Gas prices

[kenberg]

I always expected the price of gas to come down from its extreme heights, just as I thought that there would be a drop in housing prices. In both cases I was stunned by the size of the drop and I guess I was not the only one. The difference I see between the two is that I expect housing prices to sooner or later resume their normal modest growth patterns while I expect that in the not too distant future oil will be substantially more expensive than it is today.

 

 

It seems to me that this might well be an instance when responsible environmental behavior and rational self-interest are at least somewhat aligned. Keeping the growth of petroleum usage down would obviously be good for the planet, and no one is happy with our increasing dependence on foreign supply. So the question becomes: How to do it. I realize there are various problems with taxation. The burden can fall unevenly, the tax will be passed through to consumers on basic items such as food, there could be a choking of economic growth, and so on. Still, somehow we have to get a handle on this consumption, do we not?

 

 

When I was young I (of course) wanted a convertible. I bought the 47 Plymouth coupe I could afford. I now drive a Honda Accord. Not a Mustang, not a Prius. We make these decisions, at least partly, by considering the economics. It seems to me that we can tilt the choices towards fuel economy by the tax we place on oil consumption (carbon tax or at the pump is a choice I will leave to those who know more about this). The polar bears might thank us, and we might do ourselves some good as well.

[awm]

Perhaps the point is that taxation should be targeted. In the current tough economic times, we want to try to stimulate the economy, create jobs, and help those who have been hit the worst by the crisis. At the same time, there are some who seem to have benefitted from the current crisis and who are already making record amounts of money without contributing much back into the economy. It makes sense to ask that these folks pay a bit more in taxes in order to help cover the costs of creating jobs etc. because they can afford it and because in the long run huge government budget deficits are not particularly a good thing.

 

So the idea is to push the clean energy sector to create new jobs. This will be done by direct government investment, cutting taxes for companies producing clean energy, and so forth. But all this costs money. In order to fund it (and in the process create further incentives for clean energy) the idea is to raise taxes on oil companies (making record profits) and other companies or individuals who produce a lot of pollution.

 

Similarly, we need to put some money into retraining laid-off workers so they can find new jobs and contribute to the economy again. Of course, this also costs money. But corporate CEOs have seen their compensation rise to record levels (both on an absolute scale and relative to the average income) even while many companies have been performing very poorly. The wealth is not "trickling down" from these folks to everyone else -- many of the products they purchase are not produced in the US anyway, and they have far too much wealth to really spend it efficiently in any case. It seems fair to ask that they pay a small percentage of their record compensation in order to help fund the retraining of workers who, in many cases, were laid off because of the short-sighted business policies of the very same CEOs.

 

So while a general tax hike would be a bad idea in this economic climate, increasing taxes on some of the worst offenders (big polluters, overcompensated CEOs, etc) will actually help to reign in some of the problems while providing funding for some of the needed initiatives to actually help the economy improve. Note that what actually pulled the USA out of the great depression was the second world war, which involved some of the highest marginal tax rates (on the biggest earners) in the country's history. So it's not the case that "raising taxes in a recession is always a bad idea" -- it's more an issue of being careful who we raise taxes on and how the money is spent.

[cherdano]

ok, let's say a carbon tax is implemented... richard (if i read him correctly) thinks this would result in a net benefit to the economy... i'm having trouble seeing how... what would happen to all goods and services if such a tax was implemented? i assume the 18 wheelers would take a big hit, right?

As an example (this has been done in Germany), let's assume that the carbon tax is used to subsidize employer's share of employer-covered health care costs. This would mean companies would try to reduce their carbon production, but they would be more willing to hire, since the health care costs associated to hires is lower.

So more would be spent on wages, and less on "sending money to countries that don't like us very much". The new employees are more likely to use that money to buy American goods than oil barons in the Middle East. (I think this is how McCain would try to sell a carbon tax.)

 

This only works well though when there is a clear long-term commitment to increasing the carbon tax, so that companies know that investments into reduction of energy consumption will pay off (instead of becoming worthless once the Republicans regain control of the government).

[mike777]

I guess it needs to be said once more: as far as driving is concerned, a carbon tax is just a gas tax. (Ok, maybe it will be charged earlier in the supply chain as a tax on the oil sale, but that doesn't really make a big difference.)

A carbon tax is just a tax on commodities such as coal, oil, natural gas, with the rate of the tax being proportional to the amount of CO2 they produce when burnt.

Interesting discussion on carbon tax.

 

 

I am still unclear on how it works. Reading some posts it seems people are saying the tax is all along the supply chain, others seem to say it is at the very beginning when the carbon is mined. Also I assume you can burn or capture carbon in many different ways which would release different levels of co2 into the atmosphere. It seems you would need a vast bureaucracy to enforce, collect and measure all of these different levels. It seems there would be vast waste and corruption.

 

Again any misunderstanding may just be on my part but look forward to reading more about this issue in the forum. Again my concern are jobs lost or hurting overall GDP growth.

 

"True but irrelevant. If you want to tax CO2 emission, you just raise the taxes on coal, gasoline, diesel etc. according to their carbon content:

 

Helene, here you seem to say the tax is basically when it is taken out of the ground and based on it's carbon content, not on who can burn it with less CO2 emissions into the air. AGain I assume that the same pound of coal or a barrel of oil does not always release the same CO2 emission. In other words how you burn it or chemically treat it matters.

 

edit:

"The emission is the same in all cases so there is no reason the government would care."

 

Here you say the emission is the same in all cases, but is that correct? I assume there is a way to limit or change, capture, recycle the emissions.

[awm]

I recently bought a new car.

 

I was interested in purchasing a hybrid. The Toyota Prius is basically impossible to get (you have to wait for at least six months on back order) and I've driven one of those before and found many things I don't like about it (poor rear visibility the most significant). So I went to my local Honda dealer and test-drove a Civic Hybrid. Nice car.

 

But then I sat down with the dealer to work out how much it would cost. Basically, owning a hybrid would cost me $8000-$10000 more than buying a non-hybrid Civic over the lifetime of the vehicle. And most of this cost was up front (i.e. the hybrid just cost about 10K more, and while I make up some of that in reduced gas prices -- and I was assuming $5/gallon gas -- there are also increased maintenance costs for replacing the expensive hybrid battery a few years out).

 

So basically... I wanted a hybrid... I was willing to pay a couple thousand dollars more to get a hybrid... but the premium was just too high for it to make economic sense. A combination of increased gas tax, increased price of non-hybrid cards, and tax breaks for purchasing a hybrid could easily have convinced me to go the other way.

 

If the government's policy is really to try to reduce our dependence on oil, shouldn't these incentives and disincentives exist?

[Al_U_Card]

Once you get the oil lobby out of the way, they will.

[mike777]

"So basically... I wanted a hybrid... I was willing to pay a couple thousand dollars more to get a hybrid... but the premium was just too high for it to make economic sense. A combination of increased gas tax, increased price of non-hybrid cards, and tax breaks for purchasing a hybrid could easily have convinced me to go the other way."

 

This is what concerns me since here AWM has a third option, which is to buy nothing and keep his old car, or a fourth option, import a car from overseas.

 

Granted this is a bit hard if we are talking about cars, but think about buying insurance, or a service or toys or textiles. If one can buy the product much cheaper from a company that does not pay the carbon tax this can cost American jobs. Just think about all the things one can buy over the internet and have shipped to you from outside the USA. The other option being to just not buy something which also causes job loss.

 

AGain bottom line the customer ends up paying the carbon tax just as a customer pays all taxes that a corporation pays. If the customer is not willing to pay it the company goes out of business and pays no taxes.

[Al_U_Card]

All the more reason for agreements like Kyoto etc. Everyone has to get on board or its a no go.

 

We couldn't compete with Chinese products as they didn't have compliance issues like we did. But, we don't have melamine poisoning (listeriosis, yes....:) )

 

A level playing field can only be brought about by international cooperation and a concensus approach. We have to giddy-up.

[Lobowolf]

I recently bought a new car.

 

I was interested in purchasing a hybrid. The Toyota Prius is basically impossible to get (you have to wait for at least six months on back order) and I've driven one of those before and found many things I don't like about it (poor rear visibility the most significant). So I went to my local Honda dealer and test-drove a Civic Hybrid. Nice car.

 

But then I sat down with the dealer to work out how much it would cost. Basically, owning a hybrid would cost me $8000-$10000 more than buying a non-hybrid Civic over the lifetime of the vehicle. And most of this cost was up front (i.e. the hybrid just cost about 10K more, and while I make up some of that in reduced gas prices -- and I was assuming $5/gallon gas -- there are also increased maintenance costs for replacing the expensive hybrid battery a few years out).

 

So basically... I wanted a hybrid... I was willing to pay a couple thousand dollars more to get a hybrid... but the premium was just too high for it to make economic sense. A combination of increased gas tax, increased price of non-hybrid cards, and tax breaks for purchasing a hybrid could easily have convinced me to go the other way.

 

If the government's policy is really to try to reduce our dependence on oil, shouldn't these incentives and disincentives exist?

http://www.kiplinger.com/columns/car/archi...08/car0904.html

 

 

This month's Kiplinger's has a "Best Of" column, which I believe includes a hybrid recommendation, focused on the "How fast will it pay for itself?" angle, among other things. It's a good article in general regarding many of the other "Best Ofs" also.

[JoAnneM]

I judge the economy and gas prices by how many cars are using the "park and ride" lot down at the corner and their owners taking the commuter bus into Sacramento (45 miles). Right now gas is down to $2.19 and the cars are only parked about one block outside of the lot. When it was $4.50 they were parked at least three blocks around the lot.

 

I think that many riders decided they like taking the bus, especially since the capitol area and downtown is in such a concentrated space, who needs a car there.

[mike777]

ok, let's say a carbon tax is implemented... richard (if i read him correctly) thinks this would result in a net benefit to the economy... i'm having trouble seeing how... what would happen to all goods and services if such a tax was implemented? i assume the 18 wheelers would take a big hit, right?

As an example (this has been done in Germany), let's assume that the carbon tax is used to subsidize employer's share of employer-covered health care costs. This would mean companies would try to reduce their carbon production, but they would be more willing to hire, since the health care costs associated to hires is lower.

So more would be spent on wages, and less on "sending money to countries that don't like us very much". The new employees are more likely to use that money to buy American goods than oil barons in the Middle East. (I think this is how McCain would try to sell a carbon tax.)

 

This only works well though when there is a clear long-term commitment to increasing the carbon tax, so that companies know that investments into reduction of energy consumption will pay off (instead of becoming worthless once the Republicans regain control of the government).

This sounds great. If a carbon tax can clean up the environment and create jobs with decent health care benefits and higher wages, sign me up. Hopefully if it works in Germany it will work here.

[helene_t]

Also I assume you can burn or capture carbon in many different ways which would release different levels of co2 into the atmosphere. It seems you would need a vast bureaucracy to enforce, collect and measure all of these different levels.

Nope. It doesn't matter how it is processed. The reaction is always

 

C + O2 -> CO2

 

no matter which fuel we are talking about and how it is used.

 

Therefore it is the simplest tax one can imagine (OK, maybe a flat per-square-meter property tax would be even simpler).

 

As for the impact on the economy, I doubt it would be much better or much worse than alternative taxes. But if something is to be done to reduce CO2 emisions, then I think a flat carbon tax is the best way to do it.

[mike777]

Also I assume you can burn or capture carbon in many different ways which would release different levels of co2 into the atmosphere. It seems you would need a vast bureaucracy to enforce, collect and measure all of these different levels.

Nope. It doesn't matter how it is processed. The reaction is always

 

C + O2 -> CO2

 

no matter which fuel we are talking about and how it is used.

 

Therefore it is the simplest tax one can imagine (OK, maybe a flat per-square-meter property tax would be even simpler).

But can't you do something to limit the reaction when burning carbon? Also assuming you cannot I would think a business can still limit emissions into the atmosphere through recapture, conversion or recycling the CO2

[hrothgar]

Also I assume you can burn or capture carbon in many different ways which would release different levels of co2 into the atmosphere. It seems you would need a vast bureaucracy to enforce, collect and measure all of these different levels.

Nope. It doesn't matter how it is processed. The reaction is always

 

C + O2 -> CO2

 

no matter which fuel we are talking about and how it is used.

 

Therefore it is the simplest tax one can imagine (OK, maybe a flat per-square-meter property tax would be even simpler).

But can't you do something to limit the reaction when burning carbon? Also assuming you cannot I would think a business can still limit emissions into the atmosphere through recapture, conversion or recycling the CO2

it might be useful to specifically distinquish between

 

1. Burning fuel (and releasing carbon)

2. Sequestration (preventing said carbon from reaching the atmosphere)

[helene_t]

But can't you do something to limit the reaction when burning carbon?

No, the reaction is what releases energy so there is nothing you can do about it.

 

There has been some talks about CO2 sequestering. It only applies to power plants, though. Remains to be seen if it will work.

[mike777]

Here are some informational links I found on the carbon tax:

 

http://www.carbontax.org/introduction/#what

 

 

http://en.wikipedia.org/wiki/Carbon_tax

 

 

 

http://science.howstuffworks.com/carbon-tax.htm

[TimG]

A combination of increased gas tax, increased price of non-hybrid cards, and tax breaks for purchasing a hybrid could easily have convinced me to go the other way.

 

If the government's policy is really to try to reduce our dependence on oil, shouldn't these incentives and disincentives exist?

It may be irrational, but it seems more reasonable to me to tax gas or low MPG cars to make hybrids more on a par price-wise than to give tax credits (or breaks) for those who purchase hybrids.

 

Nor does it seem like there should be a tax break for buying a Toyota Camry Hybrid that gets 34 MPG but no tax break for buying a Volkswagen Jetta (diesel) that gets similar MPG.

[helene_t]

Agree with Tim. Let me add: other ways of reducing emission is to commute less, or to use the bicycle, or to walk. No reason to give tax breaks to a subset of gas savers only. Keep it simple. Just tax fuel.

[effervesce]

Agree with Tim. Let me add: other ways of reducing emission is to commute less, or to use the bicycle, or to walk. No reason to give tax breaks to a subset of gas savers only. Keep it simple. Just tax fuel.

 

Taxing fuel may be all well and good in theory, but in practice not as effective unless the tax makes the price high enough to be sufficiently painful.

It is also a quick way for a government to lose votes for the next election.

 

When buying cars, or anything else for that matter, the initial price is a very important factor.

You can have the most efficient laundry machine, which in 2 years recoups its extra expense over a less efficient laundry machine - but if the more efficient one costs $500 while the cheaper one is $200, most people will probably buy the cheaper one even if it is more expensive over the long run.

 

Same thing with cars - say there is a $20 000 vehicle that consumes $100 per week in petrol, and a $30 000 car that consumes $50 per week. The extra expense is recouped in 4 years, but I'd imagine the majority of consumers will still buy the $20 000 dollar vehicle - simply because the initial cash saving is a more important factor for the average consumer than the overall cost.

 

That is why subsidising the price of efficient cars may be a much more effective way of reducing CO2 emissions. Tax the inefficient cars, and use that money to subsidise the efficient cars. If both cars were similarly priced, there'd be many more consumers buying the efficient cars.

[luke warm]

if you add to the price of a car, how will that affect car sales? i mean, the big 3 are already bleeding money, begging for a bailout... i can't see how increasing the cost of the vehicle helps anything

 

it looks to me as if the desire for a carbon tax keeps people from looking at the bigger picture (how it will affect all of us)... now i'd be all for *cutting* taxes (even no corporate tax) on companies that had safe and reliable alternative sources of power... give companies an incentive to invest and produce

[TimG]

Same thing with cars - say there is a $20 000 vehicle that consumes $100 per week in petrol, and a $30 000 car that consumes $50 per week. The extra expense is recouped in 4 years, but I'd imagine the majority of consumers will still buy the $20 000 dollar vehicle - simply because the initial cash saving is a more important factor for the average consumer than the overall cost.

Except that in the US cars are very often financed rather than paid for in one lump sum by the consumer. So, instead of comparing $20k to $30k, you would be comparing $400/moth to $600/month and then monthly fuel costs (and maintenance and insurance) do figure highly into the equation.

[effervesce]

ok, let's say a carbon tax is implemented... richard (if i read him correctly) thinks this would result in a net benefit to the economy... i'm having trouble seeing how... what would happen to all goods and services if such a tax was implemented? i assume the 18 wheelers would take a big hit, right?

The reason why people say there is a benefit is that it would increase efficiency. If releasing CO2 into the atmosphere costs nothing to an individual, they do not care how much is released. It's basically a 'tragedy of the commons' situation.

 

Say an item (eg a car) has a price of $x, releasing y tonnes of CO2 over its lifetime.

The CO2 release into the atmosphere, if the climate change people are correct, has a real cost, but one not immediately born by those who release it. Say each tonne of CO2 will have an environmental cost of $z dollars.

Then the real cost of the car is $x + y*$z dollars. However, the real individual doesn't care - they pay $x dollars, while the y*$z dollars is shared out over the rest of society.

 

Hence, carbon taxes may serve to in fact reduce the overall cost, by driving people to buy cars that release less CO2. Ie, to buy cars that in fact cost society less. If the carbon taxes are used such that taxes from inefficient machines subsidise efficient machines, society simply gains. All the carbon tax does is to make consumers pay for the real cost to society of releasing CO2 into the atmosphere. As the carbon tax is used to subsidise more efficient machines, there's no loss of money to consumers-it is simply pricing things as they should correctly be priced.

[effervesce]

if you add to the price of a car, how will that affect car sales? i mean, the big 3 are already bleeding money, begging for a bailout... i can't see how increasing the cost of the vehicle helps anything

 

it looks to me as if the desire for a carbon tax keeps people from looking at the bigger picture (how it will affect all of us)... now i'd be all for *cutting* taxes (even no corporate tax) on companies that had safe and reliable alternative sources of power... give companies an incentive to invest and produce

It is not simply trying to make cars more expensive. Using the carbon tax to subsidise efficient cars will make efficient cars cheaper. If all the carbon tax money is used in the subsidy, then there is no net loss.

 

If x inefficient cars pay y dollars in carbon tax, then the $xy dollars can be used to subsidise z efficient cars. The z efficient cars would therefore be $xy/z dollars cheaper.

 

There would, therefore, be a great incentive for car manufacturers to design and make efficient cars, not only consumers.

[awm]

if you add to the price of a car, how will that affect car sales? i mean, the big 3 are already bleeding money, begging for a bailout... i can't see how increasing the cost of the vehicle helps anything

 

it looks to me as if the desire for a carbon tax keeps people from looking at the bigger picture (how it will affect all of us)... now i'd be all for *cutting* taxes (even no corporate tax) on companies that had safe and reliable alternative sources of power... give companies an incentive to invest and produce

Suppose we said to the US car manufacturers:

 

The US government will pay you $10,000 for every new car you sell inside the United States which has gas mileage rated over 30 MPG in the coming year. The required gas mileage for this payment will increase slowly over the years to come according to a set schedule (i.e. in a year or two it goes up to 31 MPG and gradually higher).

 

This seems like it would cause manufacturers to produce more high-mileage cars and try harder to sell them (rather than pushing consumers to always buy SUVs). Designing "next generation" hybrids which will be over the MPG line for years to come becomes a valuable priority. The prices of hybrids might be cut to make them more appealing to consumers (i.e. Ford charges a bit less for each car, sells more of them, the additional government subsidy more than makes up the difference).

 

Of course, this would cost a lot of money, but it can be paid for by increasing the gas tax, which further encourages consumers to buy small fuel efficient cars (or large hybrids).

[onoway]

One side issue here is a straight across the board tax makes life difficult for farmers and truckers and almost everyone who lives in a rural area. It's very well and good to say take a bicycle or walk, but when it is 37 miles or more to the nearest store that simply isn't an option, unless of course you have nothing else to do with your time. (like play bridge?) An across the board tax will help to speed up the flight of the rural to the urban and put even more pressure on farmers, possibly speeding the transition to more factory farms as the family farms get turned into subdivisions.I'm not convinced that paving land to support more houses and strip malls is necessarilly a good thing. This is what's happening here, at any rate. Some might see nothing alarming about this, I'm not so sure.

This isn't a plea for the status quo, just a thought that although a straight tax is a simple and straightforward solution, it does have implications beyond punishing the use of a car to go pick up a pack of cigarettes and a movie. Maybe we will (should?) get back to the times when stores had hitching posts out the front. (Now if anyone wants to buy a horse....):huh: