Politicians are floating several ideas to ease the sting of gasoline prices, which have soared 48% in the past year to $4.24 a gallon.
Peter Schiff, global strategist of Euro Pacific Capital, doesn’t think much of the ideas.
One is for a “windfall profit” tax on oil companies. “If you want more oil, if oil prices are high because we don’t have enough oil, the last companies you want to tax are the oil companies,” he said in a podcast.
“Because, if we’re going to get more oil, where is it going to come from? It’s going to come from the oil companies. Well, where are the oil companies going to get the money to develop alternative sources of oil? From their profits.”
Schiff also opposes a proposal to provide Americans with $100 per month to make up for the higher gas prices they are paying.
“Where’s the government going to get this $100 per month of extra money to send to every American? Well, they’re just going to print it,” Schiff said.
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“They’re going to get it from the Federal Reserve. They’re going to run bigger deficits, which means they’re going to have to create more inflation to solve the problem of too much inflation,” he said.
Oil prices have surged 67% in the last year, and the root cause of that gain is inflation, Schiff said. Consumer prices soared 7.9% in the 12 months through February, a 40-year high.
The rise in oil prices over the past month stems from the sanctions placed on Russia, which led to a reduction in supply, Schiff said. To keep the oil market in balance, demand must fall with supply, he said.
“That’s what the free market solution is to high prices. It’s find a way to cut back on consumption. But no, the government wants to give people money so they can keep consuming what’s in short supply, driving the price even higher.”
Some states are implementing temporary suspensions of gasoline taxes to give consumers relief. But Patrick De Haan, an analyst at GasBuddy, a fuel-price tracking service, doesn’t think that’s the answer.
“States must think of a different approach to helping motorists in regards to gas prices,” he tweeted. “Tax holidays are boosting demand and putting additional upward pressure on price. Consumption must be cut for realistic price drops. Unpopular, but it’s the only thing that will work.”