Impose a Modest Gasoline Tax Now (Yes, I Hate to Say It . . .)

By MJK | December 30, 2008

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One of the strange things about oil is that when it is cheap, new problems arise.  I fully support the notion that it is in our national security interest to promote alternatives to oil use.  As we know, our dependence on energy imported from dangerous areas and unfriendly governments is a serious national security risk.

The big risk of cheap oil is that we will be lazy in preparing for the day again when oil will again be expensive.  Cheap oil removes incentives to conserve, look to deploy oil alternatives, and purchase hybrid vehicles.  Also cheap oil reduces the financial incentives for oil companies to search for new oil sources and build / expand refineries.  Supply gluts bring down the price of oil, but what really destroys energy prices is lack of demand.  Because we are in a global recession, the worldwide demand for oil has plunged oil prices from a recent high of $143 a barrel to around $40 a barrel today.  Regular unleaded gasoline has plunged as well, from a high of $4.11  a gallon to around $2 today.

Thomas Friedman, with whom I frequently disagree on an array of matters, wrote ”Win, Win, Win, Win, Win . . .“  (New York Times, 12/27/08) advocating the imposition of a gasoline tax while it remains cheap.  This article is a worthy read, and I wholeheartedly agree with Friedman and thus support a modest gasoline tax.  Though I am normally suspicious of such blatant governmental intervention, and like everybody hate tax hikes, pressing national security considerations make such intervention necessary to help protect us from some of the pitfalls that we will again endure from future supply shocks.

Some will argue that raising any taxes in recession is wrong, but one plus of this recession is that it has killed oil and natural gas prices.  This allows us to afford a modest gasoline tax, whose benefits will be reaped in the future.  It will also help pay for Obama’s proposed alternative energy stimulus and otherwise slightly mitigate our ballooning budget deficit.

Note that the Europeans tax gasoline like crazy (way too much!), but in return do drive less and drive much smaller vehicles than we do here.

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One Response to “Impose a Modest Gasoline Tax Now (Yes, I Hate to Say It . . .)”

  1. Jamie HoltsNo Gravatar Says:
    December 30th, 2008 at 2:23 am

    I discovered your homepage by coincidence.
    Very interesting posts and well written.
    I will put your site on my blogroll.
    :-)

    Reply

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