Tuesday, October 21, 2008

Falling Gas Prices: A Tax Cut of Massive Proportions

Update: A recent CD post reported that American consumers save $1.42 billion annually for every one penny decrease in retail gasoline prices. According to EIA data, the average retail gasoline price peaked in early July at $4.165 (national average) per gallon, and is now at $2.914, a decrease of 125.1 cents (see chart above). That fall in gas prices translates into a $177.6 billion savings for U.S. consumers over a one-year period, and there'll probably be more to come as gas prices continue to fall.

And in Texas, where gas prices are down to $2.02 in some areas, the $2 per gallon fall in gas prices there (from $4 in July) would translate into almost $300 billion worth of annual consumer savings (actually $284 billion).

As Dennis Gartman wrote in "The Gartman Letter" last Friday:

"This [$177 billion savings] dwarfs by a huge factor the recent tax rebate checks that went out to the nations taxpayers and which helped bump up the economy in the summer. That was a one-off event; the weakness in gasoline prices is an on-going one instead. This is a tax cut of massive proportions... beyond anything that Obama might promise."

4 Comments:

At 10/21/2008 8:55 AM, Anonymous Anonymous said...

Maybe when states that rely heavily on oil tax revenue start firing people. oil companies start firing people and oil servce compaies start firing people we can get it down to a buck. I love deflation, it's a great time to be a bum.

 
At 10/21/2008 7:02 PM, Anonymous Dr. T said...

"Falling Gas Prices: A Tax Cut of Massive Proportions"

This is misleading. Federal gas taxes and most state and local gas taxes are based on the number of gallons purchased. As gasoline prices fall, people tend to buy more gasoline, and government gas tax revenues rise.

"A Cost of Living Savings of Massive Proportion" is a more accurate description.

 
At 10/21/2008 7:27 PM, Anonymous Anonymous said...

WTF a tax cut? Fifst the oil companies stick a big long knife into your side and then they pull it out part way and expect me to jump for joy.

I was paying less for gas just two years ago, I till have a massive tax increase.

 
At 10/22/2008 7:41 AM, Anonymous Anonymous said...

What happened to T.Boone? I haven't seen him on TV promoting his energy plan lately. How quickly we forget as Americans. This pause is our opportunity to pass and implement a comprehensive energy plan that includes drill, drill, drill.

 

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