Bring on the $5 Gallon of Gas

"What this country needs is a good, seven-cent nickel." --Groucho Marx

Last week, I came just short of my first $60 transaction at the gas station. It was startling. What's going on? Where are the gas lines?

Gas prices are slowly going up, and we're slowly adjusting to the pain. Now John McCain and Hilary Clinton are calling for a repeal of the gas tax until (if?) prices go back down.

This position reveals an ignorance of supply-and-demand economics that is shocking for a U.S. Senator. As far as I'm concerned, this position all but disqualifies either of them from the office of President of the United States.

Gas prices are rising because demand is growing (China and India are buying more oil to support their growing economies) and because supply is shrinking (conflict in the Middle East, fewer and smaller new fields being developed).

Gas prices are also rising in this country because the value of the dollar is sinking relative to other currencies. This is happening primarily because we're so far in debt to other nations, like China, to support our lifestyle. So, even if crude oil prices stabilized, we would still need more dollars to buy a barrel as the value of the dollar slips.

So, as Thomas L. Friedman points out in his op-ed New York Times editorial Dumb as We Wanna Be, cutting the gas tax will make our current problems worse. It will encourage gas consumption by artificially lowering the retail price of gas and by putting us deeper in debt thanks to the loss of tax revenue.

People are struggling, but there has to be a better way to help them then by cutting the gas tax. McCain and Clinton both know this, but they're desperate for votes. I think we should freeze the retail price of gas at $5 per gallon. That way, for every gallon we buy, OPEC and oil companies get $3.50 and the U.S. Treasury gets $1.50. People will naturally economize (I had better stop at the store on my way home from work since I'm now more conscious of the costs of travel), and the price of crude might go down due to decreased demand. If we kept the gas price frozen, though, the treasury will receive the cost savings and we would continue to discourage frivolous consumption.

What might we do with all the tax dollars coming in? I don't know...maybe improve our public transportation or put in some bike lanes. Maybe we'll retire some of our debt and shore up the value of the dollar.

Either way, gas is heading to $5 per gallon. It's up to us as voters to decide if we want to keep any of that money in the U.S.

Photo credit: "Fire and Water" by peasap