Presidential hopeful Hillary Rodham Clinton (copying John McCain, R hopeful) proposes a moratorium on federal gasoline tax for the summer driving season. Moreover, she wants to force the oil companies to pay it.
What you see is the news headline announcing the gasoline tax moratorium. What you do not see is the market answer, until some time later. The oil companies set their revenue and profit targets for the year. They then subtract all their expenses, crude oil, labor, energy, administration, etc., and then finally, they subtract the gasoline tax for the summer. Lastly they determine what they have to charge at the pump in order to hit their profit target. The price of gasoline has not changed! Mr. and Mrs. America pay the same for gasoline all summer.
Hillary must add another law. Prices at the pump must be fixed at the starting point price minus the tax.
Gasoline is now less profitable. The oil companies produce less gasoline, and instead make more heating oil, diesel, jet fuel and other by-products.
Hillary must add another law. U.S. law cannot touch the foreign oil price. Tariffs would increase the price. Releasing our oil reserves would affect the price by a couple of cents. Hillary must introduce rationing. Each household can only have so much gasoline, while businesses may apply for higher quotas.
Gasoline is scarce. It now becomes impossible to allocate in the right amounts. Long lines form as the local gas stations run out in certain areas. Remember the 1970s?
Where will Hillary stop? How can you tell when a “free market” politician turns into a Socialist? Hint: most of them already are, but the price of sheep’s clothing is cheap.