Gasoline Stimulus Package

Our government is now considering the possibility of a stimulus package to prop up the staggering economy and how big this package should be. Whatever the ultimate wisdom of such an idea, it seems that the recent precipitous drop in gasoline prices alone is providing some measure of stimulus. Focus for an instant on gasoline alone and neglect the savings in fuel oil and the propagation of the reduction of the price of oil through the economy. Any savings from lower costs for fuels other than gasoline will only add to the total we compute below.

According the the Energy Information Administration in 2007, the US consumed gasoline at the rate of 18,457 thousand barrels per day (or 18,457 million barrels per day). Integrated over a year, this amounts to about 6.7 billion barrels. One barrel of gasoline is about 31 gallons. Hence over the course of a year, Americans drive through 209 billion gallons. Gasoline has plummetedĀ  from $4 a gallon to about $2. As a consequence, Americans will save over $400 billion from what they would have paid forĀ  gas.

Last year the government attempted a stimulus package returning $300 to $1200 per taxpayer yielding a $168 billion in stimulus. This provides a way a scaling the stimulus we are receiving from decreased gas prices. Is this stimulus enough? We do not pretend to know here, but we are already stimulating at four times the rate we did earlier in the year.

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