Friday, May 30, 2008

Fuel prices - get used to it.

There are gas price protests in Europe.

What is one to do about supply and demand? Instead of protest, people should be buying more fuel efficient cars.

Oh wait, the protests are in Europe, where most everyone already has a fuel efficient car.

I don't see the purpose of protesting oil prices. As if all the oil producing countries are suddenly going to say, "Oh, the French people are protesting, we better stabilize our internal conflicts and increase output!"

What they should be protesting is American overconsumption. And by American, I am including Canada, who are just as bad!

See last years article.

There is one simple thing that could have held oil prices in check. And it might just be the very thing Europeans are protesting.

More tax.

Before you shoot the messenger, let me explain.

Historically, the USA prides itself on cheap gasoline. The government charges a pittance tax on it, and their mentality treats it like an infinite resource they have the right to abuse.

Elections are won and lost on promises of cheap gas.

As a result of years of low taxes at the pump, Americans have loaded up on pickup trucks and SUVs, the bigger the better. They have become the global glutton for overconsumption, and their growing demand, in a world of growing demand, has shot oil prices up and up and up.

But what if the American government, starting in the 1970's, taxed petroleum European style (300%) instead of American style (around 20%)?

First of all, the majority Americans would be driving hybrids and small cars instead of SUV's and pickup trucks. Their oil demand would be half, or less, than what it is today.

The big American car companies might have focused on fuel efficiency. The nineties boom might have been hybrid cars instead of Hummers.

The US trade deficit wouldn't be so horrendous because oil would be cheaper, and they'd be importing a lot less of it.

Today, pump prices would probably be what they are now. Except, instead of donating that money to unstable oil producing countries, the majority of it would be paying down the US deficit.

Here's a debt clock showing how much is sent to the government, and how much goes to OPEC, starting the moment you came to my blog.

gas tax

If they taxed gas European style, the US might not have a deficit at all. If they taxed each litre of gas one dollar way back when actual cost was around 15 cents, they might actually have a balanced budget right now.

Here is the current US debt clock.

The Gross National Debt

Exact calculations are hard to make. One must factor in the reduction in demand if the US government charged major taxes on gasoline.

Here's a clock of how much the US oil addiction costs. It's nearly half of the US national debt. A large chunk of the remainder is interest.

Total Fossil Fuel Imports

The answer was, and still is, tax tax tax. Only through crippling taxes can the US decrease it's oil demand. A sudden spike in taxes might hurt the consumer, but it might just decrease global oil demand by as much as ten percent overnight, and much more in the long run.

What will the result be? Demand goes down, prices goes down. It's that simple.

Furthermore, heavy tax might actually boost the rise of a young industry. Much like cheap gas popularized the gas guzzlers, huge taxes could spawn the rush for hybrids and later, electric vehicles.

Healthy car sales leads to a healthier economy.

It could also help save the environment, which alone should be reason enough.

1 comment:

jeneflower said...

Can I vote for you for president?