There’s talk right now about a Gas Tax Holiday. It seems that the current Presidential Candidates would like to cancel the $0.18 gas tax for the summer driving season giving a small break off the price of a gallon of gas for drivers. Great idea, if it weren’t for that pesky thing called economics.
The reason gas prices are higher in the summer has to do with the fact that gas companies can’t raise supply while we all head out on vacation for the summer, so as demand rises so do the prices.
If you were to create a gas tax free holiday, people would choose to drive as opposed to fly to grandma house, and demand would go up more than usual. That would continue to put preasure on supply and prices would go up. It wouldn’t take much of a swing to cover the 18 cents per gallon. As a result: We would be paying the same amount for gas, the federal government would loose $10 billion in revenue, and oil companies would make even more money off us. Because of that, this get’s my nomination for Bad Idea of the year.
The organization that really has the power to drop gas prices might surprise you. The Federal Reserve could trigger a change by not cutting interest rates anymore. Or at least that’s what Fortune says.
