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

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.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation

JEL Codes: Q02: Commodity Markets, L71: Mining, Extraction, and Refining: Hydrocarbon Fuels, Q35: Hydrocarbon Resources, Q38: Nonrenewable Resources and Conservation: Government Policy, D40: Market Structure, Pricing, and Design: General

Keywords: Gasoline market, price variability, buffer stocks, tax policy, US

DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No2-3

Published in Volume 27, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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