Did the state holiday bunny come to your house? Here is something she left me in the headlines of the C-J (Bush asked to delay adding to oil reserve to help gas prices):
Americans could save as much as 25 cents a gallon on gasoline if the U.S. government held off buying more oil to be saved for a national emergency, nearly three dozen House Democrats say.
...
That could increase the amount of oil on the market and perhaps reduce prices.
Such a move, they said, "can have temporary benefits that would go a long way towards helping American families who are being squeezed, and also stimulate the economy."
There's disagreement among economists about how much impact -- if any -- such a move would have.
Count me among the skeptics.
Using the formula for demand elasticity (short run e = .10), information from the rest of the article (and the only question confirmed), and mixing apples and oranges applesause (oil quantities and gas prices), the effect of totally suspending SPR purchases is less than a penny on the price of a barrel of oil gallon of gas:
- e = .10 = (dq/dp)/(p/q)
- dq = 12.3m over 6 months = 0.0683m/day
- q = 20.7m/day
- p = $3.25
- dp = $0.00107
Given the short run elasticity of .10, U.S. gas/oil consumption would need to fall by almost half to nudge gas prices down by $0.16/gallon.
Corrections to my mistakes and unprovoked attacks on my character will appear shortly in the comments section (and now I need to put on my state holiday bonnet and get ready for the state holiday service at a private, non-secular spiritual institution).
