Thursday, April 27, 2006

Let the panderfest begin

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. 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. EThe 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.

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Anonymous Anonymous said...

We really need some rational discussion about this, but as usual politics prevents such. And you're right about pandering; Bush's easing of environmental regulations is especially disturbing.

You are spot on about the artificially cheap cost of gasoline. The most important thing we can do besides raising fuel efficiency standards and encouraging hybrids through tax incentives is to reflect the true cost of gasoline at the pump. The tax increase idea makes sense, although knee-jerk conservatives will disagree. But how about this? We don't need to raise the overall taxes Americans pay by one cent. Instead, take away the billions of dollars in subsidies that the federal government pays to oil companies (using our tax dollars) and transfer that to the pump. In other words, the tax money we give to profit-laden oil companies switches over to a tax at the pump. (lower income taxes, higher gas taxes).

This achieves two things: puts a more realistic price on gasoline, and perhaps more importantly it stops the federal government from propping up the oil industry, resulting in a truer form of FREE MARKET.
- Caracarn

4/28/2006 12:02 PM  
Blogger Sean Aqui said...

That will help, of course. But direct subsidies to oil companies are only a small part of the cost.

I agree with your general point, though: the gas-tax revenue should not be used as a pot of new money (though I wouldn't mind it being used directly for deficit reduction). That's why my suggestion that the revenues be used to defray the cost of the Iraq war is only partly tongue-in-cheek. It would keep the tax somewhat revenue neutral, as well as drawing a direct connection between our energy consumption and our foreign policy.

4/28/2006 12:09 PM  

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