by Domestic Avalanche

Created on: May 31, 2008

Gas Prices Soaring, Politicians Warring.

Gas prices are soaring. New Jersey has one of the lowest prices in the nation and it was around $3.59 a couple of days ago. On the same day, just across the state border, it was $4.29 in Rockland County, NY and $4.49 in Downtown Chicago. Obviously, nobody is happy about it. Every congressman is trying hard to put the blame on someone else, whether it is Bush administration's foreign policy or record profits by oil companies. But what people want to know is where this ends.

Some of the solutions that are floating around are suspending federal gas tax, enforcing higher fuel efficiency standards and forcing the oil companies to let go of their profits. I can dissect one by one to show how each one of these measures will not put a dent on the current scenario.

Suspending or repealing the federal gas tax could save about 20 cents per gallon to the consumers. Sen. John McCain has been promoting this idea. This would only lead to about $10 savings per month for the consumers where as it would deny billions of dollars from the federal infrastructure programs. There is also a chance of the gas station owners and the oil companies will readjust the prices so that the savings may not go into the wallets of the public. Well, this is not a chance, we've seen it happening in Illinois before.

Enforcing higher fuel efficiency standards is an idea supported by the white house hopeful Sen. Barack Obama. At first glance, it looks like a pretty sound idea. But in reality, it would not work the way it is envisioned. A classic example would be story behind Chrysler PT Cruiser. The car is designed in such a way that it would be classified as a truck by NHTSA for CAFE fuel economy calculations. This enabled the company to lower the fuel economy of its light truck fleet into compliance with CAFE standards. If there is anyone out there who can challenge it when I say that it is a small car, come forward. This is just an example that shows a way by which companies circumvent the Corporate Average Fuel Economy regulations. It is very clear that the regulations cannot improve fuel efficiency. Free market can. There is no better incentive for the manufacturers to improve fuel efficiency than a $5 per gallon gas price. We see that happening now. Look at how Chrysler is doing in terms of sales. Look at the Japanese companies with their smaller fuel efficient cars. You get the idea.

Another idea that Sen. Barack Obama has been promoting is enforcing windfall

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