Let the panderfest begin

By Sean Aqui | Related entries in Economy, General Politics, Legislation, The War On Terrorism

Republicans and Democrats are vying to see who can come up with the stupidest pander to motorists — all part of a short-sighted election-year reaction to $3-a-gallon gas.

President Bush eases environmental standards for refineries, trading long-term environmental damage for short-term price relief. Republicans say “drill in ANWR!” and suggest sending every taxpayer a $100 rebate, which at least gets points for honesty as a direct money-for-votes proposal. Democrats talk of temporarily suspending the federal gasoline tax.

Then there’s the ever-popular “let’s investigate the oil companies for price gouging”, along with the related “let’s make the oil companies pay higher/lower taxes.”

None of these “solutions” are more than drops in the bucket, and the oil companies aren’t the problem: the problem is ever-rising demand for oil, nervousness in the futures markets and refining bottlenecks.

Frankly, the only rational move thus far was made by Bush, who decided to stop putting oil into the Strategic Petroleum Reserve. But he did it for the wrong reason: to try to lower prices at the pump. The real reason to stop putting oil into the reserve is that it’s needlessly expensive to buy and store oil you don’t need at peak price. Let it drop a bit before resuming purchases.

Here’s an idea, guys: stop messing with a good thing. Get up there and lead, and have the courage to explain the real problem with $3 gasoline: it’s not expensive enough.

Current “high” gas prices have already had all sorts of salutory effects: renewed interest and investment in alternative fuels, energy-efficient transportation and mass transit. People are carpooling or biking or walking. They’re trading in gas guzzlers for Priuses. And there’s growing acknowledgement that our oil addiction is a Really Bad Thing, both economically and politically. Imagine how much those effects would intensify if gas got even more expensive.

What we actually need is a hefty increase in the gas tax to drive home the real problem: an economy built on artificially cheap imported oil. Until the pump price of gasoline starts to accurately reflect the true cost of an oil-dependent culture, people will continue to make irrational decisions about energy use. And we will continue to be beholden to despotic oil-rich dictators whose people blame us for their woes.

What is the true cost of a gallon of gasoline? It can be hard to calculate. But for starters we can throw in the $400 billion we’ve spent in Iraq, and arguably the $1 trillion or so we’ll eventually spend in the overall fight against terror. I’m not saying we invaded Iraq for the oil. But we wouldn’t give a rat’s ass about the Mideast — or have spent so much time and money backing regional dictators whose oppression and economic mismanagement is part of the longstanding root of the problem — if it weren’t for oil and our desire to maintain a steady and cheap supply of it.

This 1998 study predates Iraq. But it puts the externalized cost of gas at between $4.60 and $14.14 per gallon. If they’re right, we should be paying at least $7.60 a gallon for gas. I don’t vouch for the validity of all the factors they use, but I think the general point — that what we pay at the pump reflects only part of the true cost of gasoline — is valid.

Why are there so many hidden costs? Because assumptions about energy availability and price underly everything we do. As individuals it affects where we live, how we work, the size and construction of our houses, the price and quality of everything we buy, even our health. As companies it affects where we locate, what we produce and how we produce it. As a nation it affects who we trade with and what our diplomatic and military priorities are. Change those assumptions, and you change the fabric of the country.

So I don’t see a hefty gas tax as social engineering or punitive or anything like that. I see it as true-cost pricing, allowing us to finally start making smart decisions about energy use and start down the road to true energy independence. The extra revenue could be used to defray the cost of the Iraq war. Or support the development of alternative energy. Or build giant space billboards that say “Screw you, Iran!” in letters readable from the ground.

A 2002 study by the Congressional Budget Office examined three ways to reduce gasoline consumption: increased fuel economy mandates, gas taxes, and “cap-and-trade” schemes. It concludes that raising the fuel tax is the most cost-effective way to reduce gas use, as well as having positive effects elsewhere. They didn’t contemplate a tax anywhere near as large as what I’m suggesting, but it still demonstrates the validity of the idea.

Like any addiction, kicking our cheap oil habit will take time. We’d have to phase in the tax so as to avoid serious economic dislocation, and we might want to provide exemptions or discounts to efficient users. But the sooner we start, the sooner we can tell the oil despots to perform anatomically impossible feats.

(crossposted at Midtopia)


This entry was posted on Thursday, April 27th, 2006 and is filed under Economy, General Politics, Legislation, The War On Terrorism. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

13 Responses to “Let the panderfest begin”

  1. Bob Aman Says:

    Libertarians have been saying higher gas prices are the solution for ages now. When I first heard Badnarik say that, I have to admit I was extremely skeptical about it being a good idea, but I’m completely on board at this point. We need to get rid of all subsidies designed to drive gas prices down, and we very well may eventually even need to tax the bejeezes out of gas until it’s no longer affordable to waste it. But this whole cheap gas concept has got to go. At this point, high gas prices aren’t a “tax on the working people” like Bush claims, rather, cheap gas is more like Hansel and Gretel munching on the witch’s candy.

  2. DosPeros Says:

    Republicans and Democrats are vying to see who can come up with the stupidest pander to motorists � all part of a short-sighted election-year reaction to $3-a-gallon gas.

    Truer words have not been spoken.

    Would the gas tax be necessary if the subsidies dried up?

    Great post, by the way.

  3. Lewis Says:

    Wait a minute. Y’all better spend some time doing a lot more studying before convincing youself that making gas even more expensive is a good idea. For those of you who aren’t old enough to remember the seventies, get a history book.

    It was pretty tough – 18% interest and sky high inflation and unemployment. A result of high gas prices, unrest in the middle east and reactionary government policy changes. Here we go again. And just like the last time, it’s mostly us ordinary people who will get hammered.

    Oil underpins our whole economy. We need to try to anticipate all the ripple effects (actually more like a tidal wave) before we start playing with artificial pricing. Seems to me that the “natural way” (i.e. market pricing) is already creating the desired effects. Getting the government involved risks screwing everything up, especially since the politicians are just reacting to try to get votes rather than thinking things through.

    One good thing did come out of all the government meddling – that great song “I Can’t Drive 55″.

  4. Sean Aqui Says:

    The gas tax would still be necessary; the direct subsidies are just a small part of the total externalized cost of gas.

    I forgot to mention that we consume about 140 billion gallons of gasoline a year. So a high gas tax, besides reducing fuel consumption, would generate some serious cash. Any gas-tax bill should include language restricting the use of that money so it doesn’t just go into the general treasury and disappear.

  5. Bob J Young Says:

    The current pandering kind of shocked me.
    You’d think that after all this time I’d be ready for the clueless pontificating of politicians.
    I just never expected them to come up with solutions that will make the situation worse.

    If you’re interested in a discussion by people who know the oil industry and think the oil is starting to run out (AKA: Peak oil). Check out the theoildrum.com. They like to crunch the numbers and drill towards the truth.

    When the political started talking about their “fix” for the current high prices it scared the experts over there into issuing a press release titled “The Politics of Oil: The Discourse Must Change” . (To my knowledge the first time they ever did such a think)
    http://www.theoildrum.com/story/2006/4/26/121441/891

    It’s an excellent site if you what to keep track of the reality of oil instead of the political spin.

  6. Tom Strong Says:

    What Lewis said. I agree the proposals on the table are stupid pandering, but this grit-our-teeth and take it attitude underestimates just how painful this is all going to be.

    It’s not just gas prices that will go up – it’s also food, and deliveries, and plastics, and airfare. And taxes, of course. A lot of businesses are going to get rocked by this. And consumers will end up paying increased prices for almost everything.

    Unfortunately, I don’t think there’s much that can really be done (and on most other issues, I’m usually a sunny optimist). If ordinary folks can organize effectively, we can try and make sure that the new tax burden gets placed on those who can handle it. We still need to try as many creative solutions as possible, but I expect some serious economic pain over the next decade or so.

  7. Dave Schuler Says:

    Lewis, Tom:

    The reason that Sean’s suggestion is the correct one is that it allows the market to allocate gas and oil efficiently rather than obscuring the signals that are necessary to make that determination. I have no problem with taking specific action to ameliorate the effects for the poor, however. But that’s a different subject.

  8. The Glittering Eye » Blog Archive » What to do, what to do? Says:

    [...] UPDATE:  I like this post from Sean Aqui over at Donklephant a lot. [...]

  9. Pooh Says:

    What Dave said. Insofar as the label is applicable, gas prices are artificially low here. We can continue blithely along assuming that it will always be so, but that just makes the eventual shock worse, more than likely. There are things to be done to soften the landing, but a fingers-in-the-dyke approach is short-sighted (and serves to disincentivize innovation so far as conservation and alternative sources go)

  10. DosPeros Says:

    Oil underpins our whole economy. We need to try to anticipate all the ripple effects (actually more like a tidal wave) before we start playing with artificial pricing.

    I agree that the oil spike hurts our economy, but most corrections aren’t painless. I agree that a gas tax, particularly a large one, is an adventure in artificial pricing that is dangerous. We could literaly stall out the economy, rather than smoothly transitioning to alternative energy means.

    A good place to start would be big oil subsidies.

    For those of you who aren’t old enough to remember the seventies, get a history book.

    It was pretty tough – 18% interest and sky high inflation and unemployment. A result of high gas prices, unrest in the middle east and reactionary government policy changes.

    The only thing I remember about the seventies is Seasame Street and and my brother’s afro …Anyway, I’m all for learning from history…What reactionary government policy changes are you referring too?

  11. JP Says:

    I don’t think we need hefty taxes as in Europe–but I am on board with keeping prices as they are, not handing everyone a $100 placate-me check, and not cutting environmental restrictions. We need to see what the TRUE cost of gas really is.

    Urban sprawl is one prime example of how cheap oil has led us to make decisions that go against our own interest. The increasing prices are making people think again about conservation and alternative energy, which is a very big plus.

    At the moment, I’m getting my laughs at the expense of idiots driving Lincoln Navigators back and forth to work in Atlanta, 40 miles each way, complaining about how much they’re spending. Is anyone REALLY surprised by what’s happening right now?

  12. JC Says:

    Sean,

    Don’t give Big Oil a free pass here. While the true cost of gas may indeed be more than 100% more than the current cost per gallon, it’s a helluva lot cheaper than that to simply extract it from the ground and ship it round the world. An industry doesn’t make 100 billion in profit each year by keeping prices artificially low. Why should the cost of political stabilization and defense be passed solely to the driver, who pays for this through his income taxes anyway? Shouldn’t the ones who are reaping the most direct benefits of our temporarily-stabilized world contribute to the stabilization costs? Instead of a windfall-profits tax, perhaps Sen. Specter could call his plan the We-Keep-the-World-Safe-for-you-to-Drill Surcharge.

    Even if you don’t support an additional tax/surcharge on the industry, surely you can agree with correcting their artificially low tax burden by removing their custom-tailored tax breaks.

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