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Obama Says a Higher Gasoline Tax Would be a Mistake

8 December 2008

In an interview with Tom Brokaw on Meet the Press on Sunday, US President-elect Barack Obama said that putting a higher tax on gasoline now, given the current drop in prices, to encourage consumers to continue to shift to more fuel-efficient vehicles would be a “mistake”.

...putting additional burdens on American families right now, I think, is a mistake.  What we have to do long term is make sure that we have an energy strategy that focuses on fuel-efficient cars, that focuses on providing incentives for fuel-efficient cars.  Same applies to buildings.  We have a enormously inefficient building stock, and we can save huge amounts of energy costs and reduce our dependence on foreign oil by simple things like weatherization and changing the lighting in, in major buildings.

That’s going to be part of our economic recovery plan.  It actually allows us to spend some money, put some people to work right away, but it also creates a long-term, sustainable energy future.  And I think making some of those investments in ensuring that we change our auto fleet over the next several years, that’s going to be important as well.

December 8, 2008 in Brief | Permalink | Comments (28) | TrackBack (0)

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You have to pay for this somehow. I don't see how no tax (additional) on fuel is a good idea. independent of the energy independence argument, you need a way to fund the repair, build out, maintenance of roads, bridges, etc. and it doesn't look like what we've been paying for gas taxes has been enough. I'd also like to see the amount we spend on our military to secure oil supplies be paid for by the users of the fuel.

Why not ramp it up?

I'm not a fan of connecting a specific tax to a specific expenditure, but here's one where it might be reasonable.

The Fed takes another penny per gallon in 2009. At 2007 numbers, that's 3,389,269,000 barrels * 42 gallons * $0.01/gall = $1,423,492,980.00. 1.4 billion dollars can buy all sorts of things. It can buy better mass transit options. It can buy HOV striping and walls. It can buy LNG buses. It can buy right of way to ship more on rail. It can even buy upgrades in New England buildings which still rely heavily on oil for heating.

It could be spent to reduce the amount of oil we need, thereby reducing the amount of money spent on fuel in the first place.

Gasoline consumption comes out to be about 271 gallons per person in America per year. A penny more on each gallon will cost us less than a cup of Starbucks, but could buy cheaper, safer, cleaner transportation alternatives for an additional hundreds of thousands or more each year.

Whaddya say BHO? Let's get it done. Let's start raising the gas tax in a systematic, predictable way. Doing so will help those making capital expenditures make long term purchasing decisions which result in less fuel consumed.

Raising taxes on gasoline would be a big mistake, if he is interested in getting reelected.

I wonder how many times dems can talk about building weatherization and changing light bulbs before somebody recognizes this is not a change. Same o, same o!!!

“….reduce our dependence on foreign oil by simple things like weatherization and changing the lighting in, in major buildings”

First, we do not use very much oil to make electricity. Second, all the light at my house have an on/off switch. Conservation is nothing new. An executive order to ration energy use by the rich like Al Gore would get my vote.

TM:

I agree with you.

The idea that we can continue to push spending on future generations, to please the current electors and get elected or re-elected, has been part of the 'Santa-Claus' or 'immature' leadership-citizen relationship for too long.

More and more Americans are growing up and know that credit has been over-stretched for many years. The credit super-bubble will burst, if it has not done so already.

USA cannot continue to borrow or print more and more money. The average American is already too deeply indebted.

A $7500 bonus per vehicle to electrify the current fleet would cost $1800 B. or about $6K per capita.

An equivalent of $1/gal levy on all liquid fuels and derivatives would supply $306.6 B per year and pay for the transition in about 6 years, if the current 20 million barrel/day consumption is maintained.

A 50 cents/gal levy would do it in about 12 years.

A 25 cents/gal levy would do it in about 24 years.

Any levy based on long terms, 12 to 24 years, may not be sufficient due to forecasted liquid fuel consumption reduction but would be more in line with the requirements of the progressive transition program.

Obama got the point. nobody buys gas guzzler these days anyway even though the price of gas is decreasing. Therefore putting additional tax on gas would be a mistake because it will only burden citizens who already have fuel efficient cars...

You cannot just raise tax without giving comsumers alternative choices...let's say you raised the tax so what? how are people going to move to alternative and more efficient system when those are not available in the market? I think people who saying the tax should be increased is just ignorant...

Zard, get real! If gas stays at $1.50, how long do you think it will be before people are back buying gas guzzlers?

We need a gas tax and now that gas is lower in cost, this would be a perfect time to put one in. Is it politically feasible? Probably not, which is probably why Obama is saying he won't put one on. After all, he would like to be re-elected. Nonetheless, it is is disappointing to hear him say that. How else are we going to get people to buy smaller cars and drive less? Saying pretty please doesn't cut it.

Sure, we need alternatives. Obama is planning on a huge infrastructure project, which hopefully will include public transit. This would ease the burden on many people. And a gas tax would help pay for this massive infrastructure project.

Would it be too complicated to charge a higher gas tax in areas where alternatives (mass transit) currently exists, and expand the area as more mass transit is built?

I know the idea has some obvious weaknesses, but it could provide incentives for people to use alternatives, money to build the alternatives, and some semlance of fairness for rural drivers.

NO gas tax now, when the economy is stil bad...But, Please Please announce a gradually rising gas tax in the future when the economy rebound may help keep people from buying gas guzzlers and from excessive driving again.

Obama needs to know that:
Higher gas tax will help fund the American government, which is in heavy debts...while a low gas tax will spur higher consumption, which will drain America's money into the pockets of Opec and other hostile regimes.

Where would we want to see America's money go? In the hand of the US government to help bail out American's failing industries and finance sector? OR, in the hands of hostile regimes where terrorism may be breeding?

Obama is a smart guy but he is making a mistake here, the opportunity of low gaz price won't happen that often, when the economy will pick up again gaz price will soar very fast and then he won't be able to increase gaz tax because the gaz price will be too high.

Breaking our foreign oil dependency can't be painless, unfortunately, and people can understand it and I think Obama is good at explaining things in general.

Incentive won't be enough to reduce our oil addicted habits, that's a mistake to believe that it will work this way.

last but not least an increase on gaz tax can be compensated by a income tax reduction for the low income people.

So on this Obama is wrong, and he knows it, but he also knows that American naively believe that cheap gaz is a birth right.

Roger:

You have good points.

Unfortunately, most of us (boomers or busters?) have been trained to think only as far as the cost of the next gas tank and the price of our future gas guzzlers.

With $100+ B Big-3 give away & $700+ B financial system bankrupt bail outs & no new fuel taxes & reduced income taxes, we could all be driving our glamour four-tonne 4 x 4 dinosaurs and have a wonderful time.

We will all sing...On the road again.....

Ive been saying for almost 20 years that the advantage of a high gas tax is, you have a choice as to how to deal with it: You can buy a more fuel-economical car of course, but you also have other options. You can live closer to where you work, so you don't have to drive so much. Or, use alternatives to driving alone, like car pooling, public transit, or riding a bicycle if possible. Or, slow down a little. Who needs to drive 70 miles per hour instead of 60 or less, when gasoline costs $4 a gallon?

People with children shouldn't be expected to shoehorn two, or perhaps three, hyperactive tykes into a small car. Such people might prefer ways to save gas (actually, money) other than 50 mile per gallon cars so small they are useless for transport of any more than 2 people.

Yes, I know about hybrid vehicles like the Prius. But expensive solutions like full hybrid technology become economically viable only when fuel is expensive, either because of natural economic forces or high taxation.

Frankly I think low gas prices are not good for our national soul. If we had low gas prices and economic prosperity, you would have the usual "same old" of people applauding politicians who call for draconian CAFE and safety requirements, while driving to and from political rallies in gas-guzzling SUV's.

I heard that some company is building a massive algae driven ethanol in mexico and expect to be in operation next year. I guess as these ethanol gradually spread through out US maybe he can increase the tax gradually.

What BO's comment indicates is that "Change" arrives in forms many will not like. That's part of the sacrifice we're going to have to get accustomed to.

If as many believe and repeat here, we are truly at "peak oil" then the price of gasoline will rise again to the confiscatory level it has been. If it is merely an OPEC ploy to keep their best customer addicted - Obama is smart enough to know that taxation in a recession is suicide. Expanding the build-out of alternatives, hybrid PHEVs, biofuel infrastructure and mass transit improvements both puts people to work and weans us from our worst addiction.

This new Administration is aware that they need to put a domestic, renewable fuel pump, right next to the gasoline pump - before they can tax gasoline to the prohibitive level behavioral science consultants want. That means domestic made E85/butanol and biodiesel made with domestic labor. A win for enviros, and a win for the new Obama works progress project.

There are many good arguments for increasing the fuel tax at the pump now:

1. As was demonstrated clearly this year, increased fuel cost encouraged people to drive less and therefore, the US imported less oil, over a million barrels/day less. At $100/barrel that is over $100 million/day not spent outside the country adding to our devastating trade deficit. For a while we were spending over $1 million/minute on imported oil. Isn’t that worse than a tax which would stay in the country and could be used to fund energy efficiency projects and mass transit?

2. Gas tax revenue is not paying the cost of road construction and maintenance. Already this year congress has transferred $8 billion from general revenue into the highway trust fund because of the shortfall. Obama’s stimulus plan may include many billions in bridge and highway maintenance and construction. Why not pay for this with a gas tax. Subsidies prop up an inefficient, expensive and environmentally destructive transportation system. Instead, it should be our policy to promote the transition to public transportation, electrified railroads and electric cars for local transportation and biofuels for on farm use.

3. Tax shifting as explained by Lester Brown in Plan B can be revenue neutral, decreasing payroll taxes while encouraging less fossil fuel use. This seems win-win to me.

4. We are not paying for the true cost of our oil consumption. As our Fed chairman has so
succinctly stated, “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil”. The health effects from air pollution, global warming and militarism are all externalized costs.

5. A fuel tax and perhaps a carbon tax must be used to stabilized the cost of petroleum prices to protect investments in alternatives, both private and public and to avoid shocks to the economy. Even Henry Kissinger called for a floor price on oil in the 80's. As shown on the OIL Drum, www.theoildrum.com/node/4727, 5 of the last 6 recessions were preceded by a rapid increase in oil costs.

6. A fuel tax would encourage reduced consumption and allow funding for implementing the oil depletion protocol, www.oildepletionprotocol.org, the only protection we have against future, inevitable oil price shocks and shortages.

There are so many compelling reasons to increase the fuel tax to secure our future. The arguments against seem as shallow and short sighted as the Sarah Palin’s mantra, “drill baby drill”. We can direct our future or allow outside, uncontrollable forces to do so.

What Glenn said.

The US consumer can stand $3, $4 or (dare I say it) even $5/gallon gas if there's some extra in their paycheck. Such high gas prices move consumers away from guzzling trucks and guarantee sales of efficient cars (which the Big 3 otherwise don't want to build). But the USA cannot stand the $150/bbl oil prices needed to do it the "normal" way. If we are going to both get efficient ($5/gallon gas) and keep the money at home ($50/bbl oil), we need to make up the difference with taxes.

Please listen carefully, folks: Obama: "...putting additional burdens on American families RIGHT NOW, I think, is a mistake."
My interpretation: The gasoline tax WILL be increased LATER.

I would have nothing against the gasoline tax if the revenue were used exclusively for improvements in transportation technology, fleet, and infrastructure.

To avoid wasting those revenues, they should be be reinvested in the proper order:
First in the research and development of cost effective alternatives.
Then in the implementation of cost effective alternatives.

Sam Raimy: "..put a domestic, renewable fuel pump, right next to the gasoline pump.."
That should be done not just fuguratively, but literally also! lol

A tax on all fuels at the rate of $40 per ton of their *fossil* carbon content would immediately make many alternatives economical without further subsidy and raise billions for transit and other purposes. That would amount to about $0.25 per gallon of gasoline, which would not break anyone.

There are some missing the politics here. Obama cannot afford to tax "the people" in a recession in the first year of his tenure. If he wants revenue to pay for infrastructure projects - he'll tax the upper income bracket - which he's going to do. Taxes in a recession make for bad politics. Real people respond poorly to politicians who appear to dismiss their economic plight.

Some forget that the punitive effect of massive tax hikes to gasoline demands relief by purchasing a new, fuel efficient ICE. Millions living on weekly paychecks driving pickups and family vehicles for work/family transport will not (especially) NOW have credit to purchase new vehicles. A new car payment on top of $5.00 gasoline will ruin millions living on flat incomes. No pol or humanitarian would force that on working families.

A far more interesting albeit complicated play would be to negotiate a deal with OPEC and big oil. The deal would tacitly allow oil prices to rise toward $120bbl (declared cost to oil co's) provided a profit sharing plan returns 50% net to U.S. Treasury. The leverage is U.S. military continues to protect House of Saud and partners from oil hungry emerging militants Russia and China. This will never happen because heads of State are only figureheads dancing to a company tune.

Fred H: I mean it "fuguratively" and literally.)

Can I please take my vote back now?

The Suvs will come roaring back if we don't do something to stabilize the price of gas at over $4 per gallon. The Europeans have been paying that much for 20 years and it has given them far superior auto technology, far superior public transportation, far superior roads and highways, far superior investment in renewable energy, and a much lower carbon footprint per person.

Damn! I thought I was going to get MY way by electing Obama! You mean he's got a mind of his own???

I am suprised and dissapointed how vague Obama is on energy issue! He is going to make "change" in huge brakets. Let's wait another 4 or 8 years for another possible change.

Some forget that the punitive effect of massive tax hikes to gasoline demands relief by purchasing a new, fuel efficient ICE.
Or car pooling.  Or getting a job closer to home, or vice versa.  Or bicycling.  Or driving the junker econobox instead of the SUV.
Millions living on weekly paychecks driving pickups and family vehicles for work/family transport will not (especially) NOW have credit to purchase new vehicles.
If the tax is rebated, they'll have the money.  The government could also give relief in the form of ration coupons for discounts on a limited amount of fuel.
A new car payment on top of $5.00 gasoline will ruin millions living on flat incomes. No pol or humanitarian would force that on working families.
So the alternative is to continue to drain that money out of the country entirely?

People have been demagoguing the "working families" issue as an argument against gas taxes for as long as I've been paying attention to the issue.  It wasn't valid then, and it isn't valid now.  All this has done is make our problems worse.

Thanks, Eng-Poet, for bringing up ways to make raising gasoline tax more palatable to the public.

Energy-price stabilization is a very important way to avoid another deep recession like this one...Has the govt. had the foresight to raise gasoline prices when it was dirt cheap some years ago, then demands would not have risen to astronomical level to force a huge price gouging on gasoline prices...
And, an already high gasoline tax will give the government the latitude to drastically but temporarily lower the gasoline tax during the period of price gouging in order to keep the economy going.

So, gasoline price stabilization by the government is just what's needed to maintain a healthy economy. Of course, that can only happen when BIG OIL don't run the government.

Arent we some $1.5 TRILLION behind in infrastructure improvements? Flatass BROKE? And way underwater in DEBT?

How are we ever going to reverse that, get any kind of coherent (renewable?) energy policy with "free-market" fuel prices fluctuating at the whim of world politics and economies without at least a quarter/gallon fuel tax?

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