By Len Suzio
As I write this op-ed many people believe the notorious TCI legislation is dead in Connecticut. But the proponents of this very destructive legislation have every intention of raising it again in the upcoming legislative session and Governor Lamont has been quoted as saying, “If somebody wants to take the lead and get this to my desk, I’ll sign it.” So TCI will be in the news during 2022.
The Democrat advocates behind TCI, the “Transportation Climate Initiative,” continue to seriously mislead the public about the real costs and devastating impact of the legislation should it pass. Republicans have attacked the legislation as just another tax and they are correct, but they overlook the far bigger, far more destructive impact of TCI which I will explain in this op-ed. The public needs to know the complete and real truth about TCI.
The TCI would implement a series of auctions whereby motor fuel dealers would have to bid for the right to sell gas and diesel fuel in Connecticut. The volume of fuel allowed to be sold in Connecticut would be decreased annually by a cumulative 30% over 10 years.
It’s essential to understand that TCI as presented by dishonest political advocates is the political equivalent of the infamous two-step monte card trick. First, it would employ an auction mechanism that would add to the costs of motor fuel; second, it would artificially restrict the volume of fuel available for purchase. The focus of the public debate has been on the first effect but it’s this second impact that is absolutely devastating.
The Democrats have attempted a political version of “two card monte,” focusing on the costs added by the auction bids which they claim will be limited to 5 cents to 9 cents per gallon over the next 10 years. Republicans have obliged, concentrating on this added cost and calling it a new tax. Democrats vigorously deny the auction costs are a tax and are happy to engage the Republicans in an argument about this aspect of TCI.
Why do Democrats like debating Republicans about the tax aspect of TCI?
It’s because it centers debate on the minor negative effect of TCI: the increase in gas prices that will be precipitated by the cost of the fuel auctions allowances. The Democrats know that public opposition to “only” a 5 to 9 cents increase in gas prices will be weak.
But it’s the second TCI effect that packs the wallop: the politically mandated strangulation of the supply of motor vehicle fuel available for sale. By restricting the availability of vehicle fuel in Connecticut, the supply will not satisfy the demand, which will induce gas price increases on a large scale. How much?
In economic terms, gas demand has low “elasticity.” This means that it takes big increases in the cost of gas to induce small decreases in demand. Studies show that in the short run the elasticity of gas demand is -.26. This means a price increase of 10% will correlate with a demand decrease of 2.6%.
Given this elasticity of demand for motor fuel, we can say that a mandated 30% reduction in fuel available would precipitate a price increase of about 120% to bring demand into equilibrium with supply. If we are at $3.30 price per gallon today, a 30% reduction in fuel available could potentially precipitate a price increase of as much as $3.96 per gallon, to an equilibrium price of $7.26 per gallon!
But it’s not only the demand for gas that will force higher gas prices; the gas station owners that succeed in purchasing the auction rights to sell gas will know that there is less fuel available for sale and fewer competitors too. They know they can increase their gas prices far more than the cost they will pay for the right to sell the limited amount of fuel under the gas shortage scheme supported by Governor Lamont and the Democrats.
Any doubt about the devastating impact of a government-induced gas shortage should be dispelled by recent history. Witness the mayhem that broke out along the east coast when hackers successfully shutdown the Colonial Pipeline in early 2021. In a matter of hours, gas prices increased to $6.99/gallon — and lines were around the block of every gas station! Older Americans will remember the Arab Oil embargo from 1974. If TCI passes, we’ll be facing the Democrat Gas Embargo, with the same dire consequences.
So, the trick behind the TCI political debate is that gas and diesel prices could potentially double to more than $7/gallon because Governor Lamont and the Democrat Party will artificially restrict (by 30%) the availability of motor vehicle fuel available to Connecticut motorists. The politically induced fuel shortage will also precipitate long gas lines as it becomes apparent there isn’t enough fuel to satisfy the gas needs of Connecticut motorists. No wonder why the Democrat Party is happy to center the debate on the pennies-per-gallon auction costs! Shame on the Republican Party for falling for the trick.
Republican Len Suzio is a former state senator.