Gas Tax Advocacy in Washington Post
> Why Gas Prices Are Too Low
> By David Ignatius
> Tuesday, June 1, 2004; Page A23
> Let's imagine for the moment that the United States was a prudent nation and that its politicians, rather than pandering to the public appetite for cheap gasoline, decided to reduce the nation's dependence on energy from the volatile Middle East.
> After America's annual Memorial Day drive-a-thon, the idea of such a rational energy policy may sound quaint. Millions of Americans hit the road this weekend in their cars, trucks and SUVs -- many of them doubtless grumbling about the 2004 "oil crisis" that has pushed gas prices well over $2.
> It would be nice if politicians would tell these road-happy Americans the truth, which is that the energy situation will only get worse over the long run. And it would be nicer still if politicians proposed policies that would improve the energy efficiency of SUV Nation. But in America, there's a name for such politicians: losers. The reason the oil squeeze will only get worse can be stated in two words: China and India. As those countries become more prosperous, their consumption of energy will inevitably rise -- putting further pressure on the market. That has already begun to happen with China, whose growing demand sucked up the 500,000 extra barrels a day of crude that Saudi Arabia added to the market last year to compensate for lost Iraqi production.
> Optimists hope that an easy way out of the energy crunch may be found in abundant cheap supplies of natural gas, but industry economists tell me that's wishful thinking. One Denver-based consultant says that recent price moves and merger valuations suggest a 50 percent or more rise in natural gas prices in the next three to five years. Liquefied natural gas may eventually help temper prices, but only if huge investments are made to store and transport it.
> The people who make America's gas guzzlers know exactly what would force the country to deal with the energy crunch: higher gasoline taxes. A recent article by Danny Hakim in the New York Times had some astonishing quotes from auto executives. Ford chief executive William Clay Ford Jr. explained: "Every place else we operate, fuel prices are very high relative to here and customers get used to it, but they get used to it by having a smaller vehicle, a more efficient vehicle." GM's chief executive, Rick Wagoner, agreed: "If you want people to consume something less, the simplest thing to do is price it more dearly."
> The European market illustrates how higher taxes push greater efficiency. Last week, premium gas prices in Europe were averaging more than double the U.S. level of $2.24 a gallon -- with prices at the pump averaging $5.07 a gallon in France, $5.36 in Germany and $5.59 in Britain. European consumers inevitably have demanded more efficient cars. According to Hakim, overall oil consumption has fallen in Germany and Britain since the 1970s.
> The best plan I've seen for doing the politically impossible comes from an energy economist named Philip Verleger. He has spent much of his adult life arguing for a sensible increase in gas taxes. He first proposed such a plan in December 1973; the Ford administration considered the idea, then rejected it. He supported a 50-cent-a-gallon tax during the Carter administration; it got just 35 votes in the House of Representatives. He continued arguing for a tax hike through the 1980s and '90s and, as he says, members of Congress "just rolled their eyes." President Clinton finally embraced the idea and got a tax passed -- but it amounted to just 4.3 cents per gallon.
> Now Verleger favors what he calls a "prospective gasoline tax," which would allow the country four years to get ready to do the right thing. Congress would enact a stiff tax of $2 per gallon, to take effect in January 2009, with further increases of another dollar in each of the following three years. To cushion the blow, the Treasury would borrow against the expected tax revenue to buy back the public's gas guzzlers (defined as vehicles getting fewer than 25 miles a gallon) at their 2004 value.
> Verleger estimates that this program could reduce U.S. oil consumption by almost 2 million barrels per day in the program's first year and as much as 10 million barrels per day by 2020. At a stroke, that would reduce the power of the OPEC cartel and America's vulnerability to turmoil in the Middle East. As a bonus, it would also reduce emissions that contribute to global warming and increase employment in the auto industry as all those gas guzzlers are replaced.
> There's one big problem with Verleger's idea. It's too sane. America likes roaring down Thunder Road, playing chicken with the oil cartel.
"Until you stop looking for simple answers, you will not be happy. You
will not even be human."
- The Chicago Tribune also advocated increasing gasoline taxes in an editorial in Sunday's paper:
Life, liberty and cheap gasoline
Published May 29, 2004
America's relationship with cars and gasoline is like a yo-yo diet. We curb our appetite for gasoline when the price goes up, but soon relapse to gluttonous SUVs and motor trips to buy milk three blocks away when the gas prices drop.
Adjusted for inflation, gas is still cheaper today than it was 20 years ago. But people don't think in 20-year cycles, we think about what we shelled out last week and compare it to the hole in our pocket this week, and gripe about what we're paying for gasoline.
We know we're beholden to the gas producing nations, and we need to do something about that. But the only time we do something is in those rare moments when gas gets truly scarce and very expensive.
When that happens, it prods us to take shorter trips. And it prods politicians to search for The Answer.
John Kerry wants to increase the gas supply by diverting oil that is to be delivered to the nation's strategic petroleum reserve. Other Democrats want to start draining the reserve to increase the domestic supply. Those are terrible ideas, tapping a reserve that has been established for a genuine emergency. What they want to do would have little or no impact on prices.
The Bush administration's answer is to call for the passage of an energy bill that has been running on empty for months.
Here's another idea. It's not a new one, and it has never gained much traction, but unlike everything else that has been proposed, it would have a genuine and immediate impact.
In order to force U.S. drivers into a leaner gasoline diet and lessen our reliance on foreign oil, the federal government should sharply increase taxes at the pump.
In Europe, high gas prices make Fiat Puntos the toast of the showroom. Bet you have never seen a Parisian vrooming to a patisserie in a Chevy Avalanche.
Consistently pricey gasoline would create its own virtuous cycle by reducing dependence on foreign oil and pollution, and lessening the impact of unforeseen events like a lunatic president in Venezuela or a war in the Middle East.
It's certainly a far more effective method of reducing consumption than the usual brainstorms by government bureaucrats and politicians--are your tires properly inflated?--or imposing arbitrary fuel efficiency standards on cars.
Take Kerry's plan to spend $10 billion over 10 years on new plants to manufacture fuel-efficient cars. If we just make gas expensive enough, consumers and car manufacturers will find their own happy medium. More people will take the train. People will drive shorter trips.
Bush's idea to drill our way out of the problem--with little effort to conserve fuel--would also do little to help. Drilling cannot keep up with America's growing appetite for oil.
Some have suggested eliminating the yo-yo effect of gas prices by keeping gasoline at a permanently high price, say $3.50 a gallon, by adjusting taxes to offset the fluctuation in market prices.
Higher gas taxes could be phased in over several years to avoid a shock to the economy. The federal government could also make this arrangement revenue-neutral by lowering income tax rates or providing some form of tax abatement.
OK, enough dreaming. No politician can win on a platform of raising gasoline prices. John Kerry once favored this idea, but you won't hear him even whisper it now. Car manufacturers aren't likely to buy into a plan that would shift market sentiment away from Dodge Durangos and toward Dodge Neons.
So we are stuck with "skyrocketing" gasoline prices that really aren't that high at all, and politicians' answers that aren't really answers.
Copyright (c) 2004, Chicago Tribune