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| Could a Gas Tax Holiday Help Big Oil Profits? |
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| Written by Miranda Marquit | |
| Wednesday, 07 May 2008 | |
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In an effort to pander to voters outraged by the rising cost of gasoline, John McCain and Hillary Clinton are both behind a gas tax holiday. They claim that by getting rid of the gas tax between Memorial Day and Labor Day, Americans could save money, thereby easing the pressures on household finances. But this is not necessarily the case. So far the market has been able to bear the rising cost of gasoline. Some consumers may be cutting back on gasoline consumption, but overall demand is still fairly high. Exxon (XOM) had a "disappointing" $10.9 billion profit in quarter 1, but steadily rising oil prices should remedy that in the future. Indeed Big Oil continues to make plenty of money, and the gas tax holiday would more than likely do little beyond boost profits further (as if Big Oil needed more tax breaks, on top of what the industry already has -- as well as subsidies.) In fact, some economists think that in terms of personal finances, a gas tax holiday would do nothing. Since America has already proved that it can handle gas prices at the current levels, an initial drop in gas prices at the outset of the gas tax holiday would more than likely be followed by steady increases until gas prices were back at current levels, or even higher. Cheaper gas would spur demand again, and demand, of course, "justifies" gas prices increases. And without the gas tax, Big Oil companies could enjoy larger profit margins. Additionally, Barack Obama points out that the gas tax funds road improvements. A gas tax holiday would effectively reduce infrastructure funding. And that isn't really good for anyone. So, the gas tax holiday would be unlikely to actually help in terms of household budget, but it would result in a reduction in services that we've come to expect. Really, the plan is just political posturing. It sounds like something is being done to help ordinary Americans, but really such a plan wouldn't help anyone. Except Big Oil companies. Disclosure: I do not own XOM. Site disclaimer. Big Oil 
Miranda Marquit 
Politics 
XOM 
Comments
(2)
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written by David Neubert , May 08, 2008
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written by Miranda , May 08, 2008
I agree completely.
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I can't think of a more stupid policy than to lower gas taxes and transfer taxpayer money to drivers of big cars and oil companies.