Well, that certainly didn’t take long. Only a few months after politicians stopped screaming that speculators were pushing oil prices too high, mostly because oil prices dropped so quickly, the editorialists at the Washington Post are fretting that oil is too cheap. The fear is that cheaper oil will make expensive alternative fuels less attractive. The solution: a reverse subsidy for alternate fuels by taxing gasoline.
What’s striking, though, is that the only idea that seems to be off the table is the one that would address all three concerns directly and efficiently: higher gas taxes. This step would stimulate the market for new fuel-efficient cars; defund mischief-making petro-states; and cut carbon emissions. Not only that, it would reduce traffic, curb urban sprawl and, by giving drivers an incentive to drive more slowly, improve highway safety.
America’s state of denial about fuel taxes is not new. But the time has come for it to end. The recent plunge in oil prices has created a golden opportunity. The price of a gallon of regular gasoline, which peaked at over $4 last summer, is now about $1.75. This means that today’s drivers are enjoying the equivalent of 1980 prices, according to the Energy Information Administration. Meanwhile, the average per-gallon tax on gasoline is about 40 cents, including state levies. The federal portion of that has held steady at 18.4 cents since 1993; thus, in real terms, consumers have gotten a significant gas tax cut over the past 15 years. This tax should have been indexed to inflation long ago.
Europe’s motorists pay far higher gas taxes than American drivers do, a principal reason that its manufacturers (like Japan’s) are practiced experts at profitably building fuel-efficient vehicles — and that the average fuel efficiency of new cars on European roads in 2006 was 38 miles per gallon. In contrast, newly enacted CAFE fuel-efficiency rules would require U.S. cars to get 35 miles per gallon by 2020. The Congressional Budget Office estimated in 2004 that raising the gas tax by 46 cents per gallon would cut fuel consumption more quickly and cheaply than CAF
Congress should enact a steep, inflation-indexed hike in gas taxes, one big enough to alter consumer incentives and habits permanently. This would take back some of the de facto economic stimulus consumers have received from the recent drop in gas prices, and it would be a hard sell politically. But surely voters can understand that, even if Congress were to triple the tax to 55.2 cents, gas would still be cheaper, in real terms, than it was in 2005. The increase could be rebated through the income tax system.
A lot of folks would have thought that a global recession would preclude any giant tax hikes. As it turns out, nothing is going to be allowed to stand in the way of a green tech bubble.