Oil Rules

Republican Presidential candidate John McCain is doing what he can to appease the American people. For now, that means proposing a gas-tax holiday from Memorial Day to Labor Day that would suspend the 18.4¢ federal gas tax and 24.4¢ diesel tax.

If McCain’s proposal goes through, how much effect would it have on summer gas consumption? The DOE’s Energy Information Administration (EIA) has projected a decrease in consumption of gasoline, diesel and other petroleum products in 2008 by about 85,000 barrels per day. States like California have already begun to see a big decrease in consumption this year. So will an 18.4¢ or 24.4¢ difference be enough to keep people on the roads? Will that discount be enough to break the DOE’s ill omen over the industry?

My projection? Some people will consider anything to be a discount. They could look at McCain’s proposal, if it passes, as a Blue Light Special or a coupon for gas. Even if they are paying $2.38 for raw oil, 40¢ for delivery, 20¢ for refining, and 10¢ for local retailer profit, some people will still feel OK about traveling more this summer if they feel like they’re saving 18.4¢ a gallon.

It’s like going to the grocery store with a “Buy Three, Get One Free” coupon. While you may not need four Hot Pockets, you will buy them just for the discount. While some people may not need to travel to Mother’s house on the weekend this summer, they may feel better about gas prices if McCain’s proposal passes.

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