Going to the gas station is such a pleasure these days, which is exactly the wrong way to think about low gasoline prices, according to Allan Sloan, who wants us to "jack them up, sharply, by adopting a big honking tax on gasoline." This part of his argument is highly entertaining:
Unless we can summon the political will to slap a big tax on gasoline, we'll be setting ourselves up for the next spike in oil prices. History shows that there will be a spike, whether it comes from a world economic recovery or a terrorist strike against oil facilities or something else that we can't predict.
So ... unless we jack up gas prices, we will be setting ourselves up for a big increase in gas prices!
I realize that there is more to the idea than just this silly argument, but the other arguments seem pretty silly to me, too. Like the one where Sloan suggests that he would "let the market ... guided by a high gas tax ... rule." The market Sloan has in mind is the one that produces high-mileage vehicles and lots of customers to buy them. Even if the federal government has to create that market with a "big honking tax on gasoline."
In fairness, nothing about oil and gasoline seems to resemble a functioning market. Remember when we were speculating about $200/barrel oil earlier this year? Oil is now selling for $54/barrel. Of course, Saudi Arabia thinks that's too low because it would rather get a higher price. Here is how we arrive at the new "fair price" of $75/barrel:
Saudi oil minister, Ali Naimi, argued [in Cairo this weekend] that oil prices should be around $20 a barrel higher than they are now. Mr. Naimi's remarks represented an unusual departure for Saudi Arabia, which has long avoided the appearance of trying to set the price of oil. Saudi King Abdullah also used the $75-a-barrel price tag in an interview on Saturday with a Kuwaiti newspaper. Other OPEC ministers quickly seized on the $75 target, saying that current prices were too low to sustain needed investments in oil exploration and production in higher-cost areas.
The big question is whether the OPEC countries can actually pull off a price maintenance strategy. Even if they succeed, $75 sounds a lot better to me than $150 or $200, unless Allan Sloan gets his way, in which case it won't make any difference.
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1. Posted by Cathy on December 1, 2008 @ 8:49 | Permalink
I skipped the article, so I don't know how crazy he comes off, but the idea on its face isn't crazy. Right now oil is a bargain, and one of the worst things that could happen while we get a shaky economy back on its feet is build it so that it's dependent on these bargain prices. Especially if the next stop for prices turns out to be the usurious levels of the summer.
So why not impose a tax that establishes a price at a reasonable middle? Expensive enough so that it does stimulate greater fuel efficiency but cheap enough that it doesn't kill our economy further. Plus, such a tax could serve as a cushion, for as the underlying wholesale price increases the tax could then give way to it and insulate consumers from the shock of a sudden increase. But in the meantime the tax will help replenish depleted public coffers.
2. Posted by fedgovernor on December 1, 2008 @ 14:29 | Permalink
"Right now oil is a bargain ..."
This statement is false. However, I did notice how you blithely just don't even bother to prove that oil is a "bargain," but then go on to suggest that in order to eliminate this bargain we should raise taxes.
So, please, before you advocate that we dampen consumer spending further by taxing people more (and thus, prolong the Depression) please submit some proof that oil is a "bargain."
3. Posted by Cathy on December 1, 2008 @ 16:02 | Permalink
To clarify, I was focusing on gasoline prices, which may differ from the straight oil market but surely has some relation to it. Gas is currently at less than $2 a gallon in California, a price that hasn't been seen in ages. Given what we've recently been paying, it's extravagantly cheap, and much cheaper than it needs to be. While the $4/gallon prices were choking, it wasn't until they started approaching $3+ that it really started to have a significant impact. So I don't see why a tax that puts gas back in the $2.50 range would be a bad idea. The market appears to be able to bear it, and the state could use the revenue. Plus, as I said before, it could provide some protective cushion for if and when prices do rise by diminishing as the retail prices approach that threshhold.
4. Posted by Jake on December 1, 2008 @ 19:31 | Permalink
Only 10 years ago, I filled up at a West Texas gas station at a mere 78.9 cents per gallon. That was a bargain. Two bucks a gallon is not a bargain. The chief factor inflating gasoline prices in this Nation is the unremitting hostility of the ever more powerful environmental lobby to responsible national policies like permitting new refineries and drilling for American oil. Because no one in the media seems to have any interest in the truth, the public is being misled to believe that drilling for oil today is the same sloppy mess that it was 100 years ago when Spindletop was discovered. That is incredibly far from the truth, in light of modern computer-aided directional drilling technology. But the marvels of innovative engineering are never of interest to demagogues.
5. Posted by fedgovernor on December 2, 2008 @ 2:56 | Permalink
Exactly Jake ... gas being less today than it was yesterday does not make it a "bargain" that should be eliminated by taking people's money from them.
Gordon is right on with this post by noting that the argument that we need more gasoline taxes is idiotic. And the more that you query a person who advocates it, the more you realize just how thinly intellectualized they are.
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