$4 Gas Mandate a Poor Idea
By Alan Stewart Carl | Related entries in Energy, Gas, TaxesThomas Friedman thinks the federal government should mandate $4.00 a gallon gas. Why? Because now that we’ve pretty much reached that price point, people are finally changing their habits, driving less and buying smaller cars. Friedman wants to make sure we don’t go back to our gas-guzzling ways.
For many years raising gas taxes to spur conservation has been popular among certain theorists. The plan would almost certainly work but is it fair and should the federal government be playing such games with the economy?
Friedman wants the government to raise taxes every time gas prices drop below $4. He would offset the tax hit on consumers by lowering payroll taxes for those making less than $80,000. O.k. Fine. But if we already feel obliged to question whether or not oil companies are manipulating gas prices for profiteering reasons, just wait for the price mandate. What oil company would ever choose to sell their gasoline for less than $4 a gallon when doing so would give them absolutely no competitive advantage?
A mandated price would be a boon to big oil’s pocketbooks while decreasing incentives those companies have for finding new fossil fuel reserves and developing cost-saving measures or alternative fuels. While encouraging Americans to own more fuel efficient cars is certainly a good thing, the law of unintended consequences makes government price mandates a less than desirable option.
Of course, this debate may be moot. High gas prices could very well be here to stay, at least long enough to significantly change American car buying and driving habits. At this point, we’d be better off letting the free market work its magic and spur innovation rather than trying to use the heavy hand of government to force an outcome that could be riddled with negatives.
This entry was posted on Wednesday, May 28th, 2008 and is filed under Energy, Gas, Taxes. 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.
May 28th, 2008 at 4:12 pm
For me, the scariest thing about soaring gas prices is not what it means for the average consumer at the pump (even though it really sucks). The just-finished holiday weekend shows we can dial back our consumption when push comes to shove.
No, what scares the bejeesus out of me is how the current cost of gasoline affects over-the-road drivers… which in turn could have serious impact on retail pricing of just about everything.
May 28th, 2008 at 11:15 pm
I hear what you’re saying about unintended consequences, but there does need to be a mechanism to keep incentives in place for changes in habits and innovation.
Our system for delivering oil and gas to consumers is unbelievably efficient and entrenched. We’ve had a century to perfect it. It will take a long time and probably $ trillions to develop an infrastructure that can compete. No one wants to compete with big carbon unless they can feel confident that they’re cometing against $4+ a gallon.
Back in the early ’80s, gas was as expensive as it is now (adjusting for inflation). But then non-OPEC oil came on stream, OPEC’s cartel fell apart and prices plunged. Suddenly, there was no incentive to conserve and look for alternatives. We all started driving SUVs, and all the strides Detroit and Japan made with engines went to more power instead of better efficiency. as consumers, if gas prices aren’t an issue, we all want peppy, big cars.
the free market values efficiency. unfortunately, the efficient oil producers pretty much hate us. we can either transition away from those sources deliberately or suddenly. which would you prefer?
May 29th, 2008 at 12:00 am
Individual drivers isn’t the biggest focus of fuel prices. The food you eat, the food your food eats all uses fuel to plant, grow, harvest and take to market. Higher fuel prices merely breaks the backs of the poorer segments of our population.
May 29th, 2008 at 8:29 am
“At this point, we’d be better off letting the free market work its magic and spur innovation rather than trying to use the heavy hand of government to force an outcome that could be riddled with negatives.”
ASC; Hasn’t the ‘free market’ been a big part of the problem here? Conservatives complain about Gov involvement hampering the ‘free market’ when it hinders corporate profits. Why is it not a problem when the Fed pumps huge amounts of liquidity (cash) into the banking system to bail out the terrible lending practices of the nations largest lenders. This raises the national debt and adds to the dollars’ decline which, among other things (instability in the Middle East), raises the price of crude oil. Isn’t that tampering with the credit markets? The only thing ‘free’ about this market is the free ride our largest companies enjoy with the help of this administration.
What about reinserting the Profit Windfall Tax on Big Oil to insure reinvestment in alt fuels rather than trusting the Oil Co’s. That’s not socialism. That’s taking a small percentage of huge profits from a sector that can afford it and investing it into the public good. Isn’t that what we need our Gov to do? The whining about liberal socialism ruining the free mrkt economy is getting old.
June 2nd, 2008 at 10:32 pm
Windfall profits tax is a scam. Remember, its a tax on profits. By taxing it, the oil companies will just find better ways to hide it, so it won’t show up as a profit. If you think they will invest it in alternative fuels you are mistaken there as well.
Blame whoever you want, when you are done, look in the mirror. No one told every third person in the U.S to go out and buy an SUV. Honda, Hyundai, and Toyota have all made cars that were ahead of the pack in fuel efficiency, but we chose to ignore them.
Why weren’t we all over our state and local governments to improve public transportation? Everyone’s always waxing rhapsodic about how great Europe is, well we should be building trains, subways, and buses. But no, we all want to drive everywhere. By the way, Europe has been paying at least 4 dollars a gallon for gas for how long? Isn’t that great? We finally have something in common with the obviously advanced lifeforms, we call the French.
Hybrids are available in larger quantities now. The auto industry would produce more of them, and much cheaper if they thought the demand was there. But sadly it is not.
Why would that be? Every family in America could have a Hybrid right now.
But the few thousand extra is too much. Then they wouldn’t be able to take that cruise, or buy that new ipod for their daughter. We can’t afford a Hybrid this year, Mom needs that lipo, junior needs the new V cast phone with the unlimited texting plan.
It seems to be the American way, to bemoan our financial circumstances, then go out and buy crap we don’t need. Then we expect the government to step in and save us from ourselves.
As to the earlier comment about the Government not doing enough to help people facing foreclosure because it was the lenders fault, what part of “Adjustable rate” did you not understand? We don’t need the government to bail you out after you screw yourself over. We obviously need them there to explain these things to you before hand.
And before you all go of on some tirade about what I said, I am not rich, my wife and I both work. Neither of us makes enough money to be called anything other than lower-middleclass. We just take the time to educate ourselves and make responsible choices. Not expect the government to act as our savior and moral proxy.