A reader, apparently doubting the Energy Party axiom that sharply increasing the price of gasoline via a tax increase would lower consumption, defund our enemies, clean our air, prevent catastrophic climate change and help the Cubs win the World Series, raised this point on my last post:
Hasn’t the price of gas gone up about $1 over the past 2-3 years?
People were saying in 2005 that a $1 increase in the gas tax would
reduce consumption. Did it?Posted by: Gary | Oct 9, 2007 1:39:59 PM
Yes, it did (go up a dollar) and no it didn’t (depress demand). But I believe that’s because the price was so low to start with — near historic lows, adjusted for inflation.
I’m sort of reminded of one of my favorite books and movies, "The Right Stuff." The filmmakers had the brilliant stroke of having Levon Helm narrate the film, enabling him to say such things as (and you have to hear it in that gravelly Arkansas accent):
There was a demon that lived in the air. They said whoever challenged
him would die. Their controls would freeze up, their planes would
buffet wildly, and they would disintegrate. The demon lived at Mach 1
on the meter, seven hundred and fifty miles an hour, where the air
could no longer move out of the way. He lived behind a barrier through
which they said no man could ever pass. They called it the sound
barrier.
Well, as it turned out that, to paraphrase Sam Shepard as Yeager, the damned thing didn’t even exist. At least, it didn’t exist in the sense of being something that would rip your ears off if you tried to go through it. So test pilots kept pushing the limit back. When Scott Crossfield actually passed Mach 2, Jack Ridley (also portrayed by Levon Helm), assures Yeager et al. that there are still frontiers to be challenged:
The real test wasn’t Mach 2. That demon lives at about 2.3 on your machmeter.
So it is that I find myself saying that ol’ demon that’ll kill the SUV wasn’t really to be found at $3 a gallon. That demon lives more at about $4 or $5 on your gas pump.
Kidding aside, I think an immediate, all-at-once increase of a dollar or even two — something that can only be achieved with a tax increase — would have a shock effect that gradual increase would not. The debate leading up to such an increase would be filled with such emotion, such doomsday moaning and crying, that when it actually happened, it would have a tremendous psychological effect.
Admittedly, that effect might wear off if that was then the permanent price, as others have suggested and I have endorsed. But even if consumption crept back up, less of the money would be going to the petrodictators, and more would be going into paying for research for ways to become independent of those sources for good.
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We were paying 45 cents a gallon when my wife and I got married in 1972, and we could get hamburger for 25 cents a pound. We have been lulled to sleep by cheap energy, but the rude awakening may not be far away.
Thank you for acknowledging my post in a separate post. I feel honored. Sort of.
To somewhat paraphrase your Energy Party screed, I’m all for goring sacred cows, I just want to make sure that running the blade through the cow will really help things. I think there are some things we really don’t know … and if you weren’t really sure that a $1 or $2 gas tax increase would really reduce demand effectively, then you wouldn’t want to do it, right? After all, a TON of people would be hurt economically in the short run.
If we don’t do that, and more, the next generation (from me, and I’m 60) may be devastated. We’re talking about millions of deathe world wide, and unsustainable areas here in the USA. Can you think of a way to get people to get serious without major economic prompts?? Most especially those who would buy a civilian version of a Humvee to start with?
Wow. You think jacking the price of gas up $1 to $2 a gallon would curtail consumption, and that would be a good thing.
Me, I’m already checking out a Kia Rio, and you want to plunge the knife in and twist, all in the name of tax affecting behavior.
The pizza-delivery guys wouldn’t agree with you. The commuters wouldn’t, either. Ditto the truck drivers.
And ditto you, when you see what your tom-fool tax does to the cost of living you pay with your newspaper salary.
Do you think your carriers ride bicycles?
Do you think a Sunday State’s worth $3?
Do you think?
A tax increase of $1 or more on a gallon of gas would have a devastating impact on the economy.
Start with the sale of existing inventory of low MPG vehicles and the upstream impact on auto manufacturers and all their suppliers.
Next, consider those who are struggling to get by each week who already have to make tough decisions on food versus gas. What do they do? I could afford an extra $40 per week for gas, many can’t. But that would mean one less trip to the ice cream store, the movies, the fast food restaurant, etc. More impact on the local economies.
And that extra $40 going to the government is going to be used in the most inefficient way possible. As we see with most government programs, that $20 will end up in either a) the hands of some firm represented by lobbyists b) used to implement some bizarre set of government regulations that do nothing of value or c) funneled to some pet project of a congressman.
Instead of taxing everyone into oblivion, the government should be doing whatever it can to remove barriers from companies developing alternative fuel options. A company with a motivation to make a profit is far more efficient and productive than one that is given government money to do
the same thing.
We need to allow demand for oil to be reduced NATURALLY not through ARTIFICIAL means. Price controls never work.
Actually gasoline sales ARE down. Prices were low in January-March of this year and sales exceeded the same months from 2006. But then the pricing mechanism took over and look what has happened since. This from the Energy Information Administration (EIA):
Gasoline Deliveries (thousands of gallons per day) – April-July
2006 – 143,544.30
2007 – 143,287.90
Given the growth in the population and the economy we would expect an INCREASE in gasoline deliveries. It’s not much, but over time people can adjust their lifestyles to accomodate the higher prices. If people know that prices will remain high then they will be more inclined to purchase smaller cars and live closer to where they work. But people have become accustomed to wide swings in prices and they don’t make that adjustment. A consistent, steady increase in prices would make for more rational decisions by consumers. Brad’s taxing scheme has some merit.
This shows that pricing does affect the quantity of something purchased. It’s not much of a change but it does show what works.