Tuesday, January 17, 2006

One Thousand Words or Less: On Increasing the Gasoline Tax

By EJ Moosa

If you cannot make a point in less than 1,000 words, you may need to reconsider what your point is. This comes from someone who never has a shortage of something to say. Today, I am going to talk about the false idea of conserving fuel by increasing the tax on a gallon of gasoline.

Conservation can be described as “Preservation or restoration from loss, damage, or neglect”. There is a push for those of us in the U.S. to conserve gasoline(or oil). There are those such as Michael Jackson, CEO of Autonation, pushing for a $1 a gallon gas on tax to encourage conservation. (as seen on CNBC TV-January 2006)

Mr. Jackson was able to quote all sorts of statistics on consumption, how we pay less than other nations, how the federal gas tax has not risen, without ever explaining how there would be more gas left in the end for America. If one were to be cynical, one might see this as a way to stimulate auto sales as everyone moves towards more fuel efficient vehicles(thereby selling their old and buying new) on a faster time table than Americans are currently doing.

Frankly, this new tax will do nothing to actually save any oil. We have a global economy. If the citizens of the US curtail their consumption because they are forced to pay more for fuel, we are only lowering the cost of fuel for the rest of the world. There will not be extra oil for us one day because we have chosen this path.

Oil is bought on the open markets based on supply and demand. If the demand drops here , that oil that would have been purchased, bought and consumed here will not be going into storage for us to use one day. Instead those resources will be used by other nations who purchase those resources at a lower cost.

If our economy was not global, the case could be made that a gallon of gas not burned today by America will be there tomorrow. But that is not the case. There are a billion Chinese waiting to get cars and burn that gallon that we save. And if it is cheaper because we have reduced demand, all the better for them.

Now if the federal government were to say that we will pay an extra $1 per gallon, but that those funds were going to be used to purchase and store oil for future use by Americans only, then we might be able to truly call it a conversation plan.

Why in the world would we want to penalize ourselves for the benefit of the everyone but ourselves? Good intentions. It makes us feel good. We have to do something. You can pick whatever reason you desire.

Imagine you went to a bar, and for Americans, the beer cost $1 a bottle more., to encourage responsible drinking. Yet, the Germans and the English and the Irish are not required to pay that same dollar. Does any rational individual think that there will be beer left for the Americans at the end?

No, the Americans will have just paid more along the way, with the money enriching, well, even the politicians would not know for sure.

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