Oil prices are up and the question has become will the government institute a gasoline tax holiday? The professionals behind the Uintah Basin Small Business Development Center explain why this is not something to get excited about. “Basic economics tells us that it will cause an eventual increase in the price. Remember it’s all about price/supply/demand. If we are willing to pay $3.50/gallon for gas (for example) and a tax holiday drops the price to $3, supply won’t change. So, a drop in price will cause an increase in demand. If demand goes up, so will price, eventually back to the $3.50 we’re willing to pay. Then, when the government decides they can’t do without the fuel tax and adds it back on, the price will go to $4,” continues the Small Business Development Center. “There’s a ratchet effect with fuel price, so it goes up fast but will be slow to come down and probably won’t come down to the original price because we will be willing to pay more to get where we need to go.”
