McCain Advocates Suspending the Federal Gas Tax:
Leading Republican Presidential Candidate John McCain has echoed the proposal made by Hillary Clinton and Ron Paul
to suspend the 18.4 cents per gallon Federal gasoline tax this summer to fight high gas prices. This would save drivers about $2.35 every time they filled their tanks, or about $30 over the summer, assuming an average gas tank of 13 gallons. McCain admits that, although this isn't much, but it would at least provide a break to low income Americans.
Unfortunately, the gas tax holiday would add $10 billion to the U.S. deficit
. By lowering prices, it could also increase demand, which would raise gas prices. The pain to consumers would then be even greater in the fall when the gas tax holiday was over.(Source: CNN, "McCain: Gas Tax Holiday a Little Break," May 1, 2008; Texas Straight Talk,"Big Government Responsible for High Gas Prices," May 8, 2008)
McCain's Long-term Energy Solution:
McCain advocates mandatory greenhouse gas emission reduction targets. To meet these targets, participants would either make the reductions directly or purchase "offsets" – financial instruments representing a reduction of emissions practiced by other activities, such as agriculture – to cover their required reductions. He also proposes to auction off emissions permits to companies that will develop new alternative fuel technologies. (Source: JohnMcCain.com, "Climate Change")
Barack Obama Opposes a Short-term Solution to High Gas Prices:
Obama clearly states that eliminating the gas tax this summer is "a phony scheme that nobody thinks is going to work." He stated that "...the oil companies would just jack up their prices to match whatever the reduction was on the gas tax."
Instead, he proposes a long-term solution that would "break our addiction on foreign oil." (Source: ABC News, "Obama Heats Up Primaries," May 5, 2008).
Obama's Long-term Energy Solution:
Obama's plan is to reduce oil use by 35% by 2030 primarily by investing $150 billion over 10 years to advance the next generation of biofuels, accelerate the commercialization of plug-in hybrids and promote development of commercial-scale renewable energy. More specifically, he proposes to:
- Develop cellulosic ethanol with a goal of adding two billion gallons by 2013 and 60 billion gallons by 2030.
- Expand farmer-owned biofuel refineries.
- Require 36 billion gallons of renewable fuels to be in the fuel supply by 2022.
Obama's goal is to double fuel economy standards within 18 years by:
- Retooling tax credits for domestic auto plants to build new fuel-efficient cars and
- Investing in advanced vehicle technology such as advanced lightweight engines.
He also plans to improve energy efficiency 50% by 2030 by setting goals to:
- Make all new buildings carbon neutral by 2030.
- Improve new building efficiency by 50% and existing building efficiency by 25% over the next decade.
- Create a grant program for states that implement new building codes that prioritize energy efficiency.
- Invest in a digital smart utility grid that will be more efficient.
(Source: BarackObama.com, "Energy and the Environment")
How Will the Candidates's Proposals Affect High Gas Prices?:
John McCain's gas tax holiday will initially decrease gas prices, which would probably increase demand
. This could then result in an eventual gas price increase. The pain will be greater when the tax is reinstated in the fall. However, tax repeals like this are usually maintained, which would then result in further budget deficits
McCain's long-term solution would eventually have an impact by encouraging new alternative fuel technologies. This could then reduce demand for oil and lower the price. However, the first goal is to reduce emissions by 2012 to 2005 levels. Gas prices will likely remain high at least until then.
Obama's long-term solution is much more specific, but also doesn't have any deadlines before 2013, when 2 billion gallons of cellulosic ethanol will be pumped into the system. His plans should help achieve much better energy efficiency, and lower gas prices, but not until 2030.
Neither candidate addresses one of the current causes of high gas prices, which is the pricing bubble in oil futures contracts created by commodities traders. Without further regulation or at least oversight of this market, it is unlikely either candidates' proposals will affect high gas prices anytime soon.