In case you haven’t noticed, the gas prices have been a bit higher than usual. In fact, just yesterday crude oil prices hit another record high ($70.80/barrel) after Hurricane Katrina but a halt to all oil production in the Gulf of Mexico. And now that gas prices are quickly approaching $3 per gallon, most Americans either fuming or sulking at the pump. So much so, in fact, that the President is considering tapping into our strategic oil reserves to help alleviate prices.
Sheesh. What a bunch of cry babies. I say gas prices are still too low.
Ah, I see you are completely shocked and appalled. Allow me to explain. You see, in this lovely land we call America money is the single most influential factor in creating change. For example, low interest rates create more demand for housing and raise prices. At the other end of the spectrum, gas prices, if they get high enough, force people and businesses to adopt practices that conserve on fuel consumption rather than abuse it. And while gas prices are high enough to affect small changes, the significant changes that America needs will not come until gas prices increase to at least that of Europe.
What changes you ask? Well, look at the numbers. The United States is currently estimated to have a population of 295,734,134 people, which is approximately 4.58% of the world population. By contrast, the United States is by far the number one consumer of oil in the world at over 19.5 billion barrels per year. This over 25% of the world’s oil being used by less than 5% of its population and five times the consumption of any other single country in the world. And that’s not even per capita. All of this consumption, you can imagine, also leads to unbelievable emissions of greenhouse gases and other lung-collapsing nastiness.
Additionally, our addiction to oil has also put us at the mercy of some not-so-friendly counties around the world (ie. the Middle East). This, in turn, has also contributed to (do not read singularly caused) our own not-so-friendliness in the form of invasion and bloodshed.
All of this has got to stop. Oil consumption in America must be reduced, but the oil companies have so much influence in the government that change isn’t going to come easily. That’s why gas prices need to continue to rise.
The best idea I’ve heard so far I read in an article I found in The Washington Post circa “the 2004 ‘oil crisis’ that has pushed gas prices well over $2″. Pfff. Anyway, energy economist Philip Verleger proposes…
…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.
This is brilliant! The government will take in mega-bucks which can be used to pay of our insane amount of debt and bring additional stimulation to the economy while simultaneously reducing oil consumption, greenhouse gas emissions, and our dependence on OPEC and the like. What’s not to love?
So, GW, keep our strategic oil reserves in tact and let the price at the pump rise. We’ll all be better for it in the end. In the meantime, go get a TerraPass.
[...] Excellent post over at Radical Congruency about the gas price ?crisis? here in America. Some excellent points are made. Don?t forget to check out the articles linked to from there. There are some other articles that I think are worth reading. [...]
Apparently GW’s not going to honor my request since he announced today that he will be tapping our strategic oil supply in light of this fuel supply ‘crisis‘. Please. If we think this is a crisis, just wait and see what is to come if we don’t start conserving now - especially since China and India are requiring more and more oil every month.
This shows to me a rather narrow understanding of how the price of fuel is related to the price of most everything we consume, since most everything we consume is transported by truck (and much of the ingredients and parts used to manufacture the stuff, etc. all the way up the manufacturing and distribution networks for most everything).
In other words, if you consume 50 gallons of gas a month and the price goes up a dollar a gallon permanently, you’ll be out more than $50.00, maybe much more.
This means that many companies that are marginally profitable now might become unprofitable, and people will lose their jobs, etc. Bad and more bad.
Of course, we may actually get to test that theory in the near future. Much depends on how quickly the gas refining and distribution infrastructure on the Gulf Coast gets back on line. My guess is pretty quickly since it’s bound to be top priority; some will be back up an running in days from what I’ve read.
Remember, we got Iraq oil production up pretty quickly after the war, and here we won’t have people blowing things up almost as fast as we can fix them.
So, anyone banking on this disaster to change things in the long term is likely to be dissapointed.
However, the global demand for oil — thanks much to the Indians and Chinese — is about equal to the supply, and the Chinese and Indians will want more and more, so the price of gas will likely gradually increase for the indefinite future, and that might change things in a much orderly way because the economy can gradually adjust with the price of gas. The market for SUV’s will dry up, and hybrids will replace them, and things will reach equilibrium again.
Finally, using huge tax increases to artificially cause such an economic shock is suicidal idiocy, in my opinion. This guy may be an “energy economist” but is he the kind of economist who understands all the ramifications of what he is proposing?
One more thing…Are “most Americans either fuming or sulking at the pump”?
I’m not. I’m pumping gas and paying for it, and that’s what I see other people doing.
The only “fuming and sulking” I know of are the people that the news media inevitably put on their broadcasts whenever gas prices go up.
I either read or heard once that when gas prices go up significantly, news reporters will hang out at gas stations looking for people who want to “fume and sulk” and then record their comments. Then, you hear the crybabies fuming and sulking and you think they represent the majority.
I suppose hearing someone say “Yeah, I make enough money so that it really doesn’t impact me a whole lot”, or “I guess I’ll buy one less latte this week” wouldn’t fit the “tragedy TV” entertainment format.
[...] For all those ranting and raving about gas prices that are ?sky high,? consider this very logical post by Aaron Ogle over at RC. [...]
Hey Richard, thanks for your comments! I am aware higher fuel prices lead to much smaller revenue for many American companies and I lament it. But it also reveals how vulnerable we are to OPEC, hurricanes, increased demand by Chine and India, and other uncontrollable factors that affect oil prices. We are an oil addicted nation and the only way I see that ever that changing is if oil prices go up. So that leaves us with two choices, as I see it:
These two choices have many similarities. They both assume that demand for oil will increase, that prices will increase, and that America and the other industrialized nations must find alternative sources of energy. The main difference between the two is that with choice 2 we have control over the price increases and reap many of the rewards. With the alternative choice there are countless factors that can increase prices in unpredictable ways and much the revenue goes to terrorist-friendly countries.
But regardless, prices are going to go up (fortunately). In the long run it will be good for all of us.
And I suppose I should have said “many Americans either fuming or sulking at the pump”. My bad.
a GM commercial came on tv the other day with “customers” standing by (and talking about) their recent purchases, all of them ginormous SUVs and i thought it was a joke. who is out buying suburbans when gas is so high? it’s almost as if the corporate giants are feeding us more soma, hoping we’ll forget what we’re paying every week at the pump.
Aaron and Heather…
Thanks for good discussion.
I agree that the whole SUV thing needs to end, but I’m suprised that with all the smart people here the only approach to curbing gas consumption is a gas tax. (Actually, I like my SUV, but the gas guzzling needs to end. I want a hybrid SUV.)
We don’t have to be like Europe. We aren’t Europe, and we can solve the problem a different way if we want to. Our culture is built around the car, so let’s use our cultural inclination to our advantage. Maybe we won’t build mass transit systems like Europe, but maybe we can build the best electric cars in the world. We can if we want to.
The problem is that we use too much oil and we need to decrease the demand. There are ways to do this other than taxing gas. Remember that there are many small and medium busineses (and families) that run on razor thin margins, and most everyone, rich and poor, buys gas. So, taxing gas does little to disuade the rich from using gas because they’re rich, and the poor get hammered.
So, my idea is to tax the guzzling vehicles, not the gas. If a person has the money to buy a new vehicle that gets 10 mpg, for example, they can pay a nice big lump sum up front for the privelege. That sum could increase over time.
Then, demand is shifted away from those vehicles toward fuel-efficient vehicles, and the auto makers have an incentive to put their best foot forward and get those hybrids into production. Also, the tax hits those who can afford it and misses those who would be hurt.
A second point that few seem to be aware of is that the supply of oil is not a constant. As the global price of oil is bid up by the Indians and Chinese, thousands of wells in the US that are not economical to exploit suddenly become operable again. There’s a drilling boom in the midwest going on right now.
Oil wells aren’t bottles of liquid but rather stratified layers of goop of various thickness. The thicker the goop is, the harder it is to extract. Many wells become uneconomical to operate once the easy-to-get stuff is pumped out. I read that many wells are abandoned when only about 25% of the oil is pumped from them.
However, techniques for getting this oil have improved since the 1970’s, and as the global price of oil goes up, the supply of oil available from US sources will go up as more and more wells are reactivated.
So, the global price goes up and the local supply goes up and cars get more efficient with my guzzler tax. Problem solved.
And, the terrorists still have mountains of money, but its Chinese and Indian and European money, and hopefully not our own dollars. So, we won’t be financing our own destruction directly anymore.
So, which is it - free-market-capitalist or tree-hugging-communist?
I whole heartedly agree that the market should be setting the price and not the government. And for those with gas guzzlers (I have a ‘92 F-150 that gets about 15mpg) we either have to deal with or come up with something else. I don’t really have an option right now. For me, it’s cheaper to pay another $50 or so a month on gas than to blow two to three times that on a newer car payment.
And the whole “green house gases” thing - as with everything, we need to be good stewards, but banning the SUVs and Trucks aren’t going to “clean our air.” Most of those SUVs generate considerably (I’d say at least 75%) less emissions than most vehicles that are still in use from the late 80’s/early 90’s.
Ultimately, we have to make a choice - let the market run things, or let the government over-regulate. I’d rather take my chances with the former - we’ve already see what the latter has done.
Hi Ben,
I think the answer is neither but somewhere in between. I believe you start with free market capitalism and then have the government gently nudge it in the right direction.
By gently but inexorably taxing the gas guzzling vehicles either out of existence or making them a niche market for the super-rich, you eventually get them off the road and replace with more efficient vehicles.
So, go ahead and enjoy your F-150 and maintain it and run it into the ground. Then, when it’s finally time to replace it, perhaps you’ll get a recent model used truck that gets better milage because as the years go by all vehicles manufactured get more and more efficient as my tax scheme forces consumer demand away from gas guzzling vehicles. I call it “trickle down conservation”. (I made that up myself).
Eventually, and we may not live to see this, we’ve got to have vehicles that run on something else. Nano-tech might help us. Did you know that a company is developing a paint that doubles as a solar energy collector? The light absorbtion mechanisms are microscopic and in the paint.
So, someday we could have electric cars that recharge themselves while they’re sitting outside absorbing light into their paint. It might happen some day. Perhaps boost the power with hydrogen fuel cells.
The car of the future might have four flat electrical engines, one mounted behind each wheel. There will be a central energy conversion mechanism that can run on several different fuels. It will absorb light through it’s skin to recharge a battery, and it might run on hydrogen cells as a backup power supply, plus you’ll be able to charge it through your home power as well. There will be electrical charging facilities and hydrogen cell dispensation centers where there are now gas stations.
Thats one idea, anyway.
Ben, you’re confusing greenhouse gases and toxic air pollutants. You’re right that cars today emit many fewer toxic air pollutants (notably carbon monoxide and nitrous and sulfuric oxides) than they did in the past, thanks to what I call the Clean Air Act, or what you call “government over-regulation.” This means that there are fewer days each year when millions of people like me (I have asthma) have trouble breathing, and I thank the government for this kind of “over-regulation.”
On the other hand, emissions of carbon dioxide, the main greenhouse gas, are directly tied to fuel economy. Car engines work by exploding gasoline, which is called a “hydrocarbon” because it contains long chains of hydrogen and carbon, to release energy and, well, carbon dioxide (carbon + oxygen from the air), water (hydrogen + oxygen), and a few toxic byproducts. A perfectly efficient engine wouldn’t produce any toxic byproducts, but the mere act of combustion always produces carbon dioxide and water. So no, a pickup or SUV today doesn’t produce any fewer greenhouse gases than a late 1970s car.
The bottom line: Americans use gasoline, like many other natural resources, pretty darn inefficiently. The most effective way to improve this situation is through market incentives–i.e., prices. No conflict exists between “green taxation” and market economics (not “free market”; no such beast ever truly existed), not when liberals have long pushed “tax to discourage, give to encourage” ideas like cigarette taxes, estate taxes, and tax credits for the working poor. Indeed, the 1993 tax hike proposed by Clinton initially included an anti-pollution “carbon tax” which was eventually replaced with a flat-rate gas tax.
Our entire economy does need to re-orient itself in order to use gas, and non-renewable energy in general, more efficiently. This will be a painful, difficult, and costly transition, but putting it off further by seeking to continue the illusion of low gas prices won’t help at all.
Richard says “we aren’t like Europe,” but large parts of this country *are* like Europe. The Eastern Seaboard is as densely populated as Germany. Even Australia and Canada, which have even lower population densities than the U.S., have much higher gas taxes and much better transportation options than the U.S. The idea of a gas guzzler tax could be extended to include “feebates,” which would include rebates on gas-sipping cars. But in the absence of higher gas prices, the result would be what we’ve seen for 20 years: people just drive more, wiping out any real reductions in gas consumption and creating the ugly, sprawling messes we have in place of of real cities in the U.S.
PS. This post earned WebbleYou another customer.
[...] Personally, these issues are becoming dear to my heart. I’ve been advocating for increasing rapid transit in Seattle (in case you hadn’t noticed), embraced Terrapass, and have thought long about ways of reducing oil consumption (both individually and nationally). God has provided us a perfect world. If for not other reason than basic respect, we should be good stewards of that gift. | RSS | generous+orthodoxy+conference | christian+environmentalism | Inlinks [...]
This article from Wired also agrees that gas prices are too low.
[...] I think this is a great start and is enough to get someone like me to switch, but it’s going to take a lot more to get most of Seattle to let go of their idols, I mean autos. I think the incentives should be much higher for individuals with no car versus “one less car”. Perhaps a smaller Flexcar stipend for a much longer amount of time. Also, more and better bike lanes, higher parking costs in the city, and higher gas prices are needed. Rapid transit might be nice as well. [...]
You’re right. We should raise gas prices to $8.00 per gallon which will quickly throw middle class Americans into severe poverty. More businesses than ever will shut down due to rising shipping costs, a lot of people will be permanently out of work, and federal taxes will skyrocket. Homelessness will dramatically increase, as well as desperate acts of violence and crime. Tax collectors will be knocking on everyone’s door demanding us to pay up wearing armor and clubs prepared to commit the worst. Yes, I can picture America in 5 or 10 years from now. Lovely picture, ain’t it? Oh and I almost forgot, God bless America.
Jack- First of all, I never said prices should be raised quickly. That would be foolish. Any artificial increase in gas prices would need to be slow and linear. My argument was that prices should be raised slowly and predictably as opposed to being raised sporadically by unpredictable forces (the whims of foreign countries, weather, war, etc). Any profit could be pumped back into public transportation, alternative fuel research, and the like.
I’d also like to point out that at the time I wrote this post oil was $70.80 a barrel. Also note that this was after Katrina shut down all of our oil production in the Gulf. Just this week, oil reached $75.35 a barrel, all of our refineries are online in the Gulf, and we haven’t even hit Memorial Day weekend (notoriously known for high gas prices). My guess is that we could be in for quite a summer.