## US Energy Secretary Calls Tax Hike on Gasoline “Not Politically Feasible”

##### 28 May 2009

In an interview with the Financial Times, US Energy Secretary Steven Chu said that raising US gasoline prices to levels comparable to Europe’s through taxes or regulation is not politically feasible.

In the past Mr Chu, a Nobel laureate, has argued that if the US wanted to reduce its carbon emissions, policymakers would have to find a way to increase petrol prices to levels in Europe. But in an interview with the Financial Times, he said: “At this moment, let me be frank, it is not politically feasible.”

...But Mr Chu warned that Americans will have to learn to live with higher petrol prices even if Washington does not enact policy that boosts them. “Regardless of what one does in any sort of taxation, I believe that prices of oil and natural gas will go up in the coming decades,” he said, adding: “They will naturally go up just because of fundamental supply and demand issues.”

There's a massive gap between Fed+state taxes and taxes within most of the EU. Chu suggests we can't tax all the way to EU levels, but he doesn't suggest that there isn't room within the USA for the taxes to go up.

Perhaps the way to do it is for the Feds to pay for a smaller portion of a project, requiring states to pay more. The states will figure out how, either with general taxes or with a gas tax.

Someone has to show the political will and it would probably be at the state level. California taxes gasoline at about twice the federal rate. They pay more per gallon, but people have gotten used to it. Somebody has to pay for the roads and it might as well be drivers.

The states will certainly find a way to raise taxes and have no fear the revenue will be squandered just as the revenues in all the Federal Trust Funds.

It would be politically palatable if gasoline tax will be raised gradually, year after year, and announced much in advance so that people can adapt to it gradually.

The alternative is economic catastrophe every time Big Oil decides to price gouge, while alternative fuel technology will go bust when the price gouging is relaxed just long enough to destroy alternative fuel/ green energy businesses.

Which scenerio would be more politically acceptable now, once the people look at the big picture?

Remember when demand was pushing near the supply capacity. The speculators got hold of the oil futures and made a fortune with gas at more than $4.00 per gallon. The demand went down and so did the prices. This price spike was most likely one of the causes of the current recession. When people understand the games played in commodities circles they will demand that government remove taxes from payroll and other regressionary taxes and get more revenue from Goods and Services. That way, the taxes dampen demand swings and preempt price spikes. The other benefit is that these increased gas taxes provide reduced non-monitary costs to people in other areas. What that means is: driving less or with a full passenger load, for example; saves lives, increases productive time and increases human interaction. The right taxes are a win-win for the people and government. A gas tax is the right tax. In 1992 Ross Perot proposed a 5 cent per gallon tax added every year for 10 years. By 2002 we would have been paying more than 50 cents per gallon of tax and people would be used to$4 gasoline. Stop hedge funds from jacking around with prices and you might have a winner.

Although it may not be popular politically, I nonetheless believe that a heavy tax on fossil fuel carbon (applicable to ALL fossil fuels, not just motor fuels) is the most flexible method of moving us towards less carbon dioxide-intensive lifestyles.

In particular, by taxing gasoline we give people a choice: You can drive a more fuel-economical car, and many might prefer to do that. Alternatively people could alter their life styles so as not to require so much driving. Car pooling instead of driving alone, for example.

Putting a tax on fossil fuel carbon would also create incentives towards carbon-neutral fuels, such as methane derived from organic sources (i.e. sewage or animal wastes).

Squeezing the auto industry harder and harder on fuel economy is a much less flexible approach to whatever problems we may be having from carbon dioxide. I sincerely hope more and more people will come to understand this.

We need a fuel tax to provide stable, high fuel prices for several reasons:

1. Demand is reduced so the cost of imported oil is less. At the high point in oil prices last year, imported oil was costing us over \$1 million/minute.

2. Monetary and R/D investments in alternatives have a more predictable return.

3. People will shift to more fuel efficient vehicles and other non fossil fuel modes of transportation.

4. We will have a much more energy efficient economy so the inevitable increases in fossil fuel costs will not be as damaging.

The taxes can be revenue neutral as Lester Brown has explained in Plan B, shifting tax away from persons and on energy.

The only way your gona get a large enough gas tax to ever pass is to replace existing taxes people realy hate.

Fossil fuel taxation, or a price floor, is in my opinion one of the most important policy changes needed to get our society headed toward sustainability (and peaceful national security). Not only will this curb harmful emissions, but the price stabilization will do wonders for investment and innovation. A gasoline tax would damp out the effect of events that would otherwise cause price spikes (or collapses). What we really need is fuel prices that reflect true-cost pricing, which would go beyond current European prices. This would of course need to be phased in, with appropriate tax cuts in other areas and mechanisms in place to help support the transition to a low (or no) petroleum economy. A preemptive transition like this would be much less painful than one forced by declining supply.

The political will to make this policy change won't exist until more citizens are convinced, and speak up and persuade their representatives to push this. Those of us who are already convinced need to speak not only to those who are like-minded, but to those who are opposed to fuel tax increases. Somehow we need to persuade them to think long term, and to persuade our representatives to think beyond the next election.

What I have in mind is to set aside the next decade as an 'Earth Decade', one where we focus on getting back on track, and build a better future for everyone.