By no means the most dramatic gasoline price change of late, it does stand out for being the first [image-nocss] rise in six months, in part due to a partial comeback on the part of demand. There are two camps expressing concern: reporters supposing that a return to demand growth would be an economic negative, and politicians hoping it isn't too late to conveniently slap on a tax hike.
Since July 11, when the all time historical high price of $4.11 per gallon for regular grade gasoline was reached, the price crashed by an amazing $2.45 per gallon. It took a very brief six months to bottom out. It bounced up these 12 cents, which is just a moderate amount in context of extreme 2008 price movement, mostly because gasoline demand is not as poor as it was (thanks to price).
It wasn't crude, whose price climbed briefly during international news feeds (Gaza operation, Russia/Ukraine natural gas dispute) but then corrected itself. OPEC wants to see prices rise, and coming weeks will show whether its cutbacks will catch up with world demand's retreat or merely chase it.
The current price of $1.78, $1.29 below its year-ago level, is clearly low enough to beckon gasoline demand at least part way up out of its ditch. A return to actual gasoline demand growth would reflect a more positive consumer environment, be good for all parts of the industry from refining to retail (profits, projects, and jobs), and feed tax coffers too.
On October 14, 2008, this column said that officials and industry critics "are about to get the terrible idea that low prices are a good time to push for gasoline tax hikes." A movement to do just that has now emerged. It blooms perennially when retail prices are low. The current rationalization is reduced tax collection due to lower demand should be corrected, but demand reduction has not been entrenched for long. For decades, the underlying assumption as been that tax hikes should be slipped in at low price points because consumers are unlikely to notice or resist. Today, some additional support for bigger tax collection comes from anti-petroleum sorts that desire to see very high retail prices slash demand long term.
Still, this time, a tax hike might prove a hard sell, and fail wonderfully.
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