.

IMO we should be parameterizing solutions, not prescribing them.

Any thing which produces < X grams of CO2 per KM should be subsidized. (or whatever the real metric should be).

2 problems arise if not done that way

1. The market distorts away from suitable alternatives towards specific items (which may only been greenwashed, btw)

2. As future products progress they actually are disincentivized despite being superior, unfortunately laws and governmental programs seem to be sticky long beyond their usefulness

Or, a carbon fee and dividend. Which would put gas prices up, make everything else relatively cheaper and reward effificiency.

Agreed. I was providing an example, but if this was a step the govt took, it should certainly be parametrized.

And what of parents that are commuting here or there with children in tow? I don’t think Americans are ready to see our cities become the two-wheeled circuses many tropical Asian countries are known for.

While this is about American politics, I would like to mention that other countries exist and Germany has already implemented this. There all the possible downsides 1.,2.,3. turned out to not happen (with some further public/political enforcement needed for 2.).

So while the objections sound like reasonable concerns, it might be that they are unfounded also in the US.

Reply on news.ycombinator.com