Boycott Watch  
May 7, 2008
Gas Tax Holliday is Bad for America
Summary: A political stunt that can result in a recurrence of the gas lines of the Carter administration, and with dire consequences.
    With Presidential candidates talking about a one-day gas-tax holiday and the annual May 15th one-day gas boycott looming, Boycott Watch decided to analyze both together since they are related. Repeating our comments in previous reports, one-day boycotts of any kind simply do not work. The boycotters idea of one-day gas boycotts is to create a glut of gasoline in the supply lines, claiming the gas companies will, in the words of the boycotters, choke on an over-supply thus forcing a sudden and sustained lowering of gas prices. The problem with that theory is that with one-day boycotts, people will simply buy gas the day before or the day after, thus the overall supply is not affected, thus such a boycott is meaningless.

   On the supply side, gasoline sales remain seasonally stable on average, and gasoline terminals have large storage tanks which can easily store excess delivery via pipelines, not to mention that pipeline delivery and refinery production can be varied based upon any sudden changes in demand, therefore minor fluctuations in demand are easily adjusted for.

    The proposed one-day gas-tax holiday is essentially the exact opposite of the May 15th gas boycott, and can potentially have a catastrophic affect. If people plan to fill their gas tanks on the one-day gas-tax holiday, they will let their tanks run low, thus creating a sudden high demand on that one day. The problem is that there are only so many gas pumps at stations, and there are only so many tanker trucks capable of delivering gasoline from gasoline terminals to individual stations. As such, a one-day run on gasoline may actually result in long lines at gas stations - while cars are filling up at every pump, the sudden high demand may result in an insufficient immediate supply to fill every car.

    Within a few hours, people may end up running out of gas waiting to fill up, causing more traffic jams, and rumors of not enough gas by mid-day may result in even bigger runs on gas which will only compound the problem of sudden demand. While there is a sufficient number if gas delivery tankers available to handle the existing levels of demand, the same fleet of trucks may not be able to handle a sudden one-day doubling or even tripling of demand. Essentially, the sudden demand created can potentially create the gas station equivalent of a run on the banks - the gas market can essentially collapse while cars are on the road with empty gas tanks clogging up the roads, highways and parking lots, compounding problems.

    Within hours, gas stations will raise prices because of the sudden demand, thus reversing any savings due to the tax holiday - gas prices will rise swiftly and people who are low in gas will simply have to pay the higher prices because they still have to get home, which means driving home in super heavy traffic, eliminating any real savings from the few dollars consumers expected to save per fill-up even if they do buy gas at the lower gas prices.

    The proposed one-day gas-tax holiday is a recipe for an economic disaster, and will make the U.S. the butt of international jokes. If banks offered a one-day extra three percent cash incentive per withdrawal, you can be sure there would be a cash-run on the banks, causing all kinds of economic uncertainty since banks will surely run out of cash with such a proposal. The same applies to a one-day gas-tax holiday. If the Presidential candidates want to give consumers a real break in gas prices, a better idea would be to let American companies explore for oil in Alaska, the North East coast and in the Gulf of Mexico. The problem we face is that world demand has increased and the U.S. has not met its own needs in the face of it. A one-day gas-tax holiday may sound nice on the campaign trail, but it does not solve any long term issues, rather it creates new and potentially devastating economic problems.

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