Responding To High Oil Prices (Not With Tax Holidays)

Responding To High Oil Prices (Not With Tax Holidays)

In yet another indicator of true public attitudes towards energy policy, politicians around the world are being pressured to lower oil, gas and power prices by a public being hammered with inflation. In the U. S., the traditional split is between Republicans want to cut gasoline taxes in line with their traditional desire to lower taxes, any taxes, and the Democrats with their traditional desire to maintain taxes but help those with lower incomes. There are a number of rationales for both points of view: high fuel prices power inflation, reduce (net) consumer income, hitting the poor hardest, and threaten to tip the economy into recession. On other side of the equation, reducing taxes is only temporary, cuts funds for highway improvements, benefits the wealthiest most, and hinders conservation keeping demand high and thus market tight. The situation is naturally more complicated that the two sides make it. Without question, cutting fuel prices to consumers will have a (marginal) impact on demand and in the wrong direction. Thankfully, in most controls price controls are not being considered: the oil price controls that President Nixon imposed—while pushing for energy independence—was an egregious example of this mistake. It also suppressed U. S.