Gasoline prices are in free fall. And after last week’s OPEC decision to keep pumping oil at the same rate despite a growing international glut, they’re only going to go lower in the weeks ahead.
At the end of July, the average price of a gallon of gas was $3.50, about what it’s been for several years. By Thanksgiving, though, the average price was $2.78 and falling fast, almost day by day.
This is similar to a massive tax cut, and it will mostly benefit working class Americans. If you have to drive to work, as most Americans do, you have to buy gas. No matter what the price. So a 50 cent (or 75 cent, or more) per gallon drop means you get to work with more money in your pocket. All told, Americans could save $125 billion — or more, if crude prices keep falling.
So, naturally, at least one Democratic member of Congress wants to jack up gas taxes.
“All it takes is a little leadership and courage, like Ronald Reagan and (House Speaker) Tip O’Neill did 32 years ago,” Rep. Earl Blumenauer (D-OR) announced on the House floor. He wants to increase the 18.4-cent-per-gallon federal gas levy.
It’s worth noting that Blumenauer’s bill isn’t in response to today’s declining gas prices; he actually introduced the measure last year, when the average price of gas was $3.25. As a publicity stunt, Blumenauer spoke this week next to a life-size cutout of Ronald Reagan. And it’s a fact that, as president, Reagan did allow a gas tax increase. But that’s not the energy policy he’s best known for.
In his very first executive order, Reagan lifted the Carter-era price controls on oil and natural gas. That, predictably, triggered a jump in production and led to a plunge in prices. It also set the stage for the fracking revolution a generation later, when — because profits were available to entrepreneurs — American ingenuity developed new ways to get “tight oil” and natural gas out of shale deposits.
In the long run, today’s lower prices may be bad for oil companies. They may even reduce output from American wells, although a recent study by the research group IHS found that “most of the potential U.S. tight oil capacity additions in 2015 (about 80 percent) have a break-even price in the range of $50 to $69 per barrel.” If prices drop below even that amount, we can leave that oil in the ground and frack for natural gas instead.
Perhaps I was a bit optimistic when I predicted, before Halloween, that gasoline would be $2.50 by Thanksgiving and $2.00 by Christmas. But now AAA agrees: “Drivers in southeastern states may see a select few stations selling gas at or below $2 in the coming weeks,” a spokesman for the automotive group says.
Less expensive energy is good for an economy, and today’s gas prices — caused by a flood of drilled-in-America fuel — are the best thing to happen to the middle class in a generation. Let’s not tax our bounty away.
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