Oil and the economy

All these low prices are is a carrot to forget about becoming more independent from the middle east for our oil.

As soon as the Keystone Pipeline looks to be shut down for good, $4.00 gas will be back. It happened to Carter and our corn farmers in the 1970s, and it might happen again today.

I do not think we should add any taxes to gas as well. We should assume that it will go up again.

 

Oh I'm sure hard-core environmentalists, particularly urban greens, applaud anything that hastens the end of fossil fuel use but hurting poor and middle class people to get there isn't right, either.

 

Its not just liberals. Forbes Magazine publisher Rich Karlgaard came out for a carbon tax some time ago. He is far from alone. The reason you can find proponents of carbon taxes across the political spectrum has to do with one of the most basic elements of economics.

In economic theory prices should cover all costs. When a company makes a useful product (Kodak color film), but does not clean up after itself and discharges toxic materials into the air and water (Kodak's Rochester facility was for decades the largest industrial facility in the Northeast and the most polluted) then everyone else pays a price, just one that does not appear on the company's or industry's books. The cost may show up as asthma or heart attacks or cancer or fewer fish in the waterways, but somehow the price will be recorded somewhere on the universal ledger. I call this economic pollution -- because it pollutes not just the environment, but the economy.

Oil companies get massive subsidies from the 12.5% oil depletion allowance to the dollar-for-dollar foreign tax credit that helps keep the Saudis and other PEC countries rich to the military to protect oil fields to.....I could go on here for a book of material, which some others have done already.

Cheap gasoline prompted wildly inefficient land use practices in the US -- and, in turn, massive taxpayer expenditures to, among other things, build and maintain roads (many of which were poorly built to start with, unlike the Europeans and Chinese who invest in quality roads that last), time spent computing and idling in traffic jams also has costs in terms of air quality, health, family life and adding CO2 to the atmosphere.

If you want less of something the easiest, most straight forward way to achieve that is through a significant tax increase. Little marginal changes are not so effective, especially for products which we need for one reason or another (gasoline to get to work; nicotine for cigarette addicts). But when prices are raised sharply, as with cigarette taxes, we see a big drop in both new users (the whole business is about addicting teenagers) and reduced use by existing users. This is why a carbon tax is preferable to cap-and-trade deals in which polluters supposedly pay to pollute -- they are complex financial deals that can be easily gamed to do nothing to reduce pollution while generating more fees for Wall Street.

A stiff carbon tax would over time produce a more efficient use of many resources and, in turn, tamp down taxpayer burdens to support such a large geographic area with infrastructure and with government services.

A hefty gasoline tax would prompt more people choose to live closer to work, to favor fuel-efficient engines or alternatives (my wife leases a Chevy Volt and you can, too, for $199 a month, ads in my local paper declare) or public transportation, all of which have numerous benefits.

A gasoline tax would, for sure, fall more heavily on those down the income ladder. But there are ways to adjust for that. For example we could raise gasoline taxes by 50-cents a gallon and then give everyone a rebate that covers the first TK gallons so that the burden falls largely on those who drive much more than the average of about 13k miles per year, favor big engines, etc. Of course, that would not be of much help to a low income worker who needs a V-8 in a heavy pickup truck and I am sure my snowplow guy would raise prices.

But by no means is raising gasoline --or carbon -- taxes a liberals-only idea.

 

This drop in oil prices is such a welcome boom for those with household incomes under 50k.

I've been on both sides of this. We raised kids on 52k for four years. I remember getting that stimulus check about a decade ago and it felt like I won a jackpot. Putting $20 a week back in people's pockets in gas savings makes that weekly margin to hit a little less stressful.

Now we're in a position I never thought. Close to 140k between the two of us. Yet we still try to live on about 80 because, like a kid who grew up in the Depression, I always think the wolf is at the door. The oil prices dropping don't really affect us but I remember when an extra $20 a week would have been a difference maker. (In a funny way, I'm actually losing a bit of money as I hold higher positions in oil stocks and oil drilling companies. Yet I save the money now when I fill up and, let's face it, the oil prices will go back up at some point in the future.)

I do think of the businesses. We spend about $90,000 a year in fuel costs -- in a soft market for advertising, if we drop to, say, $60,000 in fuel this year, that will help a bit.

As for the people working in North Dakota or Alberta, that's part of the economy. No one cried for newspapers (or TV reporters) in 2008 and 2009 when we saw our colleagues losing their jobs all over the place or, if some of us were lucky, going on furlough for two weeks to keep our jobs. If you're relatively unskilled labor working in the oil industry and clearing 80k or more, I would hope against hope you put some of that cash away, knowing that the ride would eventually end.

 

Krauthammer's been arguing for higher gasoline taxes for a number of years. His plan is to raise gas taxes by $1 a gallon, then use the revenues to offset a corresponding cut in payroll taxes. The average American's weekly gas tax bill would go up by about $12, but his/her FICA bill would go down by that amount (or his/her unemployment or Social Security benefit check would go up by that amount).

Gasoline/carbon taxes targeted at anything other than the obvious -- the building of roads, etc. -- would be what's known as Pigovian taxes. They sound great until you start getting to brass tacks, then you realize just how dicey their implementation can be.

 

True. And gas/fuel/carbon taxes tax all economic activity.

 

I am continually amazed at the people who put nothing away. There is a bumper sticker joke around here to the effect of "if I get one more boom I promise not to piss it away," lots didn't heed that advice.

 

That's awesome.

 

Do you understand the difference between gas and diesel?

I believe that taxes on diesel should be increased so that truckers pay a fairer share for the roads they cause so much damage to.

But I do not want higher gas prices. Nor do I want higher gas taxes.

I'm enjoying the hell oit of $1.89 gas and would love for it go even lower.

 

Saudi Arabia can cope with low oil prices for "at least eight years", Saudi Arabia's petroleum minister's former senior adviser has told the BBC.

 

How would you separate that tax from fuel-efficient vehicles that use diesel, rather than just big trucks? Or, farmers or work crews?

 

The danger in this is the potential that people will sense less urgency to invest in alternative and cleaner energy sources.