Normally this is true. But it becomes less true as supply becomes less elastic. If $3.50 of a $4.00 gallon of gas goes to the producers (oil companies, service stations, whoever), and $0.50 goes to government, then removing the tax will allow the supplier to sell the same amount of gasoline at $4.00 (and keep the extra $0.50), *or* sell some larger amount of gasoline at some intermediate price lower than the original $4.00 (but keeping more for themselves). If there were a lot of spare gasoline that was being held back because the current prices weren’t profitable enough, then you would see a significant drop in price (though less than the full amount of the removed tax) when it came on the market. If on the other hand the refineries are already running pretty flat out and there isn’t really a lot of spare capacity to respond to the price incentive, you get a situation closer to the first one, where the amount of gas sold increases only very slightly and the price hardly moves – all the money goes to the producers.
I’m not saying that’s a bad thing – in the long run, extra incentives mean that someone will find a way to produce more gasoline. But it’s definitely true that in the *short term*, removal of the gas tax may hardly move prices at all. Look at it this way – over the past year, gasoline prices have risen by more than $1.00 a gallon. During that time, the amount supplied to US consumers dropped by a couple percentage points. I think the gas companies would love to be selling more gasoline at these high prices, but they aren’t even supplying as much as they did last year. Do you think that offering them another $0.18 per gallon will change that?

That would ultimately increase their profits.

Ya, well, in reality, they are probably just pointing the finger at each other…..

What would help is for Big Oil to spend some of thier huge profits and build more gasoline refineries! But they are not about to do that……

because the gov’t has stood in the way and has not allowed the construction of any new refining facilities for the last 37 years.

Oil, gas, gold, wheat, rice, and many other commodities are priced high because the Federal Reserve f-ed over the US Dollar to try to stop banks, hedge funds, and investment brokerages from going belly up due to the housing related credit crisis.

OPEC is responding to the deminished value of the dollar (and their standard of living) by reducing oil production thus increasing the price of oil per brrl.

Cutting taxes would help but that would only reduce the “stand of living” for the Federal Govt. What would help is for Big Oil to spend some of thier huge profits and build more gasoline refineries! But they are not about to do that……

Supply is generated by supplying stuff. How hard is this?

“What the Senate committee staff documented in the report was a gaping loophole in US Government regulation of oil derivatives trading so huge a herd of elephants could walk through it. That seems precisely what they have been doing in ramping oil prices through the roof in recent months.

The Senate report was ignored in the media and in the Congress.”

That would be the _Congressional_ branch of the Bush administration – you know…the one controlled by Democrats.

For most of the rest of the high price you can thank the Bush administration.

http://www.globalresearch.ca/index.php?context=va&aid=8878

Why do you Republicans hate business so much?

Folks are just trying to make a buck.

Ha. Ha.

I have enough pseudophedrine in me to do another edition of Ask Egg, which combined with the fact that it’s Friday the 13th, means this thing’s late. Sorry about that. Hopefully this mega-edition of the Scramble will fix that.

……

Sure…

and cut the taxes.

Cutting taxes will have very little effect on the consumer price (short term) in the current situation. Prices are high because it is extremely difficult for producers to increase the supply. Normally, the supply would rise on a tax cut as producers and consumers split the discount between them. Here, almost all of the tax relief would accrue to the producers or possibly other parts of the supply chain (kind of the opposite of taxing windfall profits…). In the long term this would provide even more incentive than there already is to increase the supply of gasoline, but anyone who thinks that it would help in the short term is basically saying that suppliers are currently underproducing because prices aren’t high enough.
Also, if the tax were removed temporarily (gas tax holiday) the likely effect would be a short small drop in prices as all possible gasoline (any slack in the supply chain) was sold during the tax holiday timeframe, followed by a more severe price spike once the holiday was over. In other words it’s a stupid idea.
All of these tax proposals are just flimflam that obscure the basic problem that high prices are communicating: we don’t have enough gasoline. And you aren’t going to suddenly create millions of gallons of it by fiddling with the tax code.

McCain should beat Obama like a rented mule with this issue

You really don’t know very much about McCain do you?

http://www.johnmccain.com/Informing/Issues/da151a1c-733a-4dc1-9cd3-f9ca5caba1de.htm

Tom