Brian27

4 Money Problems That Obama Can't Fix

The author makes a couple economic mistakes.

1) When oil production is maxed, repealing the 18 cent tax will not reduce oil prices. That's because any decrease in price will result in a slight increase in demand that cannot be met by an increase in production. So market price of gas will remain unchanged.

2) Current and future oil prices are linked by arbitrage equation

F= P + C.

where C is the carrying cost of inventories and cost of borrowing.

Any information that causes individuals to believe that future price of oil will be lower will impact current prices negatively. Offshore drilling for oil today will create expectations of increased future supply. This will have a negative impact on future oil prices and by arbitrage reduce current prices.