UPDATE: Tom Friedman of the NYT wrote an op-ed piece calling for a gas tax on Dec. 28, one week after I wrote this post.
Here we go again.
Driving to coffee this morning I couldn't believe that gas was $1.86 a gallon. Most people are relieved when they see gas prices go down, but it makes me nauseous.
Some have described our country as addicted to oil, and I think the metaphor is more accurate than many think. It goes beyond mere dependency on oil - we are so hooked that we behave irrationally and delude ourselves that we can simultaneously tackle environmental issues and force automakers to build "green cars" while celebrating cheap gas as essential to our economic well being.
This is the stark reality: $1.86 gas (in SF), combined with ever increasing CAFE standards forced down the throats of automakers, will give the automakers no hope of survival. It is a suicide mission. The fact that Obama and Pelosi and other democrats simultaneously hold the industry's feet to the fire to build ever more efficient (and expensive) cars while simultaneously decrying high gas prices as a threat to the livelihood of our middle class is so intellectually bankrupt it is depressing.
Why? because these politicians and their staffers are smart enough to know that as long as gas is cheap, the masses will not have any real incentive to purchase fuel efficient cars, rendering battery electric and plug in vehicles to a niche market for consumers who are willing to pay a premium for the peace of mind of driving a car with significantly lower carbon emissions. Since they clearly must know this simple fact, it follows that they have made a calculated decision that they will not confront this politically difficult truth and instead will continue the hypocrisy of forcing automakers to produce more efficient, expensive cars that the mass market has very little economic incentive to purchase.
The solution is simple from an economics standpoint. Pass a gas tax to keep gas prices at a relatively high figure. Let's say $5-6, which is sacrilege in the US but still 30% cheaper than gas in Europe. Ever wonder why small, efficient cars are popular in Europe but not here? Look at the gas prices.
From a political standpoint, this is considered suicide. Perhaps this was true during campaign season, where running on a platform of a gas tax in times of record high prices and looming recession would have killed Obama's chances. But now he has won the election, and the best time to confront a nasty truth that requires some very bad tasting medicine is now, at the beginning of his first term.
Alternatively, if the government is unwilling to do this, they should at the very least drop their hypocritical efforts to drag the auto industry into ever higher CAFE standards against market forces, adding insult to injury by criticizing the automakers for not building cars that the public wants.
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Sunday, December 21, 2008
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It would cost the equivalent of 60 cents a gallon to charge and drive an electric car. The electricity to charge the car could come from solar or wind generated electricity. If all gasoline cars, trucks, and suv’s instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. Why don't we use some of the billions in bail out money to bail us out of our dependence on foreign oil? This past year the high cost of fuel so seriously damaged our economy and society that the ripple effects will be felt for years to come. Why not invest in setting up some alternative energy projects on a national basis, create clean cheap electricity, create millions of badly needed new green collar jobs, and get out from under our dependence on foreign oil. What a win -win situation that would be. There is a great new book out called The Manhattan Project of 2009 Energy Independence NOW by Jeff Wilson. I highly recommend this book for anyone interested in alternative energy. www.themanhattanprojectof2009.com
Wilson also has a fascinating article on the Better Place Blog called How Much Electricity Would It Take To Replace Gasoline? you can read it @
http://planet.betterplace.com/profiles/blogs/how-much-electricity-does-it
Better Place is the company that is setting up the infrastructure for electric car use in San Fransisco, San Jose, Oakland CA as well as in Hawaii. Very interesting web site. They also have a place to sign an online petition to bring similar projects to your area. Just click the get involved button on the top right hand side of the page. I think it is going to take us...the average Joe citizen to ban together and make this happen!
Gas won't stay this cheap. Oil field development has slowed due to evaporating profit margins, but depletion continues, so when the economy recovers, oil production once again won't be able to match demand and we'll be over $100 a barrel quickly.
Because of the recession, consumers are presently demanding "cheap" vehicles, which tend to also be relatively fuel efficient. An economic recovery is certain to increase oil demand, causing a rise in gas prices simultaneous to people's willingness to spend money on cars.
An automaker that wants to make big money when this happens will have a selection of luxurious, fuel-efficient vehicles and cheaper vehicles with high-margin must-have options.
Darryl, I couldn't agree with you more about how nauseating it is to see gasoline so cheap yet again and how destructive CAFE standards are to Detroit when gas is so cheap.
I posted the following recently on huffpo.com in response to "A Climate Plan for the New Administration", written by a founder of the NRDC, which urges regulation of CO2 emissions from cars but says nothing about raising taxes on gasoline.
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CAFE standards and regulation of automotive CO2 emissions are hardly the most effective ways of increasing fuel efficiency.
Why aren't you advocating higher taxes on gasoline? Raising the price at the pump and keeping it high would be much more effective than forcing automakers to produce cars that consumers will never want as long as gasoline is cheap.
We learned last summer that consumer behavior really starts changing at prices around $4/gallon. Obama should propose a gasoline tax that creates a permanent floor for the price at the pump of at least $4/gallon. He should propose raising the federal gasoline tax by $0.15 every calendar quarter until the price reaches $4, which would take four years starting from the current average U.S. price of $1.65. This would be gradual enough to let consumers and automakers plan and adjust.
Keep the higher gas tax from being regressive by using the revenue to reduce payroll taxes. Or use some of the revenue to finance tax credits for renewables, to rebuild the electric grid to support renewable energy sources and battery electric vehicles.
(In 2007 Americans consumed 390 million gallons of gasoline per day. http://www.eia.doe.gov/basics/quickoil.html . This works out to more than 142 billion gallons a year. So $2.35 per gallon in additional federal gasoline taxes would generate more than $333 billion in annual revenue.)
The tax could be scaled back if necessary to protect the economy when oil prices go back to $150/bbl. But the critical characteristic of this approach is certainty on the part of all concerned that prices will never go back down below $4.
As smart as Obama is he must know perfectly well that this is the best approach to CO2 emissions from cars, trade imbalances, national security issues and all of the other problems caused by "oil addiction". Consumers would line up for the most efficient car available and automakers would be compete like crazy to build much more efficient cars -- as long as the price of gasoline is high enough and everyone knows that the price will never go back down.
This would be a "sacrifice" that people could be persuaded to understand and support. Sure, there would be resistance at first. But it's the best approach to the problem and Obama has the political capital to do it. He should be encouraged to use that capital. He should be encouraged to lead.
@David - I agree with you completely, and like the idea of ameliorating the regressive nature of the gas tax with a reduction in payroll tax.
@Ryan - I'm not sure $100 a barrel will be the norm for a while. Remember that OPEC is terrified of reduced global consumption. It is their job to make sure we stay hungry for oil. They were not able to prevent $150/bbl due to speculation on the futures markets, but they will ensure that oil is not so cheap that people aggressively figure out ways to not use oil. It is a matter of their survival.
Look to Europe. 3$/gallon tax implented. Effect? Fleet with significantly higher MPG than US. The effect is huge. I don't think I have ever seen a SUV live before :()
Europe has had to do this on from the first oil crisis in order to combat oil shortage, opec cartels and generally dislike of funding petro-dictators. EU may be sluggish and ineffiecient, but in this particular example - excuse the pun - they set an example.
Yeah, we all make so much money like yourself, Siry, that we can afford gas at that cost. Do you even realize what that high of price would do, to our already broken economy? You probably do and just don't give a shit about the peons at the bottom. Hell, prices like that, wouldn't affect you. So who cares right? People like you make me sick.
Dear "Anonymous"
Please grow a pair and post with your real name if you are going to be rude.
5-6 $ tax on gas would create a depression that would take decades to recover from. It would be much better to hang people that think like you.
Let them eat cake, eh Darryl?
I'd like to clarify a few things:
1) I am not rich
2) Even if I were, it doesn't matter
3) Calling for hanging people over their expressed opinions is really fucked up.
You are a piece of shit...you go pay higher taxes.
I just want to say that i am not the same anonymous from above. First of all, Mr. Siry, i greatly admire your blog. Second, what the hell is "Roy Mustang" talking about. "Let them eat Cake." As anyone who understands the true nature behind that statement, you may have noticed it was never actually said and instead was simply made up by radicals in order to further infuriate the French populous. Third, to "Anonymous," the whole reason behind the increase in fuel prices is based on the same ideas as supply and demand. When the people want something, in this case more economical cars (due the heightened gas prices), the automotive manufacturers will give them more fuel economic cars. So basically, there may be a time when people will not be able to afford the gas for their Fords or Chevrolets, but after the period of outrage and fear, when cars are made to be more fuel efficient, all people can once again drive whatever cars there are.
I'm writing this from the opinion of a 16 year old that drives a V10 Excursion and V6 Passat. If anyone would be affected by a fuel tax the most, it will be my generation. But, personally at least, I would rather have highly economical cars (as long as they still go fast =D) rather than poorly running, gas guzzlers that will die off before the end of my lifetime anyways.
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