Gas Prices.........

[Gone4Good]

So, put a tax on oil in a recovery that is not that stable..........that should end well..........

Maybe you could elaborate on the net economic impact of a revenue neutral energy tax whose proceeds are used to pay for income and payroll tax deductions. We're constantly being reminded on these boards how income taxes, regardless of level, are arsenic to economic growth (evidence notwithstanding). Are we now to believe that a narrow consumption tax is worse?

 

[Texas Proud]

I think the price of gas in the US is probably the cheapest in the world. Quite a bit cheaper than Canada and Europe anyway. Canada exports more than half it's production to the US while importing some into Eastern Canada from overseas. Net Canada has an oil surplus of a little over 1million bbls per day and still our gas costs much more than yours. Go figure.

Saudi Arabia has cheaper gas...

I bet Venezuela also has cheaper gas... (just a guess based on their ruler, nothing else)


Yours cost more probably because of taxes... I remember seeing a table on actual gas prices before taxes and most all countries were pretty similar... and I think the UK was lower than the US... it is the taxes that make the difference...



Edit.... looked it up.... here is the price in 2007

Kuwait 91 cents a gallon,

Saudi Arabia 45 cents a gallon,

and Caracas, Venezula 14 cents a gallon!

 

[Nodak]

Is there something stopping people from drilling in North Dakota? I thought the only areas that had restricted drilling are off the coast and ANWR.

I could see maybe the state restricting drilling to protect local water or something, but is there something the federal gov't is doing to prevent it in places like ND?

No, they're definitely drilling here. There are however groups throughout the US that try to inhibit oil exploration by throwing up assorted legal challenges.

 

[Danmar]

Texas- I am sure you are correct. Definately the difference is taxes.

 

[Rustic23]

Actually the US doesn't.

CNN/Money: Global gas prices

Caveat: I did not see the date on this article, but I think it is fairly current.

Venezuela Caracas $0.12 is the lowest.

 

[samclem]

Are we now to believe that a narrow consumption tax is worse?

A tax on masking tape is a "narrow consumption tax." A tax on the substance used to move nearly everyone and everything in the country probably won't be seen as "narrow."

 

[Gone4Good]

A tax on masking tape is a "narrow consumption tax." A tax on the substance used to move nearly everyone and everything in the country probably won't be seen as "narrow."

Which neatly avoids the relevant question.

 

[samclem]

Maybe you could elaborate on the net economic impact of a revenue neutral energy tax whose proceeds are used to pay for income and payroll tax deductions.

Yet earlier, the proposed energy tax would:

1) Improves our federal deficit

So, which is it--revenue neutral, or does it "improve" our deficit? Or a magic tax that does both? Is there any other product whose taxation would be more broadly disruptive? Do you see these disruptions/second order effects as enhancing our economic competitiveness, or are they "revenue neutral" too?

And then we have

3) Reduces greenhouse gasses

Maybe not. When the US uses less oil, other countries will be buying more of it at lower prices. Most countries burn it less efficiently than we do, so more oil is burned per unit of productivity. That's not a formula for reducing global greenhouse gases. Plus, you've proposed taxing oil--which means we'll burn more coal. Does that produce fewer greenhouse gases? No.

4) Supports alternative energy

Yes, true.

5) Reduces revenues to places like Iran

Marginally. Others will buy what we don't.

6) Reduces our strategic interest in the middle east (where we're currently involved in three wars we wouldn't be if the region had no oil).

Someone moved Afghanistan to the Middle East? Anyway, the oil-rich sheiks and the extremists will still get revenue whether we buy oil or not. And their new customers will likely buy with fewer strings attached. Look for an even less useful UN (possible?) as China sells her votes to her new economic partners.

I think static analysis has claimed another victim.

 

[Gone4Good]

So, which is it--revenue neutral, or does it "improve" our deficit?

It could be either, or. I think I read somewhere that we had a problem with the deficit, so it could help on that front if we wanted it to. But I also realize that some here seem allergic to even the mention of raising revenues, so it doesn't have to if that becomes a stumbling block to discussing the concept.

When the US uses less oil, other countries will be buying more of it at lower prices.

If U.S. demand declines, prices will be lower to some extent. But it's not clear to me that oil demand is all that price elastic. How much has demand changed in the past decade while the price sextupled? Has worldwide consumption dropped considerably? Not that I can tell. If oil prices dropped in half, how much would consumption change? Here is some research on the subject . . .

This paper uses a multiple regression model derived from an adaptation of Nerlove's partial adjustment model to estimate both the short-run and long-run elasticities of demand for crude oil in 23 countries. The estimates so obtained confirm that the demand for crude oil internationally is highly insensitive to changes in price.

Plus, you've proposed taxing oil--which means we'll burn more coal. Does that produce fewer greenhouse gases? No.

Oil and coal are not substitute fuels.

Someone moved oil-rich Afghanistan to the Middle East?

Yup, our last president.

The Greater Middle East is a political term coined by the Bush administration[1] to englobe together various countries, pertaining to the Muslim world, specifically Iran, Turkey, Afghanistan and Pakistan.[2]

I think static analysis has claimed another victim.

I don't see any 'dynamic' analysis at work here. What I see is a bunch of dirt being thrown in the air to try to obscure the obvious for reasons that are mostly unclear. My guess is that an 'oil tax' sounds vaguely liberal so there is a knee jerk reaction against it. But I'm relatively sure if I searched these message boards I'd find folks who are dead set against an oil tax here talking more sportively of the concept of a consumption tax in other threads.

 

[samclem]

Oil and coal are not substitute fuels.

I thought the goal of this tax was to reduce oil use? Electric cars are often cited as reducing oil use, and their use would increase under the oil tax you've proposed. Over 50% of US electricity comes from coal. It will be a substitute fuel.

Yup, our last president.

"Greater Middle East" ≠ "Middle East"

.But it's not clear to me that oil demand is all that price elastic. How much has demand changed in the past decade while the price sextupled? Has worldwide consumption dropped considerably? Not that I can tell..

Then your whole "tax oil consumption" proposal is worthless. If oil use won't be reduced by increasing the price, then what the heck is the reason for your whole proposal? Please, pick a side and stick to it.

But I'm relatively sure if I searched these message boards I'd find folks who are dead set against an oil tax here talking more sportively of the concept of a consumption tax in other threads.

An oil tax would be a more effective way to decrease US consumption of oil than any of the "incentive" schemes (cash for clunkers, bucks for hybrids, etc) we've tried or which have been proposed. It attacks the "problem" in a straightforward way: It provides a disincentive to use oil and allows individuals and other entities to figure out for themselves how best to reduce oil use. But it will accomplish this at a tremendous price, a price that (in my opinion) clearly exceeds the gain we can expect. So, we shouldn't do it.

 

[almost there]

Oil is $111 a barrel today and Regular is $4.25

(Same price per gallon back when oil was $160 per barrel)

Weird..........

 

[Gone4Good]

I thought the goal of this tax was to reduce oil use? Electric cars are often cited as reducing oil use, and their use would increase under the oil tax you've proposed. Over 50% of US electricity comes from coal. It will be a substitute fuel.

I'm glad you know how energy technology will evolve over the next 75 years. But as things stand today, they are not substitute fuels and they may never be.

 

[Gone4Good]

An oil tax would be a more effective way to decrease US consumption of oil than any of the "incentive" schemes (cash for clunkers, bucks for hybrids, etc) we've tried or which have been proposed. It attacks the "problem" in a straightforward way: It provides a disincentive to use oil and allows individuals and other entities to figure out for themselves how best to reduce oil use. But it will accomplish this at a tremendous price, a price that (in my opinion) clearly exceeds the gain we can expect. So, we shouldn't do it.

Thank you for that response.

My question is this: is that 'tremendous' price greater or lesser than the cost of other revenue raising schemes. I think you're framing the argument as a false choice between an oil tax and no tax. But what if the choice is between an oil tax and an income tax. Is it still the worst option?

More simply, if we agree that the government needs $1 in revenue, what is economically the best mechanism for collecting that dollar? My vote would be for taxes on things that have large external costs, like burning oil.

 

[samclem]

Thank you for that response.

My question is this: is that 'tremendous' price greater or lesser than the cost of other revenue raising schemes. I think you're framing the argument as a false choice between an oil tax and no tax. But what if the choice is between an oil tax and an income tax. Is it still the worst option?

More simply, if we agree that the government needs $1 in revenue, what is economically the best mechanism for collecting that dollar? My vote would be for taxes on things that have large external costs, like burning oil.

In my opinion, the strongest argument for an increased tax on oil is the one in your last line--making the price reflect, as much as possible, all the external costs. Unfortunately, figuring these costs is a tall order. As one example: (despite the rhetoric) we're involved in the Middle East for many reasons that do not involve our own direct oil use. Similarly, figuring the environmental costs of nearly any energy source is a game so fraught with politics that I'm nearly certain it can't be done objectively.

 

[brewer12345]

Just wanted to point out that nat gas is a much easier substitue for oil than coal will ever be. You can convert gasoline engines to run on CNG relatively easily and you can use nat gas to make a very effective diesel substitute pretty easily (nat gas to methanol to dimethyl ether). Since we are floating on a sea of nat gas, this would seem to make a lot more sense.

 

[samclem]

Just wanted to point out that nat gas is a much easier substitue for oil than coal will ever be. You can convert gasoline engines to run on CNG relatively easily and you can use nat gas to make a very effective diesel substitute pretty easily (nat gas to methanol to dimethyl ether). Since we are floating on a sea of nat gas, this would seem to make a lot more sense.

If we had a programmed annual tax increase in gasoline prices of, say, 30 cents/gal per year for the next 10 years, these conversions would make a lot of sense and sell well, especially in short haul/delivery fleet service, but also in passenger cars. A bi-fuel Ford Fusion can go over 200 miles on CNG, can then use gasoline at the press of a button, and still has a usable trunk. For a daily driver it would be fine and save a lot of money. But it won't cut greenhouse gas emissions and isn't sexy technology that needs "assisting", and the whole "fracking" controversy is abrew, so I'm afraid CNG won't find support in some quarters. But it does address a lot of problems.

 

[Nodak]

If we had a programmed annual tax increase in gasoline prices of, say, 30 cents per year for the next 10 years, these conversions would make a lot of sense and sell well, especially in short haul/delivery fleet service, but also in passenger cars. A bi-fuel Ford Fusion can go over 200 miles on CNG, can then use gasoline at the press of a button, and still has a usable trunk. For a daily driver it would be fine and save a lot of money. But it won't cut greenhouse gas emissions and isn't sexy technology that needs "assisting", and the whole "fracking" controversy is abrew, so I'm afraid CNG won't find support in some quarters. But it does address a lot of problems.

The problem with a programmed tax increase is you will increase the cost to persons living in low population areas without guaranteeing an infrastructure to support the availability of CNG. We have 4 gas stations and none of them are national chains, the owners would have to build the infrastructure and I doubt they could afford it.

 

[brewer12345]

If we had a programmed annual tax increase in gasoline prices of, say, 30 cents/gal per year for the next 10 years, these conversions would make a lot of sense and sell well, especially in short haul/delivery fleet service, but also in passenger cars. A bi-fuel Ford Fusion can go over 200 miles on CNG, can then use gasoline at the press of a button, and still has a usable trunk. For a daily driver it would be fine and save a lot of money. But it won't cut greenhouse gas emissions and isn't sexy technology that needs "assisting", and the whole "fracking" controversy is abrew, so I'm afraid CNG won't find support in some quarters. But it does address a lot of problems.

Actually, I think commercial vehicles would make the most sense for CNG. Whether any of this comes to pass is an exercise left to the reader, but I note that outside of the US there are plenty of places where CNG or DME are increasingly widely used as transportation fuels.

 

[FinanceDude]

I think the price of gas in the US is probably the cheapest in the world. Quite a bit cheaper than Canada and Europe anyway. Canada exports more than half it's production to the US while importing some into Eastern Canada from overseas. Net Canada has an oil surplus of a little over 1million bbls per day and still our gas costs much more than yours. Go figure.

Socieo-economic policies are much different. Plus, Canadiens are "used to paying it", so why drop the price? I am sure the govt is finding ways to spend it wisely.........

 

[Independent]

In my opinion, the strongest argument for an increased tax on oil is the one in your last line--making the price reflect, as much as possible, all the external costs. Unfortunately, figuring these costs is a tall order. As one example: (despite the rhetoric) we're involved in the Middle East for many reasons that do not involve our own direct oil use. Similarly, figuring the environmental costs of nearly any energy source is a game so fraught with politics that I'm nearly certain it can't be done objectively.

I've been reading along and thought I'd throw my two cents in here.

I'm sure that we spend something on military readiness and actions to provide a steady supply of oil. I don't know if the annual average is $200 billion, $300 billion, $400 billion, or some other number. But I'm sure it's measured in 12 digits. "Zero" is not an option.

So any tax we put on oil moves us in the right direction. I've suggested $1 per gallon because it's a round number that seems to be in the right neighborhood (we use about 300 billion gallons of crude per year).

I don't think the US has much national interest reason to be involved in the middle east other than the concentration of oil. So I think most of our expenses there are oil related one way or another.

If we didn't have a budget deficit, I'd do an explicit rebate to make the tax revenue neutral. Since we have a serious budget deficit, I'd view the tax as a way to avoid some other tax increase. Anything we do to reduce the deficit in the near term will be "bad for the economy". Given our current situation, we need to grade any deficit fix in (not a big problem given how slowly Washington works).

 

[FinanceDude]

It could be either, or. I think I read somewhere that we had a problem with the deficit, so it could help on that front if we wanted it to. But I also realize that some here seem allergic to even the mention of raising revenues, so it doesn't have to if that becomes a stumbling block to discussing the concept.

There is an EASY solution to raising revenues, CREATE JOBS!!!!!

 

[Danmar]

Socieo-economic policies are much different. Plus, Canadiens are "used to paying it", so why drop the price? I am sure the govt is finding ways to spend it wisely.........

Yes I agree that Canada is very different. Actually we are doing pretty well in many respects compared to our friends to the south.

 

[FinanceDude]

Maybe you could elaborate on the net economic impact of a revenue neutral energy tax whose proceeds are used to pay for income and payroll tax deductions. We're constantly being reminded on these boards how income taxes, regardless of level, are arsenic to economic growth (evidence notwithstanding). Are we now to believe that a narrow consumption tax is worse?

I get it, you are a Keynesian.........

 

[samclem]

I don't think the US has much national interest reason to be involved in the middle east other than the concentration of oil. So I think most of our expenses there are oil related one way or another.

Afghanistan has no oil, and we're there. It's true that the extremists got some funding from oil money, but they would have gotten that with or without US purchases of oil.

We buy virtually no oil from Libya, but we are involved there militarily. Our allies get some oil from Libya, but (again) they'd be doing that even if we weren't. Yes, a reduction in Libyan oil exports increases oil prices for us, but just a little. More fundamentally, if we just wanted to ensure the continued availability of Libyan crude, we'd by backing Qaddaffi, not bombing him.

Our military forces are designed to be flexible, and we count on the same ones to be available to meet many contingencies. We have relatively little dedicated basing infrastructure the ME that could be axed to save money if, somehow, we decided that we weren't interested in the place. We'd still need virtually the same force structure (which is what costs the real money) to be available for other requirements.

 

[JOHNNIE36]

Very interesting discussions and opinions. I am not qualified to speak on the subject and since nobody would be interested in my opinion, I'll pass to someone else. However, the discussion on the use of natural gas makes me wonder, "where is T. Boone Pickens when you need him most?"
He has got the be the biggest force behind NG and he proposed long ago to convert commercial vehicles (and others) to NG ASAP. You would think this is a perfect time for him to push natural gas and for the whole country to listen
closely. Then go out and start the conversions.