fuel tax

An interesting piece of analysis via TBP about rising gas prices crowding out retail and industrial consumption. The premise is sound but fails to acknowledge the already stimulative effect of a $2.50 decline in prices from their 2008 peak…

gas_pricesAs if the US consumer didn’t have enough to worry about, following the DOE data, the front gasoline contract is rallying to the highest level since Oct 15th ‘08. This morning, AAA said the national average for unleaded gasoline rose to $2.63, the most since Oct 28th ‘08, up from the recent low of $1.62 at the end of Dec. To quantify, the US uses about 9mm barrels of gasoline per day with 42 gallons in each barrel, thus 378mm gallons per day and almost 140b per year. Therefore, for every $1 move in the price of gasoline, it’s an extra $140b more in consumer spending at the pump. If gasoline prices stay elevated, it will dramatically dilute the tax cut portion of the Obama stimulus plan. On Feb 17th, Pres Obama signed the $787b stimulus plan that included $237b of ‘tax relief’ for individuals, $116b of which was a temporary payroll tax credit for income earners under a certain level.


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