Next month, the Saudis will be pumping an extra half-a-million barrels of oil a day compared to last month, bringing total Saudi production to 9.7 million barrels a day, their highest ever level. But the world’s biggest oil exporters are coupling the increase with an appeal to western Europe to cut fuel taxes to lower the price of petrol to consumers.
Why do they want the West to lower fuel taxes? They want to be able to raise their own prices and/or they want higher demand for their primary product:
As N. Gregory Mankiw, the former chair of President Bush’s Council of Economic Advisors, says, “What you learn in Economics 101 is that if producers can’t produce much more, when you cut the tax on that good, the tax is kept … by the suppliers and is not passed on to consumers.”
Note to McCain: If the Saudis are advocating your energy policy, you probably want to rethink it, lest you end up like that other Saudi hand-holder.
As an aside, since McCain doesn’t propose to pay for his gas tax holiday, the lost revenue would either increase the budget deficit (more U.S. bonds for the Saudis to buy) or come out of the Highway trust fund (fewer jobs and more decaying US transportation infrastructure).
http://climateprogress.org/2008/05/01/gas-tax-holiday-part-3-it-is-cynical-and-indefensible-no-matter-who-proposes-it/