The economics works like this. Many jobs that might have been economically feasible with gas a 25¢ will not be when gas is at $4.00. With the price of gas going up at a known rate will alert those who have those jobs or employ people in those jobs that something much change.
There are several possible changes. The cost of the product or service may go up or the delivery method change orit will not be delivered.
Some people will find themselves without a job. They will then find that there are new jobs opening up. With the cost of fuel higher, then the corner food market will become more desirable (economically feasible). Likewise public transit will need more employees etc. and others will end up there.
Under these conditions there are winners, loosers and whiners. You chose which you want to be.
Here's another issue with the tax. You're assuming that the cost of the gasoline will remain steady while you tax it, and/or go down as you reduce comsumption. This is possible in a normal supply and demand style market. HOWEVER, both the production and price of oil is tightly controlled by OPEC. IF we succeed in significantly cutting our consumption, and so do other markets, OPEC will simply cut production to match. This would result in an increase in the price of oil, so that in the end we're all still paying the same money for less fuel to be able to drive the same amount.
The only practical way to reduce consumption is to promote public transportation. People simply don't have any other alternatives, in many cases, to driving A LOT simply for work and daily life.
As for Joseph E Meehan, your ideas about jobs are ludicrous. The loss of so many jobs, coupled with the increase in food and heating costs would drive this country into the worst economic depression it's ever seen.
Agree that classical economics don't work here; The pricce of gasoline, other than the tax part is determined outside the country! There is a wordwide supply crunch coming,and investors are putting their futures in oil and not in US dollars, which will only decrease in value.
A severe recession in the US will only remove about 120,000 barrels per day from the world market, compared with an INCREASE of over 1,000,000 barrels per day coming from India, China, Russia and other fast growing economies.
However, a sharp increase in gas prices will affect the big 3 car firms, RV manufacturers, and not much else. If the increase in fuel taxes is refunded some way to keep it revenue neutral, only RV dealers and makers of other energy-intensive products will suffer.
The good news is that US gasoline consumption is already stagnant and will drop slightly this year as summer holiday drivers stay closer to home. In multi-car families, the samller car will be driven more often, so total consumption will drop further.
This will, hoever, do nothing for the PRICE of gas or world oil prices!!! Many of you still think that the US can influence world energy prices; not so, unfortunately. The US is the world's largest consumer of coffee, but cannot control the price of that commodity either.
I still think that a nationwide strike against the high fuel costs and the low value of thje dollar,would demonstrate the public frustration.I believe that the ultimate power lies with the consummer.If we demonstrate our disgust by stopping the economy over the Memorial Day Weekend,I think there will be a major favorable outcome.Four years ago,there was a fuel boycott,organized over the internet,the next week fuel prices dropped $1.80 to $1.75.I think what has happened over the last 6 months deserves a more formidibable public display.
Well, if you are concerned about the value of the dollar (as you should be), you should be in favor of a significant reduction of oil imports. This small increase in oil prices is an opportunity to begin to reduce consumption, but it will only work if the public understands that energy prices will go significantly higher (either due to increased taxes or market forces). Obviously, a one weekend boycott is silly, but the public will actually begin to consume less energy when energy prices get up to a reasonable level and stay there for the long term. It will probably take $5+ gasoline prices to begin the process, and it will probably take another decade to really put a dent in consumption.
Bad liberal idea - no more taxes! The Government IS the problem here, not the solution.
But - If we want to conserve oil:
1. Build more nuclear power plants - so that we can get rid of the old power plants burning oil and coal (that can be converted to oil). This also reduces chemical emissions.
2. Buy more products made locally - and stop buying bottled water! This will save oil (diesel) by not moving products needlessly.
3. Stop making so much plastic stuff (i.e. grociery bags, takeout supplies, etc.). Use renewable paper instead.
But the real answer is simple economics - increase the domestic supply to meet the demand by opening up land and coastlines for drilling and for building refineries. Also, eliminate stupid boutique fuels (a zero cost item). That way a problem at one refinery doesn't cause a supply issue like it does now.
Think oil production is dirty? Did you realize there are working oil wells at our state capitol building in Oklahoma? It's no big deal - very clean with no oil spilled on the ground using modern techniques.
I am totally with you on this brother. I have some variations on this but agree totally in principle. Why (coming from a republican like me)? Because we (all of us in the capitalist societies) can’t handle the market variability with commodities like fuel. Fuel/energy commodities are more critical to our existence than any other (taking oxygen out of the commodity market). I am just disgusted with our society’s inability to learn from past fiascos.
Why didn’t we learn anything from the 1970’s (beyond the dangers of bell-bottom pants)??
We got drunk on cheap fuel in the 80’s and lost any hope of becoming responsible in our use of energy. The solution is careful regulation. For crepes sake milk is regulated and we don’t think fuel/energy has a larger benefit from regulation? And not the kind of regulation Jimmy Carter gave us. Regulating the price down is what caused our economy to spiral down out of control in the 70’s. You are correct Ray a “floor” type regulation is what we need. I would add some additional modifications:
Margin controls for the oil companies and the gas retailers. They have an approved margin per gallon on fuel. Very simple to enforce and agree upon! They make $.08/gallon come hell or high-water. Now they can’t charge us more for the cheap fuel in their storage tanks when the price spikes up and then wait until they totally re-fill storage tanks to lower prices (if then). Now they will truly fluctuate with the market and pass on higher prices and lower prices as the market moves. Can you imagine how this alone would level the playing field? Why should we get the shaft while oil companies reap the insane profits??
Then a sweeping floor tax that would be almost exactly like Ray suggested except based as a reducing percentage of the price. So as the price increases this tax relaxes and as prices decrease the tax would raise. This way the bite would hurt much less as markets drive prices higher and more as supply increases and we need “restraint”.
Wholesale
$2/gallon 20% or $.40/gallon
$3/gallon 10% or $.30/gallon
$4/gallon 5% or $.20/gallon
$5/gallon 2.5% or $.12/gallon
$6/gallon 1.25% or $.07/gallon
$7/gallon 0% and Lord help us
On the “we are poor so we need the breaks” comments I have seen. You can do a couple of things. Make your fuel purchases for commuting to work tax-deductable. This is simple and benefits the right people. Secondly you already get breaks as your income is taxed at a lower percentage! But if you really want to make an economic statement change the income tax rate regionally! People in San Francisco earning $250K/year live in cardboard boxes where as people in Cleveland Ohio making $250/Kyear live in mansions. When will people understand that geographic cost of living is a huge factor in how people should get labeled “Rich” and eligible for more taxation!
The politicians really don't have to anymore. We now have bank economists and presidents forecating $200 oil within a few years. With the prospects of lasting high prices, and the only way up, the US public is now shifting to smaller vehicles. I watched an auction yesterday and a very clean 3 year old Ford pickup with supercab had a high bid of $2900!
If you are a farmer or small businessman this is a great time to buy a used truck!
Ray, that's brilliant!
Oh, wait a second...did someone changed the name of the country to France while I wasn't paying attention? If not, good luck on getting any unified support on raising taxes significantly for anything in this country. In America, with very little exception, new taxes = forget about it.
Good News; rising gas prices have finally made a dent in large vehicle purchases. Hummer sales are down 60% and GM is putting the division up for sale or scrapping it. GM's president finally woke up and announced the closure of 4 truck plants; two in the US and one each in Canada and Mexico. He said these plants would "not likely re-open and the shift to smaller vehicles was permanent". They will now increase productoion of Cobalts and import more small cars from overseas.
The Honda Civic is now the best selling car in the US. Toyota cannot make Prius models fast enough.
So Tom and Ray's proposal, made sense after all, rising fuel prices and the prospect of no retreat in the future is permanently changing US buying habits.
A silver lining to those feeling forced out of their behemoths...lots more wonderful cars to drive this time around when compared to the late 70's gas crunch. 200hp from 2.0 liters, getting 30mpg? Cheer-up, the automotive world isn't that bad of a place anymore. $4.25 per gallon with a $1.00 tax? Hmmm...do I see 225hp from 1.8 liters getting 35mpg on the horizon? Only consumer demand will tell how stupid cars don't have to be.
GOLLY RAY WHEN I FIRST STARTED TO READ IT I SAID TO MYSELF THAT THERE FELLOWS BEEN SMELLING EXAUST FUMES WAY TO LONG, BUT AFTER READING IT ALL THE WAY THROUGH I REALIZED YOU SLIPPED ON A GREASE SPOT AND HIT YOUR HEAD . fIFTY CENTS ! IT SHOULD BE AT LEAST 63 CENTS . AFTER ALL THATS REALLY WHAT THE GREEN BACKS WORTH THESE DAYS.
Tom and Ray might have read my suggestion on the old Rant and Rave forum years ago. My suggestion was to raise the tax .50 per year for 4 years. At that time gasoline well under $2.00 as I recall.
And as for economic intervention by the government, there is more than one opinion on the issue and the supporters of each are similar in their certainty. Wall St's opinion is as myopic as anyone elses.
I have been for this sort of thing for years. I would be more modest: add 10cents a year until the tax reaches $1/gas. It would be predictable, would allow car manufacturers and consumers to shift away from gas guzzlers, and wouldn't have a devastating impact on anyone. Low income drivers can buy smaller cars as theirs wear out.
If you want proof this'll work, just look at US gasoline consumption this year as gas got to $4/gallon. It works! Econ 101, folks. CAFE standards are stupid and so are 55 mph speed limits.
Agree that with gas approaching $4/gallon, driving decreased and sale of large cars, trucks and SUVs plummeted. All 3 US car companies now want federal loans guarantees up to $25 BILLION to avoid bankruptcy, similar to the big financial institutions.
CAFE standards force manufacturers to make cars more fuel-efficient, so I suppport that. But you also need disincentives such as high fuel prices and gas guzzler taxes to discourage a large numer of people from buying inefficient vehicles they don't need. Without the disincentives, the Efficieny Paradox tells us that drivers will just drive more if the car efficiency goes up!
What I categorically do not support is the 55 mph speed limit which is wasteful of driver's time and road surface in use. Europeans readily accept all sorts of taxes and vehicles restrictions, but a 55 mph limit would cause a revolution in most countries.
Most non-oil producing countries have a combination of these taxes in place. For the guy with the large family there is the Toyota Hi-Ace minivan, a 4 cylinder, 8 passenger vehicle that gets about 35 mpg, even more with a diesel.
Even though I am quite conservative financially and morally, I feel that taxing excess is acceptable. Whether it is the excess of driving an H-2 to the office or heating and cooling a 5,000 sq ft home for 2 people, the tax burden should reflect the excesses. If people want to enjoy excess they can and should pay for it.
This is a great idea. I own a 2007 Dodge Ram 1500 4x4 w/the Hemi but I don't drive it all that much; I ride my 2008 Harley Davidson FLSTF year 'round (which is quite the feat living in Oregon).
Ever thought of running for office?? Wait...sorry...you've got too much common sense for public office.
05/10/2008 5:59:16 AM
