Monday, July 21, 2008

The Bush tax cut of 2008? 

Driving back into town Saturday night after the show, I drive first by the St. Augusta exit which has two gas stations in direct competition. One has lots of signs to attract passing vehicles, offering gas at $3.849; the one that moved in second has a much smaller sign, $3.829. I drive by both of these. They tend to attract the less-informed gas purchases. (Though it's interesting -- their prices tend to look more like Twin Cities prices than St. Cloud prices, the latter of which are often 5-10 cents more. But not this day.)

I use First Fuel (bought a big load at $2.649 about fifteen months ago), so I usually go around to Highway 15 to get to the Pantown station near the St. Cloud Times' offices. There's a station owned by some immigrant family on Third St. N., and it's sign was $3.799. I smile: I was right about those stations near St. Augusta.

Later on the phone Gary tells me that stations on the east side were selling at $3.699. The Sunday morning paper reported it; this morning prices are two cents less than that according to GasPriceWatch.

What does a forty cent decline in gas prices mean for you and me? In 2005-2006 the average vehicle consumed about 700 gallons of gas according to the Bureau of Transportation Statistics. The average household has 2.28 vehicles. So a forty cent drop in gas prices is the equivalent of a $638.40 tax cut for the average household if the price remains at this lower level for a year. As it is, for a week it would get you about $12.27 in savings.

I am hard pressed to find alternative explanations for the reduction to the president's signature of a rescission of the ban on offshore drilling. You are welcome to add other possible explanations in comments; the previous statement has a very post hoc ergo propter hoc feel. I like the graph Paul Krugman draws -- I've discussed this before as the second law of demand -- but the precipitous nature of the drop makes me skeptical that a fall in demand is the proximate cause.

FFB, by the way, pushed its price down to $3.749 to put gas away for the next time we get over $4. To the right is a chart of their prices to put fuel into your account since Jan 2007. Time to buy again?

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