Newt's Plan for $2.50 Gasoline

In the video clip above from the last GOP presidential candidate debate, Newt Gingrich revealed that he has a plan for $2.50 a gallon gasoline. Unfortunately, he did not say what the plan involved and did not release a white paper giving any details. The resulting intellectual vacuum has led to some interesting speculation.

Yesterday, the Atlantic (here) made some assumptions and filled in the blanks for Newt. If we look around the world for countries that have cheaper gas prices, we find that these countries accomplish the miracle through straight-forward subsidies. For example, in Venezuela, gasoline is 12 cents a gallon!

Doing the math for the US, for the last seven years American's used roughly 3.3 billion barrels of oil which at 42 gallons per barrel yields 134 billion gallons of gas per year. Gas is currently averaging about $3.85 a gallon. To get down to $2.50 would require eliminating the gas tax (18 cents per gallon going to roads) leaving $3.68 ($3.85 - 0.18). To get to $2.50 would require another $1.17 ($3.85 - 0.18 - 1.17 = $2.50). Multiplying by 134 billion gallons per year ($1.17 * 134B = $157 B) and adding back in $25B in gas tax you get $187B.

This might seem like a lot of money but the Bush Tax cuts cost $2.5T over their first ten years. Eliminating the Bush tax cuts and using the money for fuel subsidies would leave money left over for other ideas Gingrich might have. So far, this is the only way anyone has been able to figure out that would actually satisfy Newt's plan. The only problem is that Newt is opposed to any tax increases even if used to subsidize $2.50 gasoline so he must have in mind increasing the deficit (was it Gingrich that said deficits don't matter or was that Dick Cheney, I'm getting confused).