Tax holidays on federal, state, and local fuel taxes are being considered and adopted by many governments. While I in many cases support lower taxes, the possible unintended effects must be kept in mind.

Basic economics tells us lowering the price of a desirable thing usually leads to greater consumption of it. We should expect the reduction in fuel taxes will increase the demand at the pump. That will reduce the supply, which in turn will likely lead to an increase in the base price. It potentially will negate the desired effect of the tax holiday.

Regardless, the best long-term solution to moderating the price is to increase the supply of fuel, preferably from U.S. sources.

Bruce Cole