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I'm knee deep in macro-econ 111 as we speak and specifically working on a project on the elasticity of gasoline, increases over the last decade, CPI adjustment, etc.

Otherwise I a) wouldn't have even known what the hell you were talking about and b) had no means to judge the accuracy of your claims.

You bring up interesting points about the MPG and demand reductions though, I need to study this further... Thanks!

OK, no problem bud. Good luck with your project. Whether or not to treat MPG regulations as exogenous is tricky, since at times they are a response to price (think Jimmy Carter) and at other times they are not responsive (ever since Carter). My point was to predict the demand response from this particular, small tax I would probably not include the late 70s/early 80s in my dataset.

I'm a bit too young to remember Mr. Carter and anything he did, but according to Mr. Mankiw's text the price of oil doubled between 79 and 81 but by 90 had fallen back to the same level (adjusted) as 70.

So in trying to understand what you're talking about (coefficients, population adjusted basis, Huh?) what I'm really learning is that there are so many damn variables to consider that it's giving me a headache.

:/

Don't worry, undergrad they just want you to understand the theory of tax incidence -- I wouldn't sweat the details too much. I do this type of analysis for a living and real world application is a little trickier.

Two pieces of information that makes the spill even more evil:

http://www.thedailybeast.com/blogs-and-stories/2010-05-25/shocking-bp-memo-and-the-oil-spill-in-the-gulf/?cid=hp:mainpromo1

And now Halliburton's very very dark role:

"Giant oil-services provider Halliburton may be a primary suspect in the investigation into the oil rig explosion that has devastated the Gulf Coast, the Wall Street Journal reports.

Though the investigation into the explosion that sank the Deepwater Horizon site is still in its early stages, drilling experts agree that blame probably lies with flaws in the "cementing" process -- that is, plugging holes in the pipeline seal by pumping cement into it from the rig. Halliburton was in charge of cementing for Deepwater Horizon.

"The initial likely cause of gas coming to the surface had something to do with the cement," said Robert MacKenzie, managing director of energy and natural resources at FBR Capital Markets and a former cementing engineer in the oil industry.

The problem could have been a faulty cement plug at the bottom of the well, he said. Another possibility would be that cement between the pipe and well walls didn't harden properly and allowed gas to pass through it."

"The oil well explosion in the Gulf of Mexico could be a well-timed and profitable accident for Halliburton, the global oil company with the famous connection to former U.S. Vice President D*ck Cheney. Just eight days before the uber-Valdez accident, Houston-based Halliburton acquired Boots & Coots Services, also based in Houston, in a $240 million cash and stock deal.

Boots & Coots, which uses the graphic of a burning oil well to represent the ampersand in its name, specializes in "pressure control and well intervention services." In other words, when an oil well explodes, Boots & Coots can step in and help remedy the problem. In a release, Jerry Winchester, Boots & Coots president and CEO, says "Combining the resources of both companies creates the premier intervention company across the globe.”

While Halliburton's timing of the acquisition could be chalked up to luck, some members of Congress are asking questions. Reps. Henry A. Waxman (D-Beverly Hills) and Bart Stupak (D-Mich.), have asked Halliburton provide all documents relating to "the possibility or risk of an explosion or blowout" at the rig in the Gulf, according to a report in the LA Times. "

Gotta love how, despite the fact that BP is legally required (and in fact has committed) to pay all costs, the Feds are still adding a new gas tax to raise billions of dollars "in case this ever happens again". Sounds more like another way to line their pockets.

And here's a surprise: Guess how much of their fine Exxon has paid since the Valdez spill in 89 (?) --- $0. Still hung up in courts.

At least the feds admit that even the almighty nanny state don't have a solution for this tragic disaster.

(or was it caused by a N. Korea sub missile?)

Gas tax typically refers to gasoline sales. That is not being increased, although it may be bumped up as part of the transportation reauthorization later in the summer.

What you're referring to is the barrel tax, which is levied on crude. The receipts go into a fund that sits waiting for events like this (unlike SS, the money is actually there).

Exxon has paid fines related to the Valdez. They plead guilty to violating the CWA and other laws in 1991, and paid a $100 million fine. Exxon also paid about a billion in civil damages to various governments.

What you're referring to is the class-action suit that residents of Alaska filed and won, with the award later being reduced by SCOTUS. Some $500 million of that has been paid out. The only issue remaining is the interest.

BP is legally required to pay up to a certain amount, not "all costs." That's exactly why Exxon has been able to tie the Valdez settlements up in the courts for decades.

BP is legally required to pay all cleanup costs.

BP's liability for damages is capped at $75 million, and they have said they will ignore that cap.

The Exxon court action, at least the biggest issue, had to do with punitive damages.

Obama can keep it up with the tough guy talk, but the law doesn't really support anything he is saying. If BP ultimately fails to fix it and/or pay the damages, there's not much we can do about it.

Sure, if you consider prohibiting them from operating in the US and seizing any assets that are here to be "not much"...

Since there aren't really any comments of Obama's in this article, what exactly are you referring to, anyway?

The gov't might be able to deny future licenses but there is no basis for seizing their assets. There are liability caps written into law and they're not high enough to pay for this mess. Ideally BP will do the right thing for PR reasons, but if they decide to cut and run, we're going to be on the hook for the cleanup.

Actually, Congress wants to quadruple the oil tax this week to shore up the cleanup fund, and those costs will be passed on to us, so we're on the hook either way.

BTW, as oil is a commodity, those costs are not really passed onto us.

Actually, because demand for gasoline is highly in-elastic and refined product supply in the US is fairly elastic, it will almost certainly be based on to consumers.

http://en.wikipedia.org/wiki/Tax_incidence

Economics FAIL.

Gasoline is inelastic in the short run but much more elastic in the long run as consumers have time to modify their activities to use less.

And not to sound like a jerkoff, but the wiki link on economics was for politburo's edification. I have degrees in the subject.

Well, you wouldn’t come off as a jerk off if you were actually right, but sadly you’re way off the mark (except on tax incidence, which is surprisingly difficult to explain to anyone whose never taken an econ course).

First – gas prices. May 22, 2000 National average = $1.53. May 24, 2010 National average = $2.79. $1.53 x 3 = $4.59. Where is the tripling in price?

http://www.eia.doe.gov/petroleum/data_publications/wrgp/mogas_history.html

Oh, and guess what happens if we adjust the 2000 figure to 2010 dollars? CPI in 2000 was 171, 2010 is 218 and the adjusted price of gasoline in 2000 is… $1.95, which means that gas prices have LESS THAN DOUBLED in the last decade when measured in today's dollars, attributed due to an increase in world demand (China).

If you have degree in Econ then maybe you should be familiar with the many studies that have been done on the elasticity of gasoline consumption in the US:

“the average price-elasticity of demand for gasoline is -0.26. That is, a 10% hike in the price of gasoline lowers quantity demanded by 2.6%. In the long-run (defined as longer than 1 year), the price elasticity of demand is -0.58; a 10% hike in gasoline causes quantity demanded to decline by 5.8% in the long run.”

http://economics.about.com/od/priceelasticityofdemand/a/gasoline_elast.htm

One more point. Did your coefficients hold over the last 10 years? Prices increased by 200% on my approximation, 30% on yours. Did demand fall by 100%? 15%? Even on a population adjusted basis? No, why not?

I am tired of debating with internet experts - think about that one for a while.

grrr.... comment dropped to the bottom of the stack.