Regarding oil, we really are idiots.

xiggi · 07-05-2008, 11:33 AM

From the Time magazine of Thursday, Jun. 26, 2008

The Oil Follies? Our Fault

By Michael Kinsley

Quote:

It's interesting to consider what the price of oil would be today if it had been higher in the past. Suppose, for example, that President George W. Bush had used the political gift certificate he was granted on Sept. 11, 2001, when he could have asked Americans to do almost anything in the name of fighting terrorism, to impose a $1.50 "War on Terror" tax on a gallon of gas (instead of squandering his gift certificate on invading Iraq). The price at the time was about $1.50 per gal., so this would have doubled it to $3. People would have screamed with pain, then started adjusting. Demand would have gone down, and today gas would probably be selling for less than the $4 per gal. we're paying. Not only that, but $1.50 of that price would be staying here in the U.S. instead of going to Saudi Arabia or Venezuela or Bahrain.

To the rest of the world, we look like idiots. In fact, regarding oil, we really are idiots.

Except for the fact that "War on Terror" add-on of $1.50 on a gallon of gas should NOT have been a tax that fills the coffers of the US government but should have been deposited in a special fund which would have been depleted ONLY through offering commercial incentives to manufacturers and USERS of fuel efficient vehicles and technology. Not a penny used for the general obligations of the government. Actually, the "tax" should have been higher ($2.50 to $3.00) and a system where the drivers of Excursions and other gas-guzzlers should have been penalized, and purchasers of hybrid and electrical vehicles GREATLY helped via substantial rebates. Car companies could have maintained higher prices and increase profits on their better vehicles as the purchasers would have a $10,000 or $15,000 "certificate" to tender. This certificate, of course, would have come from the special fund which would have been quite "rich" because of the many individual decisions to keep on buying and driving large SUVs and trucks.

By the way, Michael Kinsley, some of us DID write about the "follies" and the need to hit consumers in the wallet when we could and should have ... many years ago, and right here on College Confidential.

Right now, people are just praying that King Abdullah and his oil buddies start showing some "mercy." If that were to happen, we would quickky revert to our old habits and wait until the next crisis. While we have preferred to discourage alternative energy development by holding oil at $20 to $40 per barrel, we have to be realistic that it was a mistake.

While oil will probably tumble down to a more reasonable price level, chances are that we will be none the wiser about how to survive the next crisis. And, yes, to the rest of the world, we look like idiots. In fact, regarding oil, we really are idiots.

WashDad · 07-05-2008, 11:52 AM

Xiggi, not a bad start. It is an idea I first read about during the oil crisis of '74. There's not much new here.

Taking potshots at the Ford Excursion in 2008 is kind of amusing since that model was discontinued three years ago. Also the whole idea of higher gas taxes is penalizing inefficient vehicles and rewarding those who buy efficient ones. Raising taxes and then piling on other penalties and goodies is adding unnecessary complexity and enforcement costs. If you believe in microeconomic incentives (I do), all you need is the consumption tax.

For what's it's worth, while European governments were artificially raising energy prices from WWII to the present, the US was riding lower energy costs to the most efficient economy in the world. Production per worker in the US is still higher than any other industrialized economy, and our unemployment is lower.

The US could reduce its residential electricity consumption by 16%. Eliminating commercial air conditioners would save any more. Which politician do you suppose would be the first to support this initiative? None. They'd rather focus on replacing light bulbs with CFLs and hybrid vehicles. I don't think it's possible to be too cynical about the way Congress and the President approach energy issues.

ucsd_ucla_dad · 07-05-2008, 12:12 PM

That's way too much government involvement in social engineering to 'some' people's idea of 'the way things should be'. Do you happen to have a large family that can't fit into a Prius? Too bad. Do you happen to have a need for a pickup truck or van for your business use? Too bad, you have to now pay more. Do you use a heavier vehicle to tow a trailer, boat, camper, horses? Too bad, you have to pay more and subsidize those driving uneconomical vehicles. What do I mean by uneconomical vehicles? I mean the Priuses (that Toyota has purportedly lost a lot of money on by their own subsidation of the car) and other hybrids and upcoming electrics subsidized through various tax credits. GM is already campaigning heavily to get the government to offer tax incentives to purchasers of the Volt since it'll likely cost more than planned to build it.

Let people buy what they want. They're already paying the higher price for lower mpg vehicles in the form of having to buy more gas. People are already incented to buy more economical vehicles hence the SUVs just sitting on lots and small cars difficult to find right now. Furthermore, let the hybrids and electric vehicles stand on their own economically. Technology will improve and at some point these vehicles will be truly economically viable. The hybrid is probably almost there already with the fuel cost differential (i.e. people are willing to pay the extra cost without tax incentives and the manufacturer can make a profit).

Like 'Washdad' stated, why not tax air conditioners, plasma TVs, more than 3 light bulbs in a house, water heaters over 25 gallons, etc.?

xiggi · 07-05-2008, 12:56 PM

Ucsd_ucla_dad, I think you missed the point that this is something we COULD have done.

The point also goes beyond the "penalty" people would have accepted to pay ... it goes to the question that a reduction of consumption and the growing availability of fuel efficient vehicles MIGHT have introduced a different element in the current pricing structure of oil. Who knows what could have happened if the US consumption would have dipped well below 20 million bbl/day. We NEEDED to discourage the use of gas-guzzlers, and that is best done by additional penalties at the pump. By letting people buy what they want, we simply did not do anything to prevent or address the looming crises. European countries have had higher prices for gas for generations because they have relied on taxes to fund social services. The United States was in a position to use the price differences to build up cash reserves and jumpstart technologies that could have helped us TODAY.

Reducing our oil consumption by 5% or 10% could have had a drastic result in the United States. Today, if we were to locate a new source of 1 or 2 million bbl/day, we might enjoy lower prices. Well, all or a part of this could have been secured via better efficiency and conservation.

Now, our country seems to be crippled by gas prices at a tad over $4.00. What would we do if that became $8.00 or $10.00 and alternatives were unavailable? If small cars are hard to locate at the current prices, what will happen later?

It could have been different.

BCEagle91 · 07-05-2008, 12:56 PM

I think that graduated costs for utilities are already common. You pay more per unit if you use more. And that's easier to administer than going into houses to check what they have or checking to see how often someone waters their lawn.

Gasoline isn't taxed in a graduated manner though. In the old days, I think that there was a tax credit for efficient vehicles (I don't remember the implementation).

INVENIAMVIAM · 07-05-2008, 12:59 PM

Don't Americans realize that in Europe, gas prices are over double what ours are? They're paying upwards of 10 dollars a gallon.

ucsd_ucla_dad · 07-05-2008, 01:14 PM

The point I was responding to wasn't higher prices - it was the point of using taxes levied against only "someone's" idea of what should be penalized (i.e. the Excursion) to subsidize those who they think should reap the benefits from those additional taxes (the Prius/electric owners).

Quote:

Now, our country seems to be crippled by gas prices at a tad over $4.00. What would we do if that became $8.00 or $10.00 and alternatives were unavailable? If small cars are hard to locate at the current prices, what will happen later?

Firstly, although there's much talk, I don't think the country has become crippled by the prices and isn't close to being crippled by them. There's some pain and some higher prices but no mass crippling. The gas crisis of the early 70s was crippling since gas often couldn't be found at any price.

I rented a car in Europe last summer and drove all over. Their gas prices are more than double ours. They don't seem to be crippled although I'm sure it affects their driving habits. There are some smaller cars but there are also plenty of larger cars and even SUVs and the roads have plenty of cars on them. They haven't different geographical issues than us though whereby their countries are much smaller with trucks driving shorter distances. They also have a lot of centralized citied which helps when trying to make use of mass transit. We have NYC and San Francisco but spreadout cities like LA, San Diego, Phoenix, Dallas, Denver, etc. are a real challenge in this regard.

Manufacters are already gearing up their smaller more fuel efficient vehicles. Several manufacturers have announced they increased their build plans. Meanwhile, SYV and pickup truck factories are shutting down. It looks like the prices alone are achieving what many people want. the good old laws of supply and demand are working yet again.

mrego · 07-05-2008, 01:17 PM

Realize that rich elitists WANT gasoline prices to be super high. The higher the better to reduce other peoples driving and help the environment. Why not make it a $10/gallon tax? If the elite had their way, the poor would have to get to work using public transportation or bicycle or horseback if necessary.
Realize also that the oil market is NOT free. There is a cartel controlling most of the production of oil.
Realize that the best solution is to become more efficient, find and produce more oil, and research alternative sources of energy.

ucsd_ucla_dad · 07-05-2008, 01:33 PM

ursaminor:

I think you're referring to the gas guzzler tax. The big SUVs aren't really getting a tax deduction - they're not getting an extra tax due to guzzling because of their weight. Just a different way of looking at it. I agree that it's not in keeping with the intent of the law which was trying to penalize guzzling passenger cars and not penalize commercial vehicles (hence the weight limit).

razorsharp · 07-05-2008, 01:41 PM

9/11 excacerbated the Clinton/Gore recession that President Bush inherited. Adding a $1.50 per gallon tax would have sent us into a depression. MIchael Kinsley is the real idiot.

StitchInTime · 07-05-2008, 04:58 PM

Quote:

(#1)...Except for the fact that "War on Terror" add-on of $1.50 on a gallon of gas should NOT have been a tax that fills the coffers of the US government but should have been deposited in a special fund which would have been depleted ONLY through offering commercial incentives to manufacturers and USERS of fuel efficient vehicles and technology. Not a penny used for the general obligations of the government. Actually, the "tax" should have been higher ($2.50 to $3.00) and a system where the drivers of Excursions and other gas-guzzlers should have been penalized, and purchasers of hybrid and electrical vehicles GREATLY helped via substantial rebates...

Food for thought on when government attempts to choose 'winners' and 'losers' and goes against the free market system.

Secret report: biofuel caused food crisis:

Quote:

Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report obtained by the Guardian.

The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.

The figure emphatically contradicts the US government's claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil...

More food for thought: