This is a diary I published a couple of years ago (December 2008), but I still think is valid. During the comments, some people threw up criticisms of the numbers etc which were valid, but didn't  destroy the thrust of the diary. So I have decided to republish it

Over the last few days, there have been a large number of diaries discussing the merits or faults of raising US gas taxes, but very few have gone into any detailed numbers.

This diary aims to correct that by using easily found numbers to show that in around the time of two Obama presidencies, The US could  cut its imports of oil by 25%, simply by using a flat rate tax mechanism on gas.

In addition, I will try to shoot down some of the more obvious straw men arguements that opponents always throw back.

According to US Government statistics, The US consumes 20 million barrels of oil per day, of which 12 million are imported. The total world production of oil is 82 million barrels per day, so the US consumes almost exactly 25% of world production.

Of these 20 mm barrels per day, 9.3 mm are converted to gasoline, not liquid fuels, but gasoline, and this accounts for 45% of total oil consumption. If you add in diesel and kerosene for aircraft, transportation uses 70% of the total oil supplied to the US.

Gasoline is used almost exlcusively in cars and light trucks - the things you use very day for going to work, doing the shopping, taking the kids to school etc.

In order to reduce the US consumption of oil, it is neccessary to do two things

1)  Improve the efficency of the use of petroleum products for transport

2)  Reduce the number of miles travelled.

The way to achieve this most easily is through an increase in gas taxes

And the objective would be to sensibly (and sensitively) increase gas prices to European levels over the term of two Obama Presidencies.

This would reduce the quantity of oil imported by 25%.

According to variuos sources, US personal vehicles average around 25 mpg, whilst European vehicles average over 40 mpg. These numbers are probably based on CAFE standards for new vehicles sold, and are therefore maybe a litlle high, but the ratios would hold for the total fleet of vehicles. Therefore the average European car uses around 30% less petroleum per mile travelled. If the US average was the same as Europe, the US would consume 3 million barrels less per day, which is -voila = 25% of current imports.

How do you achieve this change?

Simply by announcing a plan to increase gas taxes by a flat rate 50cts/gallon every year for the next eight years.

With prices now at $1.85/gallon, this would increase the price to $2.35, which still seems cheap after this Summer. After 8 years the price would be $5.85 a gallon, pretty much where European prices are now.

Why over eight years? Because this would allow  the consumers to change out their cars in the full knowledge of minimum future gas prices, which will direct the buyer to give much greater emphasis on fuel economy.

Secondly, the automakers knowing that the price of gas will get to this level will redirect their Rand D to fuel efficiency, and retool their plants to make more efficient (which means lighter and smaller) cars because that is what the market will be demanding.

The result

The average consumption of US vehicles would be close to the current European Norm, which would reduce total oil consumption by 15%, and imports by 25%

There would be a corresponding reduction in CO2 emmissions.

The US would  have an auto industry capable of exporting its products to Europe ( which apart from a few exceptions is not the case now).

People would factor in the cost of gas in other decisions, like where they live and their commute, which would disincentivise long distance travel. People would tend to move closer to their work, and the higher cost would be offset (to a certain degree) by the gas savings from the shorter commute

Economic actors ( companies, towns, government) would be more conscious of the spatial implications of their location decisions and planning decisions, creating nodes of activity closer to centres of population.

If you are really lucky, you would see a pushback against the bigbox stores, and the reappearance of real town centres and community based shops and activities.

And one last benefit, a 15% decrease in US Oil demand will have the impact of holding oil prices down over time - this equates to around 4% of world supply as of today.  Economics 101

The Straw Man arguements

1) "This is regressive - it disproportionately hurts the poor

Firstly, the real poor don't buy gas, cos they don't have cars. Secondly, pause a little and do the math.  If after eight years, the price has increased from $1.85 a gallon to $5.85 a gallon, one third of that will be offset by the better mileage, so the comparative number is $3.86/gallon, not such a disaster when you think they were already over 4 bucks this Summer.

Secondly, the number of miles driven will probably decrease due to the change in living and shopping patterns, and the more frugal use of the vehicle, if you factor in say a 20% decrease (from an average 12500 miles per year (US) to around 10,000 (Europe), this will also have the effect of reducing the total fuel bill by 20%, so we are now around $3 a gallon.

On 10,000 miles at 40 mpg, the total cost at $5.85 is $1,462 per year or $ 122 / month. Current costs of 12500 miles at $1.85 is and 24 mpg is$963 per year, or $80 / month, the delta is just $40 per month. So let's just increase the minimum wage by half a buck, and rebate that to employers through another tax.

2  I need a big car to tow my boat/horse etc.

Well if you can afford the boat/horse etc, you can probably suck up the gas tax. Anyway, with this plan, you can buy up a real cheap second hand gas guzzler for your towing, and use it for  those 500 miles per year. The rest of the time drive something fuel efficient

3)  People need big trucks for their work.

If the vehicle is used for business, then the cost of fuel can be deducted from the business's profit tax ( not rebated), so the impact is minimised. Anyway, beleive it or not we have tradesmen, builders etc in Europe, and they still survive, but None drive around in 6 litre petrol driven pickups. We tend to use 2.5 or 3 litre turbo diesel vans or pick ups, and they do the job just as well or better.

The above is should be just one part of an integrated strategy, which would include hybrids, alternative fuels, public transport etc, but the beauty of this is that it requires no new technology, and works simply through the market mechanism.

Flame away - sceptics

Originally posted to senilebiker on Thu Dec 11, 2008 at 09:23 AM PST.


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