John McCain’s Really Bad Gas Tax Idea
The GOP nominee proposed a summer vacation for the gasoline tax. A bolder and more economically sound policy would be to increase it sharply.
John McCain chose April 15 to propose a slew of tax initiatives to commemorate the tax filing deadline. Some were good ideas: a reduction in the corporate tax rate, simplification of the tax code, and reduced federal discretionary spending. But Senator McCain also proposed a holiday from the federal tax on gasoline and diesel, as an economic stimulus. The gas tax is good for the economy, and one of our best policies for fighting terrorism. The tax should not be abolished; it should be increased.
Taxes drive a wedge between the price a buyer pays for something and the price a seller receives. When taxes are high, buyers have to be willing to pay more and sellers to accept less, or there won’t be any trade. Normally, that means fewer buyers and sellers, since the bigger the wedge, the more parties who will be unable to find what they are looking for at an acceptable price. In the labor market, the price is wages and salaries, and the income tax puts a big gap between the wages and salaries people actually receive after tax and what companies have to give up to hire them. This makes it more expensive to hire people and less rewarding to work, so less hiring and less working will happen. This wedge effect is the real waste created by income taxation. Higher income taxes mean giving up wealth that neither producers, consumers, nor the government ever get, because it was never created in the first place.
Unlike labor, some markets trade in goods that harm third parties, and taxes can fix the problem. For example, when a bar sells liquor to its customers, the owner receives a profit, the customers enjoy the benefits of intoxication, and innocent motorists bear the risk of being struck by a drunk driver. Alcohol taxes make the price of booze reflect these otherwise hidden social costs, known to economists as “negative externalities” because they negatively affect parties external to the transaction. The tax forces drinkers to make decisions based on drinking’s real cost; it also has the happy side effect of raising revenue the government might otherwise seek elsewhere.
Gasoline consumption, like drinking, imposes a cost on other people. Per mile, we only pay the cost of gasoline, gasoline taxes, and vehicle mileage. But driving also emits smog and greenhouse gases, wears out roads and bridges, and requires hiring traffic police. More vehicles on the road cause more collisions and more traffic jams. More driving increases the price a barrel of oil fetches on the world market, enriching oil autocracies and terrorist groups, and requiring us to spend more on national security. These are all negative externalities, and we drive more than we should because drivers don’t pay for these costs by the mile.
For these reasons, Gregory Mankiw, George W. Bush’s former chief economic adviser and Harvard economist, started the Pigou Club, an informal group of economists who advocate a high tax on all carbon emissions. The group is named after Arthur Pigou, the English economist who first described externalities. Some governments are experimenting with building Pigouvian charges into tolls, so drivers pay the cost of traffic. The city of London charges a steep fee to drivers who enter the city center during business hours. San Diego is building highways with tolls that rise and fall automatically, to charge more when more vehicles are on the road. But the simplest way to fix the problem is a system already in place: the gasoline tax.
A bold president would raise the gas tax, not abolish it. The gasoline tax we already have is meant to fund transportation maintenance; these transportation funds are already mismanaged and inadequate to repair what we have, as the Twin Cities bridge collapse showed. The costs of fighting terrorism and climate change are not reflected in the gas tax at all. The sad irony of McCain’s proposal is that besides worsening these problems, abolishing the gas tax may merely raise the cost of gas in the long run. Once the tax is repealed, it would be extremely difficult to reinstate it on Labor Day, two months before the election; it might be dead for good. In the short run it’s very difficult to change personal driving habits. But in the long run, high prices encourage people to invest in vehicles with high fuel economy and housing with shorter commutes. Lower prices now mean higher demand later; and higher demand means higher gas prices.
Even if he thinks a gas tax holiday is worth the short-term benefits economically, McCain is staking his candidacy on victory in Iraq. A tax break can only help the governments of Iran and Saudi Arabia, and the Shiite and Sunni militants they finance in Iraq. Drivers don’t see the cost to our security and our troops when they fill up at the pump, a policy that must change. We can harness the power of the market to break our dependence on fossil fuel dictators. No blood for oil, indeed.
Nic Duquette is a writer living in Ohio.
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44 Comments
1. Rone Lewis:The problem is the assumption that the federal government has the right to spend money on whatever it wants and tax its citizens in any form to pay for it. Our government grossly mismanages its revenues, beginning with the profligate spenders of Congress and proceeding down through the bloated bureaucracy that dispenses our money. Giving them more of our money is simply foolish.
Apr 18, 2008 - 3:30 am 2. Mark:By this logic, the people living on this planet are one big negative externality. What a great idea to punish us for burning gas to make a living. Why not just put a 100% tax on living and get it over with?
How about cutting taxes to stimulate the economy, and letting a robust private sector develop technological solutions? How about building nuke plants to power electric cars? Crushing us with taxes should be the LAST option.
Mark
Apr 18, 2008 - 5:12 am 3. Ken:Since gas price largely determines the cost of transportation, and transportation cost is a part of a cost of every single product and many of the services that comprise our economy, a higher gas tax will drive a wedge into the very heart of our economy, causing it to slow down. Perhaps that would be considered a good thing from a greenhouse gas perspective, but from every other perspective that would be a bad thing.
Apr 18, 2008 - 5:40 am 4. Moonage:A bold President would do it. Only a very stupid candidate would.
Secondly, I am not convinced that the Pigou logic applies here. Liquor and the time of day you run errands our whatnot is very selective. Having to be at work at 8am is not. No matter how painful you make it to the driver, they will still have to be at work at 8am. You’re just simply taking money from the consumer and giving it to the government to spend at their disctretion, which does not guarantee anyhing is done to solve the problem. See the tobacco settlements for the perfect illustration of why I don’t think this idea works. I think McCain’s suggestion is purely pandering to the voters, so it’s not like I’m defending him. I just don’t think higher taxes on stuff we HAVE to have solves anything. It never has in the past, so there is no justification to say it will in the future. All that will happen is people will buy fewer and fewer luxury and entertainment items ( and more efficient vehicles ) until a real alternative is presented.
Apr 18, 2008 - 6:23 am 5. Smarty:A tax break on gas is a more direct form of stimulus without the administrative costs. It helps the poor and middle class more than the rich (don’t libs love that?)
Also, the real solution is more drilling domestically, and more refineries. Throw in fuel-cell R&D money to cover us 15-20 years out, and we can keep the economy going and stop funding the jerks and psychopaths of the world.
Apr 18, 2008 - 6:24 am 6. Fred Beloit:The three comments above make sense. Consider adding to them the outrageous propensity of pols, and pundits, to use taxes to control the behavior of citizens. Apparently what Duquette is after is really a sins tax. The three mortal sins in order of severity: emitting carbon, driving, and drinking. When will someone in government propose producing and refining more oil?
Apr 18, 2008 - 6:36 am 7. A. N. Pierson:Gast tax-shmas tax… after listening to OBama and CLinton debate the other night, we should just make McCain president by acclimation and put the country out of its mistery.
Apr 18, 2008 - 6:59 am 8. Tolbert:Suspension of the gas tax is a spectactularly bad idea.
The day after the tax is suspended the price of gasoline would remain the same as traders would have the excuse to push crude even higher on “demand” excuses.
The only answer to high energy prices is to open up more land and off-shore to drilling as well as converting coal to gas via Fischer-Tropsch.
Ain’t going to happen though and instead we will get the same sort of stupid policies out of Washington that encourages converting food to fuel due with insane ethanol production subsidies.
Apr 18, 2008 - 7:06 am 9. LCSusan:Depending upon Senator McCain’s VP choice, I have been considering voting Repub for the first time in my life; however, ill advised policy such as lowering the gas tax - even for the short term - makes me reconsider my consideration.
http://strictlyanecdotal.com/2008/04/18/hillary-clinton-cant-be-nominated-and-barack-obama-cant-be-elected.aspx
Apr 18, 2008 - 8:25 am 10. EJHill:There is no historical facts to back up the author’s assumptions about a higher gasoline tax. When Bill Clinton first took office Al Gore argued that a .50 hike in a gallon of gas would drastically cut consumption. Gas at that time was $1.07. Well, prices have tripled since then and demand is still as high.
The other theory that I love is that “…high prices encourage people to invest in vehicles with high fuel economy and housing with shorter commutes.” So, in an economy slowed by already high energy prices and the subprime crisis, the author believes that a higher gasoline tax will cause people to either put their suburban home on an already flooded market or go ANOTHER $21,000 in debt to buy a new Prius?
Most tax-to-change-society theories belong in the same categories that start with the line, “Once upon a time…”
Apr 18, 2008 - 8:26 am 11. Dez:I watched the price of spaghetti go from $.77 to $1.17 a box in a two week time frame. There is a wheat shortage and the cost to deliver that box of pasta to my local grocery store has gone up. The author here, never addresses the fact that every product that we buy is delivered by truck at some point. If the cost of delivery goes up, the price each item goes up. Everything is going up except salaries. John McCain’s idea may not be the answer, but he’s thinking in the right direction. Maybe just repeal the tax on Diesel? If not that repeal the tax on spaghetti?
Apr 18, 2008 - 8:49 am 12. goy:Nic, like most socialists who believe the answer to every perceived ill is a tax, you have missed the point here completely. Your analysis is woefully lacking, and the fact that you think more money poured into government coffers is a “happy side effect” of anything is indicative of where you’re coming from here.
First: alcohol *consumption* imposes no more cost on society than Twinkie® consumption. The social phenomenon you’re really reaching for here is alcohol *abuse* which, like any other drug abuse, absolutely imposes a social cost. But as we see with the lengths to which *abusers* will go to get their drugs (or alcohol), high cost (or taxes) on the substance in question - and even risk of imprisonment - don’t prevent a negative outcome. The net result is little-or-no discernible reduction in the undesirable social behavior and economic exploitation of the rest of us by the government in the form of another tax.
Second: as Fred Beloit accurately points out, you seem to think gasoline *consumption* is really analogous to alcohol abuse. Furthermore, you seem to believe that the consumption of gasoline is somehow optional, like drinking, for everyone and that the normal market economics apply. This is a case of False Analogy further corrupted by an utter lack of connection with reality: the two are NOT equivalent, and people who commute to work must purchase gasoline to get there. There is no short-term option to simply stay home, which your “analysis” - and your erroneous comparison to drinking - implies. Long-term options like improvements in public transportation or other alternatives are the domain of public institutions, not individuals deciding whether to buy gas at Shell or BJ’s.
The other far more important aspect of this issue that you (and socialists like Hillary!) are completely ignoring is the incredible windfall the state and federal governments ALREADY receive as a result of these onerous taxes. For every $10B in profit a company like Exxon/Mobil *earns* - by finding, drilling, pumping, transporting, refining, marketing, distributing and finally selling their product, all at a ridiculously low margin - the state and federal government(s) collectively receive approximately $50B in the form of gas taxes and corporate income taxes - all for doing exactly squat.
We have Hillary! boasting that she wants to *take* oil companies’ profits. We see Congressional hearings demanding accountability from the oil companies for the profits they legally earn (due to OUR consumption). But do we see ANY hearings whatsoever aimed at holding government accountable for what it does with the trillions of dollars it receives? Do we see hearings aimed at determining why we aren’t using the natural resources we have at our disposal? No.
If you have a beef with dependence on foreign oil, or if you’ve been duped by Al Gore’s lies and you think humanity’s “carbon emissions” have an effect on climate that can’t be more rationally explained by millenia of temperature fluctuations, start by demanding accountability of the government for the hundreds of billion$ it rakes in every year due to *our* gasoline consumption. Where is the research into alternative energy sources these taxes were originally earmarked to fund? Where is the federal subsidy for companies like Tesla Motors, which has finally put an electric automobile into production? Answer those questions first.
Realize that the states and feds have no motivation whatsoever to reduce our dependence on oil simply because it would reduce their collective income substantially. That income means power, and power is something government is never inclined to give up.
Apr 18, 2008 - 9:05 am 13. Brad:Wow, this is what I love about the Internet–that regular folks contribute such worthy information. It’s like the pamphleteer days of our founding, what freedom of the press really meant then.
Commenters here responded beautifully to a flawed argument. While the majority of comments are good, I nominate Pajamas Media put goy’s comment piece above the article being commented on.
Nice piece, Mr./Ms. Goy.
Apr 18, 2008 - 10:28 am 14. David Thomson:“A bold president would raise the gas tax, not abolish it.”
John McCain will not be elected president if he advocates paying higher prices at the gas pump. He would instantly destroy his campaign. Voters, rightfully or wrongly, reject higher taxes that directly impact on their own pocketbook. Politicians long ago learned to be subtle and discrete. “Barry” Obama would be thrilled if McCain did something so dumb. He would then claim that he is protecting the common citizen. McCain might even lose by a landslide.
Apr 18, 2008 - 12:27 pm 15. urbanleftbehind:If the price of transport (of goods) goes up with an increase in the gas tax, it eventually becomes an indirect tariff on foreign goods in the sense that producers will gradually utilize or situate inputs closer to the site of processing and to the greatest share of its consumers.
On top of that, I feel we should be drilling closer to home, do away with the EPA-mandated differential summer fuel blends (a bone for our urban/suburban friends), and leverage our illegal Mexican “hostages” for oil from down there.
Apr 18, 2008 - 12:33 pm 16. WR Jonas:The logic of Mr. Duquette is simply too flawed as to be offered as a solution to a problem. Sending more money to the Federal government has never solved a thing.
Apr 18, 2008 - 12:36 pm 17. freetoken:Our job as taxpayers is to keep it out of their hands.
His solution ,as opposed to Mr. McCains’ is fight a fire by throwing more fuel on it. Absolute insanity.
So, for all of you who want to abolish the gasoline taxes, how do you propose building and fixing our transportation infrastructure, which is where gasoline taxes are usually (explicitly) targeted?
The power to tax is the power to destroy, and I agree with the author in that reducing American’s consumption of gasoline is a good thing. Demand destruction by taxation. Whether Pigou’s theory applies here or not… I am not sure, but certainly those more inclined to economic theory are welcome to discuss it and I think it is a good and necessary discussion.
Several of the above posters have reiterated what are standard talking points - eg. “more drilling’. I do not believe that when investigated closely such well worn claims (e.g., that more drilling will solve our import dependency) will hold up. What too many Americans are not aware of is the sheer quantity of petroleum and petroleum products we consume and import. You can go to the EIA website and check the numbers yourself. You can also go to the USGGS website and find studies of the amount of oil in ANWR, off California, etc. The realities of American oil consumption (which our President has labeled and “addiction”) is such that simply drilling more will not make that great of an impact upon importation. (E.g., likely to reduce imports only 10%, maybe 20% if best cases come together, for a short period of time.) Note too that oil fields deplete, and after a couple of decades places like ANWR and the California coast will have much lower production, so simply drilling more is not a long term solution.
I am not against letting companies drill in ANWR, or even off the California coast, but the probabilities tend to indicate that America will struggle to ever get to 7 million barrels per day production (of real oil) again, no matter where we drill. We need (with current infrastructure and practices) about 20 million barrels per day.
The Federal gasoline tax is a small portion of the cost per gallon. Given the highly inelastic nature of American’s demand for gasoline making small changes in the price of gasoline have little effect on the volume consumed. 18 cents a gallon also does not mean much to the actual family budget. E.g., if you buy 50 gallons/month then the Fed tax is just $9, less than the price of a movie ticket in many areas. In other words, the whining is disproportionate to the cause.
In summary, I encourage everybody to research these issues more, and not jump on the original author for trying to address real issues.
Apr 18, 2008 - 12:45 pm 18. Amidut:Spot on, Nic Duquette! An increased gas tax would be best way to force Americans to conserve energy and starve the terrorist rats. It would be less expensive than disembowling the shale of the Rockies and oil sands of Alberta.
Apr 18, 2008 - 2:13 pm 19. EJHill:freetoken - I don’t believe any of the comments above show lack of research and I take exception to the idea that the original author is inoculated from criticism “for trying to address real issues.”
Among the “real issues” dealt with here are these:
* Is taxation a legitimate way to regulate an economy or alter the social behavior of a nation’s citizens? And even if you agree to it’s legitimacy, does it really work? Al Gore promulgated the theory in 1993 that Americans would drastically reduce their gasoline consumption if the price were artificially raised beyond $1.50. That has demonstrably and overwhelmingly been proven false.
* Isn’t all of this a conscience effort to buy votes with the voter’s own money? And are we getting sick of it? John McCain wants to buy your vote at the gas pump, Sens. Clinton and Obama want to buy it at your doctor’s office.
* How can an author claim that “these transportation funds are already mismanaged” and decide that the situation will be vastly improved if we just give them more money to mismanage?
Apr 18, 2008 - 3:03 pm 20. Engineer-Poet:I have to yell here, because the webmaster is clueless and not answering mail: YOU BROKE THE PREVIEW! FIX IT!
Quoth “Smarty” (gotta use scare quotes on that one):
Why do so-called “conservatives” insist on believing things that are manifestly false? Here’s the straight dope:
1. When USA oil production peaked in 1970, national consumption was about 14.7 million barrels/day.US oil consumption is now about 20.6 million barrels/day.
2. US oil production has fallen from 11.3 million barrels/day to 6.9 million barrels/day.
3. Meanwhile, imports rose from 3.4 million bbl/day to 12.3 million bbl/day.
We can’t drill our way out of this! The only fix is on the consumption end. Real patriots got rid of their guzzling pickups and SUVs after 9/11, if hadn’t already.
Quoth EJHill:
Ahem. Look at gasoline consumption after the 1970’s oil price shocks; it dropped 10% from 1977 to 1980 and didn’t recover to 1977 levels until 1993!
Demand has been propped up by borrowing, supported by the real-estate bubble. That’s coming to an end.
Or people will buy $21,000 Priuses instead of $40,000 Escalades.
Quoth Ken:
Hogwash; we can move our freight to rail and save 2/3 of the oil, then electrify the tracks and save the remaining 1/3. It’ll save billions in damaged freeways, too.
Quoth Mark:
Because we’ll never have them if we pay the full price of nukes and batteries, but the costs of fighting wars in the Middle East and jihadis all over the world are paid through income taxes instead of at the pump.
Quoth goy:
I changed my petroleum consumption by 1/3 or more with my choice of vehicle. Lots of people can cut their gasoline consumption by 10% or more by just driving less aggressively. Trucks can cut fuel consumption at least 15% with better aerodynamics, and NASA showed how to do much better back in the 70’s. We have totally fuel-optional capabilities at reasonable prices with the Aptera and VentureOne, with the Chevy Volt coming. We could have had plug-in hybrids in the 1970’s, but the auto companies decided not to make them. $5/gallon gasoline would create the market, and start to starve the oil producers.
Quoth WR Jonas:
And an increased gas tax is the perfect way to keep money away from Washington and Riyadh at the same time!
Apr 18, 2008 - 3:26 pm 21. freetoken:EJ Hill: I did not intend to dissuade anyone from discussing the tax and economics issues - indeed, I thought I made it clear that it is worthwhile to discuss a Pigouvian approach, both the technique of such as well as the morals (as you seem to indicate with problems about taxation.)
Obviously I disagree with you about the state of research of some of the posters’ claims, in particular the ones which are centered around “just drill more”, as it can be paraphrased. People who make such claims rarely (if ever) cite the actual research done on the resource (and the limits of such), or of production history or prospects, or actual demand figures, or (such as in the case of the California coast) such practical things as local politics.
On whether raising gasoline prices would reduce demand - clearly the demand for gasoline in the US is very inelastic. This has been known for some time. There are some who claim that long term demand is somewhat more elastic, but still, as a commodity gasoline demand is a very tough issue to approach. Frankly, $1/gallon may not be sufficient to curb demand enough.
And that leads to Moonage’s insight: “A bold President would do it. Only a very stupid candidate would.” Perhaps there is no Presidential candidate who ever could discuss what it would take to significantly reduce oil imports, and be elected.
Apr 18, 2008 - 10:11 pm 22. Teri Pittman:I live in a rural area where there are no alternative forms of transportation. Like most workers these days, it’s a job that requires I work a shift that does not give me the alternative to car pool. I have a 27 mile commute each way and I make $11 an hour. Please explain to me why I should consider you a rational human being for expecting me to pay an even larger chunk of what I make, just to be able to get to work.
McCain gets it. He understands how hard a hit that lower income workers are taking from high gas prices. (Imagine what it would be like if you were making minimum wage!)He also understand that there are a lot of areas in the country that depend on summer travellers. A tax vacation would keep those areas from sliding into recession at least this summer.
Apr 19, 2008 - 9:32 am 23. Bill W:Engineer - Poet — As a fellow engineer, I would think you would be smarter than your post. At least you don’t claim any expertise in economics, which is evident in your post. Your two most glaring mistakes 1) you try to combine statistics from the ’70s to today to somehow draw the conclusion somehow that lowering domestic supplies actually increases domestic consumption is ludicrous. There is no connection - the population, economic output etc, are all much larger today than they were in the ’70s and lack of domestic supplies and lack of allowing ourselves to tap supplies that we know about (offshore and ANWR) has helped push up the amount of imports we need. Which leads to the second that you and the original author totally ignore, but is a huge factor - energy consumption is pretty much inelastic. So, the tax on gasoline does not have the wedge effect that most taxes have.
Apr 19, 2008 - 10:16 am 24. Tolbert:For those who insist that expanded drilling is not part of the solution to tight energy supplies.
How’s that “not drilling” working out?
Yeah, I though so.
Apr 19, 2008 - 11:35 am 25. Joe:Increasing or decreasing gas taxes are a wash, a mute point. China and India are steadily increasing their oil consumption at a rate that will probably cause the price of oil to reach $175 to $200/bbl before it stabilizes, (if it ever does). We have to deal with the increasing price as best we can.
Apr 19, 2008 - 3:55 pm 26. Engineer-Poet:This summer I have to replace my old 1997 4Runner. I plan on buying a new 2009 Accord (diesel). This should more than double my mileage. It’s true we have to have transportation, It’s essential to our commerce, but at least we can replace 15mpg cars with +30mpg cars.
What we, (the USA), really need to focus on is upgrading our electric grid and building alot of Nuke plants to help ECONOMICALLY power the our future fleet of plug-in hybrids cars & trucks.
Quoth Teri Pittman:
You have it backwards. Ask instead why your employer expects you to commute so far, on an odd shift, in such a remote place, for a lousy $11/hour.
Gas tax money doesn’t just disappear. If we follow T. Boone Pickens’ suggestion for a gas-tax increase, it should come right back to you in reduced payroll taxes… unless you drive a guzzler. The extra money could let you do any of a number of things: buy a more efficient vehicle, move closer to work, or take another job that doesn’t require so much driving. The point is that people should be encouraged to stop spending so much money on foreign oil, where it leaves the economy and takes jobs with it.
Quoth Bill W.:
Except I never said that. For an engineer, your reading abilities aren’t looking good.
Domestic supplies were not affected by the 70’s price shocks. Gasoline consumption was cut by 10% as proven by the EIA data and took more than 10 years to recover even in an era of cheap fuel. Had US policy kept fuel expensive to discourage consumption, that trend would almost certainly have continued downward; US vehicles are very inefficient compared to most other countries.
Again, you’re wrong; the short-term elasticity is small, but the long-term elasticity is much larger. When people buy a new vehicle they lock in much of their fuel consumption for several years. The sales of hybrids have been rising very steeply, which is one way we are locking in long-term reductions in fuel demand.
You’re claiming that the laws of economics were repealed for gasoline, and you call me ignorant of economics? First, remove the beam in your own eye….
Quoth Tolbert:
About as well as drilling would do, except we still have the oil in reserve for a real crisis. Not being able to tool around in 15-MPG dually pickups is not a crisis. When the auto companies stop building anything that gets less than 30 MPG because they can’t sell it, half their offerings are liquid/electric bi-fuel and we still can’t get enough oil… that would be a crisis.
Joe: You’re one of the few people who get it.
Apr 19, 2008 - 5:41 pm 27. John Samford:Nic is pretty much clueless and is driven by dogma. McCain is half-steppin it.
Apr 19, 2008 - 7:26 pm 28. Joe:We need to get rid of the income Tax AND the IRS that enforces it. Go to a value added tax system based on M3 and not GDP.
As far as global warming, what a bunch of hooie! Climate change on this planet pre-dates humanity by at least 1 million years. Please explain to me what caused climate change BEFORE humans existed and why that same cause isn’t having an effect today?
Colorado alone has enough Shale OIL to provide the human race with Petroleum products for several thousand years.
No the problem is 100% political. The greenies have tied up private enterprise AND the government to prevent the use of America’s natural resources. Greenies don’t care how many millions of humans die due to their unproven and discredited theories.
There will be no change until the ‘environmental movement’ is held accountable fpr their actions. Those greenies that where so hot and heavy for ethanol should now be charged with negligent homicide when 3rd worlders stave to death.
Those preventing drilling in ANWR should face a class action suit by those harmed by the high cost of gas.
Joe’s crystal ball for the future…
Apr 20, 2008 - 6:12 am 29. Bubba:We have to modernize the electric grid. Future autos will shift to more diesels, more hybrid vehicles(mostly diesels & most plug-ins), and some small electric commuter cars. The big challenge now is developing better batteries. Our electricity concumption will skyrocket and the kw/hr cost will probably double. But even then it will still be much cheaper than the present relative cost of gasoline. We’ll have to get electricity from all sources solar, hydro, and wind may end up making 20% of the mix, but the big increase will be Nukes. Traditional fuel oil, coal, etc.. will increase too. Biodiesel, will be big for a while, E85 will be a dud, ultimately Hydrogen fuel-cell cars will be the answer but they’re a long ways away.
The fuel tax as a revenue stream for transportation infrastructure is flawed and becoming a target for abuse the same as tobacco tax has as it relates to health costs. With all the envirocommies driving around in their stylish little hybrid freakmobiles, they are not paying their fair share for highway usage. I read somewhere awhile back that Kalifornia was considering basing taxes on mileage because the revenue stream from fuel taxes was decreasing as more people switched to more fuel efficient cars. The only common denominator between vehicles and their true cost on the transportation system is where the rubber meets the road, literaly. The fuel tax should be abolished and incorporated into the excise tax on tires. As for as taxing fuel for its effects on climate, the only people pushing that are the commies that invented the lie, and the idiots that believe it. They could pay a voluntary tax to make them feel good all over, but it shouldn’t be forced on people that are grounded in reality. To reduce fuel costs we need to exploit our domestic rescources, build more refineries and quit burning up the worlds food supply like a bunch of braindead zombies.
Apr 20, 2008 - 8:07 am 30. Engineer Smarty:We have too little refinery capacity, and we make it worse by having so many custom blends. Increasing refi capacity would help. Drilling domestically would help as well.If it wasn’t worth it, then why is Cuba drilling not far from they keys?
Any engineer should have the ability to figure out that slashing emissions is only possible by slashing productivity. That would drive wages down.
Apr 20, 2008 - 5:03 pm 31. PMC:If the government is going to levy taxes, it ought to tax behaviors that have negative externalities (driving ridiculously massive cars) rather than behaviors that have positive externalities (running a business, working hard, creating wealth, etc.).
The government ought to raise gas taxes and *decrease income taxes by a commensurate amount*. At least that way, one way to avoid taxes would be to drive a more efficient car. Currently, if you want to avoid taxes, you have to stop being a productive member of the economy!
Punishing people for creating wealth is folly.
Apr 20, 2008 - 5:26 pm 32. ulrich benzing:Nic Duquette’s explanation is economically correct.
In fact, it would be an even better idea to raise the gas tax and lower the income tax simultainously.
This would lead to more employment, less oil consumption, and less CO2 emissions.
The only problem is that governments tend to always raise taxes, but never tend to lower them.
Apr 21, 2008 - 11:23 am 33. Engineer-Poet:Quoth another “Smarty” (who seems to dare me to use scare quotes):
Let’s see how this stands up to the most trivial economic examination.
If high product prices were due to a shortage of refining capacity, then:
1. refining margins (the “crack spread”) would be high and
2. the price of the inputs would be depressed.
That’s “Smarty’s” fantasy world. In the real world, the “crack spread” is down to $13/barrel and the price of crude sets new records (in US$) almost daily. His “solution” makes about as much sense for dealing with oil shortages as buying a bigger truck.
When the USA’s per-capita oil consumption is approaching the level of Cuba’s [1], we won’t need imports even without much new drilling [2].
Cuba has extremely low oil consumption, and can become an exporter with relatively little production. This is a very good time to be an exporter. It is also a very bad time to be an importer, and the USA’s import situation cannot be fixed by domestic production; most of the changes have to be on the demand side.
[1] Cuba’s oil consumption is ~170,000 bbl/day, which is about 5.5 bbl/capita/yr.
Apr 21, 2008 - 9:08 pm 34. Dave may:[2] The USA pumps about 6.9 million bbl/day, or about 8.4 bbl/capita/yr. However, the USA consumes about 3 times that much.
I am currently working in the United Kingdom (England to most of you), a country where gas is taxed at rates that literally make American gas prices so desirable that when I come to America I offer to buy everybody gas.For me ’s Buy one Get one Free…I hate the price of gas these day and I most definitely hat the amount otax thatis paidI work for a living and have to commute 42 miles each wayand spend about £350 a month on fuel costs.That works out at about $700 a month.The fuel taxes over here are a percentage of the cost and that percentage is anbout 65 per cent. The idiots in government over here are spouting the same kind of garbage about raising taxes to reduce consumption. Just like over in America, most of us here would take public transportation if it was affordable, available and running at the times we needed it.
Apr 22, 2008 - 1:15 am 35. HappyinAZ:Commuting is not an option for most people.Maybe one doy somebody will realize that.
I am not very well informed on American politics these days , but anybody who will actually do something that makes life a little(or a lot) better for the working class of the world deserves a chance. God bless us all…
Oh PLEASE!!!!!!!! Drill for oil here in the US, build refinaries, build nuclear plants, find alternatives and stop whinning. You’d rather send billions to our enimies in oil revenues that do any of the above. This government has so much pork in it that it “oinks”. A little tax reduction won’t hurt a thing!
Apr 22, 2008 - 7:51 am 36. Reality Czech:By the numbers:
84 miles per day, times 20 days per month, is 1680 miles or about 2700 km.
350 pounds divided by 2 pounds/liter is about 175 liters.
I figure Mr. May gets about 37 MPG, give or take. This is a lot for an American car, but VW made (makes?) a Lupo TDI which gets roughly twice that.
Apr 22, 2008 - 1:22 pm 37. John Samford:Ya’ll lookin up the wrong end of the horse. WE need MORE consumption, NOT less! There is a direct relationship between OIL consumption and Wealth creation.
http://www.awerbuch.com/shimonpages/shimondocs/sewp129.pdf
“In percentage terms, the OIL-GDP effect is relatively small, producing losses in the order of
0.5% of GDP for a 10% oil price increase. In absolute terms however, even a 10% oil price
rise produces GDP losses that, could
they have been averted, would significantly offset the cost of increased RE deployment.”
These guys are greenies with an unparalled capacity for looking at data and drawing the wrong conclusions. In this case their dogma is Renewable Energy sources, so they reach a conclusion that suits their dogma. Yes, these are the fools that are starving millions of people thru the use of crop lands to groq OIL substitutes.
That is real stupid, since there is Lots of OIL out there. More OIL then corn. People can eat corn, nobody eats OIL.
Last estimate I saw on the Oil Shale in Colorado was that it would produce billions of barrels, more then OPEC could;
“Unocal operated the last large-scale experimental mining and retorting facility in western United States from 1980 until its closure in 1991. Unocal produced 4.5 million barrels of oil from oil shale averaging 34 gallons of shale oil per ton of rock over the life of the project.”
http://emd.aapg.org/technical_areas/oil_shale.cfm
How many tons of shale rock are there is Colorado?
http://deseretnews.com/dn/view/0,1249,660227927,00.html
Most people think America gets it’s OIL from the ME. It’s gets some, about 1/3.
Apr 22, 2008 - 4:12 pm 38. Engineer-Poet:Canada is the nation that the USA imports most of it’s OIL from. It’s Shale OIL for the most part.
Open ANWR and start digging in Colorado and the USA will be energy independent.
All that prevents that from happening is a few thousand wacked out greenies.
Today is Earth Day. Save the planet, shoot a greenie.
I have trouble believing that people here believe the incredibly stupid things they say. For instance, this “John Samford” has got to be a troll:
Great! That means there’s a simple way to become fabulously rich: let’s take all the oil wells in the world and just light them on fire to consume all the oil! Saddam Hussein was right, and we were wrong!
Of course, if results have any relevance, the amount of wealth produced is proportional to the efficiency with which that oil is used. The economy which produces the most per unit will be the ultimate winner, able to out-bid the rest; just burning oil for its own sake produces nothing.
Tell me, John: how much does commuting to work in a Hummer H2 produce, compared to commuting in a Prius?
And along the same lines, “Dave may” complains about his own choices:
With petrol at 109 p/litre (Reality got it wrong), so he’s burning about 320 litre/month (84.5 gallons). His commute is 84 miles for 23 days and weekends might be 20 miles/day for 8 days, so his total mileage is ~2100 miles/month.
He’s averaging about 25 MPG (US). His vehicle is a LONG way from an economy car, especially for Britain. A Mini Cooper would get 35 MPG or so (cutting his cost to ~GBP230/mo) and the aforementioned Lupo would get nearly 3 times that mileage, slashing fuel costs to ~GBP115/mo.
But that’s only the beginning. If Mr. May drove something like an Aptera, he’d get to work almost entirely on electricity. If he only recharged at home, he might drive 40 miles/day on electricity and 44 miles/day on petrol, for a daily petrol consumption of 1.28 litres at a cost of GBP 1.40/day. Weekends would be within the 40-mile electric range and petrol free, so his total monthly fuel cost would be GBP 32.20.
Do you want to look forward or back, Mr. May?
Apr 22, 2008 - 9:01 pm 39. icantelluride:It’s the “Pelosi Premium”… [Google it]
2007 Major Oil Company profits ~ $643 Billion
2007 Gas Tax collected by US government ~ 1.32 TRILLION
Who are the greedy bastards here? At least with the oil companies we get fuel for our dollars spent…
Apr 23, 2008 - 11:28 am 40. Engineer-Poet:Tell us, “icantelluride”, how much of that 2007 gas tax is needed to shore up our crumbling highways and bridges? Don’t we have several trillion $ in deferred maintenance already?
Apr 23, 2008 - 4:30 pm 41. Whitehall:I really, really, really don’t understand how the solution to $4/gal gasoline can be $5/gal gasoline.
Of course, the justification is “it’s for our own good” one way or the other.
McCain’s proposal is excellent politics. The liberals and the left are trying hard to use global climate change and oil imports as justification to capture more and more taxes from the public. Some claim they have “revenue neutral” proposals but I, for one, don’t trust such a promise.
We also see the infrastructure being build to impose rationing of electricity and natural gas under the rubic of “Smart Grid.” Remember California’s remote controlled thermostat proposal?
Energy policy should be on the table this election. The Democrats will have, slightly hidden, a plan to restrict, ration and tax energy. I’m glad to see McCain come out to support lower energy costs to Americans, even if temporary lowering of an excise tax.
McCain has a winning issue here. Let’s hope he is bold enough to follow up.
Apr 24, 2008 - 1:34 pm 42. Engineer-Poet:It’s not really hard. It’s like this:
1. The US consumer doesn’t pay the full price of oil at the pump. We pay a huge amount via the military budget, a lot as externalities, and even more in hidden taxes due to currency debasement as payments deficits drive the dollar down.
2. Paying the full price at the pump, instead of just part, helps market forces minimize the total cost. That’s impossible now due to the subsidies.
3. Excessive dependence on imported oil is a security risk, both economic and military. Taxes can be considered as insurance payments.
4. Paying taxes at the pump allows people to choose how much they want to pay. This is very much unlike income and payroll taxes.
Unfortunately, the time for $5 gasoline is past. We probably need $7-$8 gasoline to get people’s vehicle purchases, driving habits and commuting patterns on a course that will let us weather the price increases that are coming all too soon. We’re already seeing predictions of $200/bbl oil by 2012. This may be low.
It’s more of the “same old, same old”. There’s only so much oil being pumped, and consumer demand will equal the total supply at some price to the consumer; we only get to decide who gets what fraction of that price. Taxes cut demand at a given crude oil price, so the price of crude goes down. This works. If Europe’s auto fleet got the same lousy 22 MPG that the US fleet does, oil would be $150/bbl already and heading higher. The main beneficiaries of low US gas taxes are Hugo Chavez, the Saudi royal family, the mad mullahs of Iran, etc.
Would you rather have blackouts?
It’s a fact that the last 1% of electric demand is the most expensive part to meet. If you can clip demand peaks, you can eliminate a lot of expensive generators and reduce wear and tear on the transmission system. If you think the consumer doesn’t ultimately pay for all of this, I’ve got a bridge for sale.
Yes, it should. And demagoguery like cutting our paltry gas tax is exactly the kind of policy nonsense which should get a candidate laughed right out of the race.
Apr 24, 2008 - 9:21 pm 43. Enrique:I have to agree with the author that increased taxes are needed to encourage long term shifts away from oil.
Apr 24, 2008 - 10:52 pm 44. It’s the Thought that Counts » Blog Archive » Gas tax holiday still dumb:Drill more?
Increased drilling will only temporarily mitigate the long term fall of domestic production. Furthermore gas is expensive because oil is expensive. And oil is expensive worldwide. To bring down the price of oil with increased domestic production would require a significant portion of the 85 million bpd produced daily worldwide. Drill in ANWR, drill in the gulf, that simply isn’t going to have an impact.
McCain’s gas tax cut?
What many people fail to realize is that the summer supply of oil is pretty much fixed. Oil companies cannot pump more oil, build more refineries, or drill more wells to take advantage of the lower taxes before the tax cut expires on Labor Day. Demand stays the same. Supply stays the same. Price stays the same. Most of the 18.4 cents in tax reduction will go to increased oil industry profits-not reduced pump prices. Then other taxes will have to be increased to make up for the even greater deficits. This is not a winning issue.
Increase gas taxes?
It has been proven that both parties are incapable of spending restraint. Give them $50B in additional gas taxes to spend and they will come up with $100B more in spending on bridges to nowhere and earmarks for interchanges in Florida put in by an Alaskan congressman.
What we need is a revenue neutral gas tax. Every cent collected is divided among every American that pays or collects social security. Since the poor burn less gas than the rich and everyone will get the same “gas dividend” the poor will be net winners. With the extra money they have, people can absorb the equal rises in gas prices. But as prices for gas go up the incentive to conserve or buy a more efficient car goes up. Over the span of decades the dividend amount will fall as people use less and less gas- but that’s kind of the point.
[...] for me, McCain brought it up again today, and I just can’t resist. I know I am far from the first to be amazed by how bad an idea this is, and by now most people with a brain understand it’s [...]
Jun 2, 2008 - 8:46 pm