Photo:quitepeculiar, Creative Commons, Flickr
Tax rebate likely won't lead to lower gas prices.
The big news right now, of course, is the tax rebate announced yesterday. And while it may do something in terms of "stimulating" the economy in April, May and June (when the checks start arriving), right now it won't do much beyond inject a little "confidence" into the stock market. Yesterday the stock market made quite the recovery on the news — even though it's down today.
But will the tax rebate actually help individuals? That's the question. And what can you really buy with it. Central Jersey's Home News Tribune has an interesting article about what the minimum ($300) tax rebate would buy. Most folks, though, can expect between $600 and $1,200. Here's what HNT points out about how much gas you could buy with the tax rebate:
If you drive 15,000 miles a year and get 20 miles per gallon you will need to purchase 750 gallons of gas. At yesterday's average price of $2.87, according to newjerseygasprices.com, your annual cost for gasoline would be $2,152.50.
One year ago the average price of gasoline was $2.08, which would have put your annual bill at $1,560. Do the math. You're annual bill has spiked to $592.50. When you get that check from the government for $300, you've only covered half the increase.
Even if you got the $600, it would barely cover the increase. So, even though Big Oil companies like Exxon (XOM) and Chevron (CVX) are losing on the stock market right now, the industry will likely continue to make gains overall. Also, with economic stimulus expected, even if it doesn't actually happen until later, oil prices are expected to continue to rise as they have been the last couple of days. Rising oil prices didn't hurt Big Oil much in 2007, and they are unlikely to do so in 2008.
Disclosure: I do not own XOM or CVX.