The fight over the gas-tax, Krugman says is a pffile, in the scheme of things.
I wholeheartedly agree, but the disagreement points to a larger problem, one that Obama is rightly raising (sort-of) and that serious economists need to deal with.
1. The oil price is divorced from "reality", with refiner acquisition cost so far above average producer lifting costs now that it is just ridiculous (3-4 times over, to be exact).
2. The oil market is in supply-demand balance (even the Saudis say this and are perplexed by the observed market price).
What is going on? Is it all the decline in the dollar? It's not a jihadi risk premium, because it's been moving around too much out of step with that.
Governments should be talking about the kind of intervention needed to end the bubble in energy markets (including in nat gas in America).
They would do it for their currency, why not for oil?
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COMMODITIES SUBSIDIES HOLIDAY - CONGRESS GET CRACKIN'
Meanwhile, regardless of a gas-tax holiday, I don't understand why Keynesian tax policy wonks aren't insisting that some of the "structural" tax benefits do not make sense at this stage in the cycle. Getting rid of the subsidies on oil R&D and on large/corporate farms right now makes a lot of sense, as a "holiday" or otherwise. Both are awash in profits and the federal budget is hardly in balance ...
Tuesday, May 6, 2008
Oil, The Gas Tax, and Obama
