ASUnited (Arizona State University WeBlog)

I scream, you scream, we all scream for cheaper gasoline. Under the glare of public desire the presidential hopefuls start reeling out their plans for cheaper gasoline. McCain advocates a gas tax holiday, which looks good compared to Obama’s proposal to increase taxes on oil at a time when gasoline is already expensive.

Obama promises to aid the lower and middle classes with the money from a tax on windfall profits, but this does not promise relief at the pump, instead theory supports that it could actually drive prices up. So, it is no surprise that many eye McCain’s gas tax holiday with favor, even though it is a ruse. Estimates predict that families would save $29 dollars in total from this tax break, enough for a nice meal or some school supplies McCain says ( click here for more info).

But according to Economics 101 this tax break will have no effect on prices for the consumer; instead it will be a tax break for gasoline companies. “If the supply of a good is more or less unresponsive to the price, the price to consumers will always rise until the quantity demanded falls to match the quantity supplied” (more). So McCain’s $29 dollars goes to the big guys, not to the families; meanwhile the government gives a substantive amount of money, which is needed to repair roads and bridges, to the oil companies.

Neither plan sounds particularly brilliant. However, Obama is now advocating cracking down on financial speculation, which economists say will have an immediate effect on gas prices. It is difficult to say to what extent this will decrease gasoline prices, but independent experts seem to think it’s worth a shot ( more ).

However the real problem (that won’t just go away) is our economic dependency on a finite and increasingly scarce supply of oil. For long term results McCain wants to increase supply by allowing states to drill off shore. Obama on the other hand advocates decreasing demand, through moderation in the short term and investing in alternative energies for the long term.

McCain’s plan would theoretically decrease oil prices in about ten years.  But, “new US oil would take years and probably decades to come on stream in the best of conditions. What you pay at the pump would still be governed by world oil prices and those would not be affected much by the increase in US-based oil.” Even other republicans are against lifting the ban on offshore drilling, including the Governor of California, who otherwise supports McCain. The Governor of Florida, also a republican, opposes lifting the ban as well, calling for solutions to economic problems that do not risk the environment.

Obama’s plan doesn’t risk the environment. It plays to the flexibility and creativity of the American people. The market is already shifting to accommodate for high gasoline prices. Purchases of SUV’s are down; hybrids are becoming increasingly popular. Thanks to investments in alternative energies in the past, the car industry is not without ideas to go on. The American people are thinking before driving, now that the cost is high enough. As a result, pollution will go down and innovation will go forward. Obama is honest with the American people.  Decreasing our dependence on oil may not be a drive in the park, but it will be worth it.

–Mishmo

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