Achieving Gasoline Price Stability in the U.S.: A Modest Proposal

Abstract

The recent volatility of short-run gasoline prices in the United States has resulted in calls for the government to intervene. This paper details a simple means of reducing that variability, utilizing federal tax policies, without eliminating the signaling role of prices in the medium- to long-term. If properly implemented, the gyrations in gas prices could be largely removed, with little impact on the revenue that the federal government generates through taxation. If applied to the markets in nations that have significantly higher gasoline taxes, essentially all price volatility could be removed.

A comparison of Hausman's and Breslaw–Smith's methods in estimating consumer welfare loss because of fuel taxes

“…Yücel and Dahl (1990) investigate the role of gasoline tax increase as a policy tool to reduce US oil import dependence. On the contrary, facing the severe volatility of short‐run gasoline prices in recent years, LeClair (2006) suggests the use of federal tax policy as a tool for a price‐stabilizing mechanism. LeClair (2006, p. 41) argues that ‘if properly implemented, the gyrations in gas prices could be largely removed, with little impact on the revenue that the federal government generates through taxation’.…”

Exploring Market Dispersion and Factors that Predict Auction Success of a Commodity: The Case of Three E-Auction Markets

“…Suppliers use variability in prices to differentiate their offerings and make their brands or products more distinctive or more desirable as compared with competitors [Redmond, 2002]. Price dispersion, however, can harm consumers through higher search costs and potential errors in their purchase decisions [LeClair, 2006].…”