Savvy politicians (i.e., those who succeed in getting themselves elected president) know this and tread carefully. Ronald Reagan managed a 5-cent increase. So did Bush 41. Bill Clinton needed a big fight to get a 4.3-cent increase. The lesson has been widely learned. No one with national ambitions proposes a major gas tax. Indeed, this summer featured the absurd spectacle of two leading presidential candidates (John McCain and Hillary Clinton) seriously proposing a temporary gas tax suspension.
Today’s economic climate of financial instability and deepening recession, moreover, makes the piling on of new taxes–gasoline or otherwise–not just politically unpalatable but economically dubious in the
So why even think about it? Because the virtues of a gas tax remain what they have always been. A tax that suppresses U.S. gas consumption can have a major effect on reducing world oil prices. And the benefits of low world oil prices are obvious: They put tremendous pressure on OPEC, as evidenced by its disarray during the current collapse; they deal serious economic damage to energy-exporting geopolitical adversaries such as Russia, Venezuela, and Iran; and they reduce the enormous U.S. imbalance of oil trade which last year alone diverted a quarter of $1 trillion abroad. Furthermore, a reduction in U.S. demand alters the balance of power between producer and consumer, making us less dependent on oil exporters. It begins weaning us off foreign oil, and, if combined with nuclear power and renewed U.S. oil and gas drilling, puts us on the road to energy independence.
The only thing that worries me about gas taxes is that it puts an increased cost on necessary goods, and gas constitutes a large portion of the working poor’s expenses. These things can be mitigated with smart tax policy, though. Krauthammer’s solution seems elegant:
The simultaneous enactment of two measures: A $1 increase in the federal gasoline tax–together with an immediate $14 a week reduction of the FICA tax. Indeed, that reduction in payroll tax should go into effect the preceding week, so that the upside of the swap (the cash from the payroll tax rebate) is in hand even before the downside (the tax) kicks in.
The math is simple. The average American buys roughly 14 gallons of gasoline a week. The $1 gas tax takes $14 out of his pocket. The reduction in payroll tax puts it right back. The average driver comes out even, and the government makes nothing on the transaction.
The chief executive of Exxon Mobil Corp. for the first time called on Congress to enact a tax on greenhouse-gas emissions in order to fight global warming.
In a speech in Washington, Rex Tillerson said that a tax was a “more direct, a more transparent and a more effective approach” to curtailing greenhouse gases than other plans popular in Congress and with the incoming Obama administration.
“My greatest concern is that policy makers will attempt to mandate or ordain solutions that are doomed to fail,” Mr. Tillerson said.
Mr. Tillerson now calls the issue complex and challenging to understand, but — in contrast to Exxon’s previous party line — he doesn’t question whether fossil fuel use has contributed to rising global temperatures.
Over on The Oil Drum blog, Prof. Cutler Cleveland of BU offers some fact checking on energy independence. Here are the first 4m with added emphasis:
1. “Unfriendly” nations are not our primary source of oil. Only 44% of U.S. oil imports are from members of OPEC, the international oil cartel that is dominated by Middle East producers. Canada and Mexico are the two largest single sources for imported oil in 2007. (Editors note: through 6/08, Mexico has dropped to #3, though this changes seasonally and may revert in 2nd half of year)
2. The U.S. oil resource base is depleted to the extent that it could not yield the roughly 3.7 billion barrels of oil the U.S imported in 2007 (not to mention the additional refined products imported). Domestic oil is far more expensive to produce than oil in most other regions, especially OPEC nations. Increased reliance on domestic oil will put upward pressure on oil prices.
3. Increased U.S. production would have little impact on the level or volatility of oil prices. The price of oil is determined in a global market by a complex array of forces including speculation, weather, geopolitics, decisions by OPEC, and most importantly, by market fundamentals–short and long run supply and demand forces. At the margin, producing decisions made in the U.S. have little influence on this process.
4. Global price determination also means that energy independence won’t protect our economy from supply disruptions abroad. A refinery strike in Venezuela, civil war in the Niger Delta, and other similar events could quickly reduce oil production. Oil instantly becomes more expensive everywhere — the UK, Japan, China, and the U.S. all pay pretty much the same price.
The fourth item on the above list is phrased a bit misleadingly, complete independence would of course protect us from supply disruptions, but if you read the rest of the article, it’s more clear that he’s just talking about increased domestic production.
In the interview with Charlie Gibson, Sarah Palin said that Alaska produces “nearly 20 percent of the U.S. domestic supply of energy”. This isn’t true, but the degree to which it isn’t true depends on how you define her assertion. Here are some facts for different interpretations of this:
14% of the oil drilled in the U.S. last year came from Alaska. I’d imagine this is what she was reaching for, but I wouldn’t say that 14% is almost 20%, nor that oil alone constitutes America’s energy supply. It’s important to keep in mind that this is 14% of the oil we produced here, not 14% of what we used. It’s only 4.8% of the oil we use.
3.5% of the energy produced in the U.S. came from Alaska, according to the U.S. Energy Information Administration. Alaska provided 2.4% of the energy used here.
McCain has also made the same assertion recently, but I can’t find the quote (I read it earlier today). Alaska’s certainly an important source of energy for the U.S., I just wish they’d stop misrepresenting it like this.
Speaking of hyperbole, apparently Palin “knows more about energy than probably anyone in the United States of America”:
After over a week out of town, I’m pretty much caught up on the news now (except the Daily Show…). Energy has become a front-and-center issue, which is a good thing regardless of who wins. Unfortunately, the McCain campaign has been taken over by the kids from the playground.
The celebrity ad got McCain a lot of press: juxtaposing Britney Spears and Paris Hilton with Barack Obama offends the intellect on so many levels I’m at a loss for words. Even McCain’s mother said “I think it’s kinda stupid”. I can’t imagine what I’d have to do for my mother to publicly describe it as “kinda stupid”…
Soon after, someone at a McCain event asked him about the ad, specifically with respect to his earlier talk about respectful campaigning, and McCain said “We’re proud of that commercial”:
I don’t mind negative campaigning, but there was no substance in that ad… McCain has to know that.
The Bush Administration estimates that expanded offshore drilling could increase oil production by 200,000 bbl. per day by 2030. We use about 20 million bbl. per day, so that would meet about 1% of our demand two decades from now. Meanwhile, efficiency experts say that keeping tires inflated can improve gas mileage 3%, and regular maintenance can add another 4%. Many drivers already follow their advice, but if everyone did, we could immediately reduce demand several percentage points.
McCain mocked the idea and characterized it as the entirety of Obama’s energy plan, here’s Obama’s response, which I think is concise and clear:
The open mockery among conservatives of something that would actually work isn’t as surprising as I wish it were. This is the gas tax “holiday” all over again. McCain is picking what polls well instead of what actually works well (unintuitively).
I think there’s a lot of value in bringing up practical issues like this in the campaign. I didn’t know that tire pressure had that much of an effect on gas mileage, though I knew it had some. Now I’d like to keep a closer eye on mine. Presidents should ask us to help out in causes of national importance. Bush just asks us to go shopping and gives out war-time tax cuts… it’s pretty ridiculous.
The democrats have a good roundup of McCain’s transformation:
And finally, Paris Hilton’s reply to the McCain ad, which was partly funny:
watching the Hilton video, a few questions came to mind. First, why is that Paris Hilton’s fake ad includes more substantive talk about energy policy than John McCain’s real ad? Second, if writers helped Hilton with her script, and writers helped McCain with his script, why is it that Hilton seems to have a better grasp on policy details than McCain does? Shouldn’t that be, you know, the other way around?