Letters to the Editor
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Crisis pricing vs. speculation pricing (why the tax break is silly)
I have lived through a "tax holiday" from my own state, Georgia, too, and I too saw prices drop. However, without paying attention to the context, extrapolation is utterly meaningless. Why was there a tax holiday in Illinois? Why did Georgia do the same? What were the goals?
In both cases, there was a temporary panic price or crisis price. In the case of Georgia, there was pipeline damage after Katrina, and so, to ameliorate the panic pricing of $3.00 a gallon for gasoline (which had been purchased and gone into reserves at $1.00 a gallon), there was a tax holiday. The idea was to "get past the rough patch," when the pipeline would be repaired. In other words, the expectation was that the price pressure would no longer be present at the end of the holiday.
Is there any reason to believe that oil speculators will no longer be betting on supplies by the end of this summer? Is there a reason to believe that Middle East supplies will be more stable, then? Is there a reason to believe that new suppliers will be online by then? Is there a reason to believe that there will be less domestic demand by then? In short, is there any reason to believe that current prices are "panic" or "emergent" prices? If so, then we might expect prices after the "holiday" to be lower than before -- just as occurred in Illinois and Georgia. If not, there is no reason to believe that anything like that would occur.
Furthermore, if you wish to perform a genuine analysis, you will look for Illinois vs. surrounding states before and after. You will look at Georgia vs. middle West states before and after. Did Chicago pay more than its neighbors before the "holiday?" Yes. Did they pay more after? Yes.
Without the context of pricing and supply, the argument based on the dollar per gallon is, to be polite, meaningless, and, to be rude, a smoke bomb.