Those good ol' high gas prices
Gasoline prices have hit record levels and that is a good thing.
Because gas prices are high, 20% of new car sales consist of high mileage compact cars. One Ford executive said that was the highest percentage he had seen in his 31 years in the industry.
Because gas prices are high, all around the country public transportation is seeing unprecedented growth in rider-ship. Buses and train that were nearly empty last year are filled to overflowing in the last month according to the New York Times.
Because gas prices are high, people are driving differently thinking about where they will drive, if they will drive, and how they will drive.
As a result of the high price of gas we are beginning to use less oil which will improve our homeland, economic, and environmental security. If we keep these behaviors up we will become less dependent on foreign oil and we will see the price decline.
But therein lies the problem. It is the price of oil that gets us to behave in a way that is good for all of us but when we behave that way the price signal goes away and we go back to our dangerous, wasteful ways.
However, there is a solution. Instead of letting OPEC set the price of oil we should. Here is how we can do that.
To begin with gas is going to go to somewhere between $4.50 and $5/gallon. In fact it will keep going up until we cut our consumption enough so that prices stabilize. This will hurt so to begin with lets give every man, woman, and child in America $500. That means reducing payroll taxes by that amount, increasing social security payments, and even increasing welfare payments because all Americans are hurt by higher gas prices. (Cost: about $150 Billion dollars.)
After that has happened then let’s raise the tax on gasoline by a dollar a gallon. (Income: about $150 billion). OPEC is going to let gas prices get that high anyway so lets beat them to the punch. Instead of OPEC collecting that $1/gallon we will have already given it to ourselves.
Because gas prices are high, people will batch their errands, car pool, and drive 55. They will find public transportation attractive as well as high mileage cars. As a result of our success in weakening demand the price of oil will begin to fall.
Next year we could do the same thing or better, because of a weakened price signal from the lower price of oil we could give everyone approximately $1000 and increase the tax to $2/gallon. If Uncle Sam had collected more than $500/person people would get more than $1000 but if he collected less then they would get less. However, every penny that was paid as a tax would come back in the rebate.
There is no question that this would work because it has worked before. In 1979 when oil prices doubled for the second time in a decade Americans did all those things that save energy. As a result we cut our oil consumption by 20% in four years, and the price of oil dropped by 75%!
Richard Haass, president of The Council of Foreign Relations, writing in the most recent issue of Foreign Affairs about America regaining some of its influence in the world states, “Energy is the most important issue . . . Reducing consumption would lesson the pressure on world oil prices, decrease U.S. vulnerability to market manipulation by suppliers, and slow the pace of climate change.”
In 1979 John Anderson proposed a $.50/gallon tax on gasoline rebated through lower payroll taxes. If that tax had been implemented and rose with inflation we would all be driving 50+ mpg cars and we would have modern public transportation nationwide and as a result be in control of our energy future.
Again, we are presented with the opportunity to slash the price of oil by keeping gas prices high. We ought not miss the opportunity again.
Because gas prices are high, 20% of new car sales consist of high mileage compact cars. One Ford executive said that was the highest percentage he had seen in his 31 years in the industry.
Because gas prices are high, all around the country public transportation is seeing unprecedented growth in rider-ship. Buses and train that were nearly empty last year are filled to overflowing in the last month according to the New York Times.
Because gas prices are high, people are driving differently thinking about where they will drive, if they will drive, and how they will drive.
As a result of the high price of gas we are beginning to use less oil which will improve our homeland, economic, and environmental security. If we keep these behaviors up we will become less dependent on foreign oil and we will see the price decline.
But therein lies the problem. It is the price of oil that gets us to behave in a way that is good for all of us but when we behave that way the price signal goes away and we go back to our dangerous, wasteful ways.
However, there is a solution. Instead of letting OPEC set the price of oil we should. Here is how we can do that.
To begin with gas is going to go to somewhere between $4.50 and $5/gallon. In fact it will keep going up until we cut our consumption enough so that prices stabilize. This will hurt so to begin with lets give every man, woman, and child in America $500. That means reducing payroll taxes by that amount, increasing social security payments, and even increasing welfare payments because all Americans are hurt by higher gas prices. (Cost: about $150 Billion dollars.)
After that has happened then let’s raise the tax on gasoline by a dollar a gallon. (Income: about $150 billion). OPEC is going to let gas prices get that high anyway so lets beat them to the punch. Instead of OPEC collecting that $1/gallon we will have already given it to ourselves.
Because gas prices are high, people will batch their errands, car pool, and drive 55. They will find public transportation attractive as well as high mileage cars. As a result of our success in weakening demand the price of oil will begin to fall.
Next year we could do the same thing or better, because of a weakened price signal from the lower price of oil we could give everyone approximately $1000 and increase the tax to $2/gallon. If Uncle Sam had collected more than $500/person people would get more than $1000 but if he collected less then they would get less. However, every penny that was paid as a tax would come back in the rebate.
There is no question that this would work because it has worked before. In 1979 when oil prices doubled for the second time in a decade Americans did all those things that save energy. As a result we cut our oil consumption by 20% in four years, and the price of oil dropped by 75%!
Richard Haass, president of The Council of Foreign Relations, writing in the most recent issue of Foreign Affairs about America regaining some of its influence in the world states, “Energy is the most important issue . . . Reducing consumption would lesson the pressure on world oil prices, decrease U.S. vulnerability to market manipulation by suppliers, and slow the pace of climate change.”
In 1979 John Anderson proposed a $.50/gallon tax on gasoline rebated through lower payroll taxes. If that tax had been implemented and rose with inflation we would all be driving 50+ mpg cars and we would have modern public transportation nationwide and as a result be in control of our energy future.
Again, we are presented with the opportunity to slash the price of oil by keeping gas prices high. We ought not miss the opportunity again.
posted by Geoff Berg | 2:54 PM
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