Thursday, June 19, 2008

Gas prices

After the initial big rise in the price of gas, at the end of last month, there were some comparisons made between life in the US and life in Europe, where they make do with much smaller cars and a lot of trains, buses and bikes. Some say life there is just as good as here, some say maybe even better (with low crime and better schools). Sometimes people would note that taxes on gas are much higher there, about four bucks more or less.

Now the conversation here has settled on the wisdom or viability of offshore drilling, and drilling in national parks and the ANWR. Never mind the fact that we don’t have additional refining capacity for more oil, or apparently even enough ships equipped to set up the rigs. Or that the oil companies will want to sock us with the initial cost of drilling.

So we have two competing theories of how to bring down the cost of oil, increased supply or decreased demand (the decreased demand is the European solution of high taxes on gas). The increase in supply is straightforward, although some people are predicting it wouldn’t work out that way. The thing is, depleting our domestic supply of oil just so we can continue to drive SUV’s eighty miles an hour on the highway and defer taking steps to address our future … I have no words.

Curbing demand would be difficult. The wealthiest people bought houses the farthest from the cities, bought the largest (and thus the ones that consume the most energy) houses and drive the largest and least efficient vehicles. But they lobby their Representative and/or Senator, and regardless of party, money talks.

Plus a tax on gas of European magnitude, even if it was phased in, would hurt poor people. Even if it was offset by an increased EITC and some kind of tax refund to the elderly, even if the poor and elderly knew to adjust their W-4’s or Social Security payments to get that money on a weekly or monthly basis, it would still hurt.

Everyone would be paying more, so many would feel pushed towards public transportation and/or bicycles, electric bikes or walking. The feds would have this revenue from the gas tax, some of which they would be giving to the poor and those on small fixed incomes. They could use another part of that income on increased subsidies to mass transit, and grants to cities for bus and/or bike lanes and bike paths. Mass transit, with more ridership and increased money from the feds, might be able to do without money from the state or the county. The remainder of hte gas tax revenue could be used to fund or subsidize alternative fuels research and production.

Or all the revenue could be thrown into Universal Health Care.

The funny thing is that the Europeans have been sacrificing on our behalf. With their higher gas taxes, they reduced not only their own demand, but their reduction contributed to a lower world wide demand. Before China and India’s economies took off, we were the only people consuming oil with total abandon, our SUV’s barreling down the road at 80 miles per hour.

It should also be pointed out that the last time gas prices were high, in the seventies and early eighties, Americans reacted fairly admirably by cutting back, and buying smaller cars. Congress reacted intelligently, with the 55 mph speed limit (something else I am in favor of) and with CAFE standards for American cars. Then gas prices came down, the 55 mph speed limit was repealed, and people started buying SUV's, and continued to move further and futher out into the suburbs.

Since oil is a finite resource, and since it also seems clear that we will not behave like it is until we are hit over the head with a sign, I am in favor of taking steps to decrease demand by artificially increasing the price. We can take steps to make sure that poor people can still meet their rent and feed their families, but we need everyone else to suffer some. We have seen that the pain we already feel in the current price run up has influenced our behavior some, demand for gas has fallen a percent or so in the first quarter, although I don’t the impact from the latest run up has truly been measured yet. But to separate the people who truly need a pickup truck from those who want to play cowboy and also to cut down on oil company profits, we need to beat up demand with even higher gas prices.

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