Recently, Sen. McCain proposed suspending the $0.18 per gallon gas tax from Memorial Day through Labor Day. The tax goes directly into the highway trust fund. The country's infrastructure is crumbling as it is, as dramatically illustrated by the bridge collapse in the Twin Cities awhile back. Construction workers are among the groups hardest hit on the unemployment front, with much more pain to come as Commercial Real Estate is about to slow down big time. So, let's cut off the funds to repair our highways and throw more people out of work: Brilliant!
The stupidity of the idea goes much further than that. If demand for a product is high, and the supply is limited, particularly in the short term, then eliminating a tax on the product will not cause the price to come down significantly, it will just mean that to sellers will get higher margins. In the short term the supply is very much fixed. Refineries always run flat out during the summer to make as much gasoline as they can. They have some flexibility in the spring and fall months to adjust their mix of product, but that inventory building season is just about done now.
To the extent that prices do come down they will simply stimulate higher demand (or prevent demand from falling). Given our country's dependence on imported oil, and all the economic and national security considerations that go along with it, this is exactly the opposite of what we need. Not to mention that higher gas demand means more carbon in the atmosphere, eventually dooming the entire planet.
Sen. Clinton has gone along with the proposal, although she wants to slap a windfall profits tax on the oil companies to make up for the shortfall in the highway trust fund. This addresses some of the concerns, but defining what exactly are windfall profits is a task akin to judging the number of angels dancing on the head of a pin.
Imposing such a tax for only a few months is, in a word, silly, and will never get through Congress by Memorial Day. In any case, it is not that refiners are making huge profits, the crack spread has been very low recently. This is not energy policy, it is political pandering at its absolute worst.
The problem is in the price of crude, which the oil companies have no control over. Given the difficulty in finding new supplies and raising global production, get used to high crude oil prices, they will be with us for a long time. The only way that prices will come down is if global demand for oil stops growing. However, it is unlikely that demand from China, India, or domestically in OPEC countries is going to fall anytime soon.
Yes, oil prices have been pulling back in recent days as the dollar has rebounded a bit on hopes that the Fed is done with rate cuts. I would be surprised if we go lower than the most recent low in the high $90's. After this low we are likely to see another new high above the most recent high of around $120.