Why We Need a $7 per gallon tax on Gasoline and Diesel Fuel

No, I’m not a tax and spend Democrat! And obviously, I am not an old line Republican to propose such a massive tax. I really don't want any new taxes, but, the USA seemingly has a big problem with the control and consumption of oil, so hear me out before you begin foaming at the mouth!

For the record, current petroleum consumption in the USA is something over 20 million barrels per day. At $100 per barrel of oil, that is a cost of over 2 billion dollars per day. At around 45 gallons of refined fuel per barrel, my proposed gas tax would raise something over 6 billion, 300 million dollars per day.

From exile in Italy in 1979 after being deposed, the late Shah of Iran was quoted as saying: “Oil is too valuable to burn. There are more important uses for oil than burning it to produce energy, for God’s sake! There’s a limited amount of crude petroleum in the earth. Oil is used for making plastics and thousands of other products made by petrochemicals, which is oil. When we run out, what will we do? Fight each other for the last drop?”

The Shah was predicting what is now coming to pass. If you consider the current world situation with respect to oil and its growing consumption, and the very near term prospects for running out of new sources of petroleum, the future for everyone in 40 or 50 years looks pretty grim, for both food and oil, regardless of whether global warming is a myth or not.

So here are my suggestions for solving several looming problems for the USA and its energy needs and certainly leaving a better legacy for our grandchildren.

A 7 dollar tax on fuel would immediately give significant incentive to auto manufactures to produce truly efficient vehicles that use gasoline or diesel. The additional cost of oil based fuels would also propel the auto makers to make electrical or hydrogen or whatever powered transportation that is more than competitive with oil fueled cars and trucks. 

It is logical to think that a 7 dollar per gallon tax on gas and diesel would cause the USA’s consumption of petroleum to significantly decline, including oil imports, within a very short time. This would be very helpful to the current, momentous, imbalance of trade the USA has with the rest of the world.

A 7 dollar a gallon gas tax would allow Congress to eliminate or greatly diminish the current tax burden on businesses and consumers. (I realize this part of the plan will require booting the current crop of spendthrift lawmakers, both Democrats and Republicans, out of office, but that job needs to be done anyway!)

A 7 dollar a gallon gas tax would hopefully make the USA a much cleaner, less polluted place to live and work because we would figure out how to travel from place to place using non-petroleum and hopefully, non-polluting, sources of energy.

So, in the big picture, putting a 7 dollar per gallon tax on gas and diesel is a logical and easy first step to make the USA a stronger nation and reinforce its position as the technological leader of the new world, where petroleum is used to make things we really need, such as some pharmaceuticals, and not burned up never to be seen again. 

Let the rest of the world foolishly burn up their oil supplies until there is none left, while we create some new ways to get around. Someday, the oil, if left in the ground here in the USA, will be much more valuable as a resource for making things, than it is for simply burning it to create energy. 

And yes, in case you think I’m blowing smoke on this issue, I’m going to ride my bicycle over 50 miles tomorrow! Let the 7 dollar tax begin!

 

Comments

[Populista]

I agree that drastic action needs to be taken NOW, but wow! Even I wouldn't go that far...

[felixthecat]

"the future for everyone in 40 or 50 years looks pretty grim". Too true. That is why it is better to enjoy today as much as we can, and keep a gun handy for the future.

[John J.]

In Europe gasoline has always been highly taxed with the result that at pump price had been forever about 2 to 3 times what we paid here. With the Dollar imploding versus the Euro the situation has remained pretty much the same while getting worse for us.

The current prices in Europe are anywhere from about $8 to $10 a gallon. Most of that amount is taxes which is used to fund public transportation and discourage consumption and encourage efficiency. Somehow Europe has managed to survive and even prosper rather well with high fuel prices.

It can be done if there is a will to do it. Since oil prices are determined by world wide demand, they are not about to come down if ever, even for domestic oil which cannot be separated from the world market without closed borders and government intervention. We'll have to adjust whether we like it or not.

[MSUGeek]

One point missing here is that we have over 2 trillion barrels of oil locked up in shale and tar sands. The current and future market will make the shale oil and tar sands an economically viable, secure, long-term source of petroleum.

[John J.]

Yes, but it is high oil prices that will make shale and tar sands economically feasible. The process of extracting this oil requires far more energy than from oil wells and also generates pollution.

While this may provide a lot of oil, it will not bring prices down, if we are lucky it will only slow the price rise, because the international demand will continue to go up.

[John J.]

Both Clinton and McCain said recently that they, if president, would suspend Federal gas taxes at the pump and replace them with higher taxes on the oil companies' profits. What doe they think the oil companies will do? Unless the Feds institute price controls, the oil companies will simply increase the price of their product in the US. The consumer will still be paying the same. It is a flim flam by the candidates. Or a "shell" game of "where is the tax".

[parrot]

the laws of supply and demand are not always what you think. If the demand for something is steady, and a corporation controls the supply, they can raise prices to a gouge level. Multinationals have already done this (mostly in foreign countries) on electricity and water. Deregulation doesn't work if a corporation is big enough to buy up all the competition as in...where did all of our independent refineries go?

[Kerri]

That would mean that every byproduct made from oil would go up in price. The majority of Americans can't afford brand new cars, even if we go to alternative fuels, so they'd have to pay the biggest price at the pump. Quit talking....pass legislation that enacts laws to build cars w/fuel effeciency, drill meanwhile, so we can be less dependent on foreign oil. Yes, we want long term results, but you have to live in the mean while, and you can't do it at $7 a gallon. Euopean cities have had high gas prices for so long, they've structured most of their cities for public transportation. We have not done that to the same extent here in the U.S. But, if you can get the Washington democrats to vote for temporary drilling, anywhere in or around the states, as we should have 20 yrs ago, we'd have less foreign oil, until we have the options of alternative fuels ready. But, no, they've continously voted them down. Now, where are we?

[Ron K.]

Mass transit

[Timo Kokko]

I think Kerri is the closest to right on this, although I don't know about mandating mileage standards. We would likely have to drive the little Tonka cars they drive in Europe now along with their high death rate in accidents.

Believe it or not I just heard the esteemed Senator from New York, Chuck Schumer, say "even if we started drilling in ANWR now, we wouldn't see any results for 10 years." This is exactly what he said 14 years ago. The time has come for a national push to resolve this problem. Shale oil looks good to me as a long term solution, but I'd like some smart people to figure it out.

[MSUGeek]

1. Take over the oil fields in Iraq and forcefully take back what they owe us for the war effort.

2. Drill in ANWAR

3. Slant Drill in the great lakes region.

4. Drill offshore in the Gulf of Mexico.

5. Look into refining shale and coal tar.

6. Begin looking at drilling on the Arctic continental shelf.

7. Build more refineries.

8. Build nuclear and alternative energy plants.

9. and finally, disregard 90% of what environmentalists say in regards to managing our petroleum resources. We are past the point where we should care about the "Chicken Little" cries that have no scientific bearing and have been so wrong for the past 50 years.

We should have been doing all of this 20-30 years ago.

[John J.]

Good luck! We are no longer omnipotent. We also need other resources that the foreigners bid for besides oil. We are between a rock and a hard place. I think we shall have to develop mass transit like in Europe or there will be more grief. We just had a mortgage meltdown with property prices going way down. Just think what will happen rather soon when the commuters cannot afford to have their over an hour each way commutes to work from their home slurbs because of the ever increasing fuel price which are not about to come down because of the world wide demand. There will be another mortgage and property value meltdown when the suburbanites realize that they have to abandon their out in the country homes and move into the old downtowns to be close to work. This may be an explanation for the recent splurge in downtown (old areas) developments, because some money bags can see what is coming in the near future.

The Chinese had a polite curse: may you live in interesting times.

[EmersonsZen]

Spot-on post Geek.

We can absolutely thank the hyperventilating environmentalists for the current energy situation.

Had we done even half of the list you posted, we wouldn't be having this conversation today.

I'd add one more bullet to your list:

Convert recently closed military bases to refineries. And take it one step futher, to placate the EWJ's (Environmentalist Wack Jobs), create wind turbine farms on the bases that don't make the refinery cut.

As a country we've had to bow to the Religion of Environmentalism, and now we experience the results.

[Vic Jackson]

Most of you seem to have missed my message. My proposal is not about the environment one way or the other and I don't understand how a tax on fuel affects the cost of byproducts of oil. Additionally, if I personally owned all the oil rights to the ANWR, why would I want to start selling the oil for $100 per barrel today when it is likely it will sell for $200 in a short time and $500 a few years from now? I think your proposals to drill the USA's remaining oil reserves so we can immediately burn it up is a very short sighted plan that does nothing to strengthen the USA.

[MSUGeek]

Vic - You can't separate the environmental influence on the Democrats from the equation. Their influence is the main reason we are just treading water when it comes to energy independence. Whether we drill to burn today, or use the oil for plastics and pharmaceuticals, we need our own source. Your argument about holding out for higher world prices is not valid. We have untapped energy reserves to last us for well over 300 years. Besides the environmentalists, the reason we do not develop these is because, until now, it has not been cost effective to do so. We have plenty to fuel current demands for gasoline and other byproducts at today's market rate, and also to be a power on the world market at future rates. And 300 years is enough time to develop the "Star Trek" technologies to become completely independent of fossil fuel in the future.

The two biggest reasons for an absurd tax on fuel is first to push people out of their cars and into mass transit (obviously developing it as needed), and to push the cost of oil high enough to make refining our reserves and developing alternatives cost effective.

[John J.]

What nobody here seems to be able to understand is that no matter how much oil we may produce domestically it will be sold to us at the world market price.

If we were to institute price controls the oil companies would not invest one red cent in this country. All the investment then would have to come from the taxpayer's pocket and done by some government enterprise and would still take years to bring online. In the meantime we shall get to the happy thought of $200 a barrel oil like everyone else.

[MSUGeek]

There is nothing wrong with paying market prices for oil. If it is $200 a barrel, we just have to get used to it, either with stricter budgeting or cutting back on use (which has a tendency to drop prices).

[John J.]

With China and India being the sinkholes for the world's oil, no amount of cutting back by us will make much difference in world prices. If we have to buy oil at those prices, why bother with domestic production in the first place? Stricter budgeting means also alternative modes of transport, and us having very poor public transport in much of the US, who is going to do anything about it.

[parrot]

there goes timo again...the little tonka cars they drive in europe seem to have a lower death rate than ours..at least according to the site estamating world traffic fatalities. Thats even tho those tonka's *mercedes bmw's etc have no speed limits to contend with, I've had them pass me at speeds close to 140. Maybe that big cars are safer bull doesn't hold water

[KG-1]

Once people realize that oil is created through an abiotic process, I wonder how they'll feel being duped all these years by the environmentalists?