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Gas Prices High. But Not High Enough.

Posted by: David Kiley on May 17, 2007

The average price of a gallon of gas is now above $3.00 per gallon. That’s affecting some car-buyers’ choices, as it has done in the past two years when gas prices spiked. But it’s still not high enough to spur the needed transformation of the U.S. auto fleet to much higher average fuel economy.

And that brings me to gasoline taxes, the one obvious measure that would move the U.S. to energy independence from OPEC and substantially limit the U.S.’s exposure to the political and ideological whims of the Middle East and Venezuela.

But don’t hold your breath. Republicans running for the White House are lining up to take pledges for no new taxes, no matter how badly they are needed. Connecticut is actually rolling back their state tax by five cents a gallon as a bone to throw to voters. Oh boy! Five cents. Ridiculous! Democrats are showing no more courage, though they are talking more about the need for greater fuel economy. Sen. Chris Dodd, a Democratic presidential hopeful, is pushing for carbon taxes on the automakers. But he has said in the last week that “direct” taxes on the consumer/voter isn’t [politically] feasible. So much for Profiles in Courage.

Conversations I have had with Congressional staffers and one prominent Democratic Congressman tell me that polling data going back to the 1980s shows that there would not be a tax more unpopular with voters than a gas tax.

Europe has an average fuel economy for its new-cara fleet of more than 40 mpg. The European Union years ago amassed support among members for high taxes on gasoline that drove a swift migration from big cars to smaller cars and to diesel fuel. The result—less dependency on Opec and cleaner air in the cities.

A Congressional staffer told me in order to get a gas tax across to the American voter, it would require that the President drive a bi-partisan effort that results in the Democratic and Republican leadership of Congress standing behind him as he addressed the country in a series of speeches explaining the need for a gasoline tax, and that both parties would have to sign an agreement that neither side would use the gas tax against the other party in ads or rhetoric.

How likely does such a photo opp. appear?

The rhetoric today is about hydrogen by 2030, ethanol and bio-fuel, carbon taxes and such. It’s all about everything that puts higher fuel economy off for perhaps two decades. But we know that if we slap a gas tax today of, say, $1.00-$1.50 per gallon, on today’s gasoline, legislate a price floor on oil of, say, $50 per barrel, to keep gasoline above $4.00 per gallon, there will be mass trading of SUVs and pickups for smaller, more fuel efficient vehicles. And there will be a rapid flight of popularity for vehicles that run on clean diesel fuel.

Auto companies would like to see this gas tax strategy adopted. Most environmentalists support the gas tax too. It’s a proven way to achieve a rapid rise in fuel economy. Automakers just want some predictability in the marketplace, like they got in Europe, so they know what vehicles to make for American tastes and demands. In short, they build big SUVs and high-horsepower vehicles because that’s what the public wants when gas prices are low.

Gasoline prices have surged more than 20 cents in recent weeks to a record nationwide average of $3.10 per gallon, surpassing the previous record of $3.07 per gallon set in September 2005, according to the U.S. Energy Information Administration. As gas prices rise, owner loyalty in the large pickup and midsize and large utility vehicle segments drops, according to data gathered by Power Informtion Network between February and April 2007. Owner loyalty is measured by the percent of owners in any given segment who trade for another vehicle in the same segment.

“We’re seeing a broad, long-term—but gradual—movement to smaller vehicles,” says Tom Libby, senior director of industry analysis at PIN. “For example, during periods of high gas prices over the past two years, we’ve seen movement from larger to smaller SUVs. However, the total SUV pie remains largely intact.”

Additionally, sales of small vehicles, including cars and light trucks, as a percentage of total new-vehicle retail sales, have risen from 26.3 percent in the first quarter of 2004 to 31.8 percent in the first quarter of 2007.

That’s a start. But consumers won’t trade their Ford Expeditions, Toyota Sequoias and Chevy Tahoes that they don’t need until gasoline is permanently over $4.00 per gallon. The people who really need those vehicles for ranching and boat towing will buy them no matter what.

The new tax money can go to tax offsets for low and lower-middle class consumers and to invest in new energy infrastructure in the U.S.
That makes sense. This is not an original idea, but the gas tax could be called a “patriot tax” to exempt it from political wrangling.

But what candidate will approve that message.

Reader Comments

Mad American

May 17, 2007 1:36 AM

We all know that since Hurricane Katrina the oil companies have not lowered their prices to Pre-Katrina! They only keep raising them instead. There has been talk about not buying gas for a day to boycott the oil companies. Well we know that this is not going to work.

I have come up with the idea that all Americans that are just as angry as I am, to take a week off of driving completely.

Look at how these prices are hurting us:

This is giving us less money to spend at the grocery store.

A lot more people can not afford to take a short vacation if any at all.

The Oil Companies are making billions in profits a quarter while we the people are the ones who have to cut back on our necessities and normal day to day living.

There is all kinds of talk about how to plan you trips for errands to compile them into one day.

The corporate oil companies are starting to dictate our lives and how we live them.

What I have come up with to resolve this issue?

On the week of July 1, 2007 to July 7, 2007, we do absolutely no driving. We purchase our food and necessities the week before to get us through the week. We do not go to work. We do not go camping or on a vacation either. WE STAY HOME! If all employees of a place of employment do not show up for work, the company can not fire anyone because they would not have anyone to work for their business until they could hire new people. So chances of getting fired are extremely small.

If we are able to do this as a nation, it will cause the markets to crash. Look at what happened during Katrina. We have the power to make the market crash if we all unite. We are telling the oil companies and the government that we will not take this anymore. This is Legal Corporate Theft, and our government is letting them get away with it.

Please check the oil company web sites and observe their reports profits before and since Katrina. The funny thing I have noticed on them is that they have changed the billions of dollars to millions of dollars. Now why would they do that? Because Millions don’t look as big as billions. This change was made after Katrina. Pay attention to the details.

If you believe as I do on this issue please pass this along to everyone on you e-mail list. We need to say enough and we need to take care of ourselves because our government sure is not.


May 17, 2007 10:27 AM

The Administration and Congress might make more headway if they presented it as a national security issue rather than a environmental issue. A gas tax would in the end might have the effect of deflating oil prices and fixing some of our perennial budget problems.

However, the chances of this happening are slim, since members of both sides are only interested in scoring talking points and blind ideology.


May 17, 2007 11:52 AM

I wish gas would go up to $4.00 a gallon or more. Americans have been in love with big cars since I was a kid, but now it's time to let go of that, and enjoy smaller vehicles.

Fred Bibber

May 17, 2007 1:21 PM

What happened to that "Giant oil find" in the Gulf a few months ago that experts were saying would drive gasoline prices down to possibly under a $1.00 a gallon ??? I felt someone had too much uncontrolled substance and I guess I was right or do the American people need to sign a "class action" suit against the oil companies. IN the history of the U.S. has anyone ever showed consistant incomes any higher that the oil companies ? Lets do something !!

Paul McGraw

May 18, 2007 12:01 AM

Good report re: gas prices. Yes it's true that higher gas prices force people to drive smaller cars. I say let the market dictate what we drive. If gas goes to $5 a gallon, then sales of big SUV's will fall through the floor. In the meantime, the Big THree should stop whining about higher fuel mileage and start working harder to accomplish what the Japanese have done successfully for years.
Build economical and reliable vehicles.


May 18, 2007 4:39 PM

Thank you. As someone who cringes when he sees an auto ad on TV bragging about 28mpg, I think it is well past the time to get serious about fuel efficiency. We don't need ethanol (a commodity which needs massive gov't support to stay in business), biofuel or hydrogen powered cars. We already have the technology to make regular gas-powered/diesel vehicles that can achieve 40+ mpg. And maybe, although I realize this is outside the realm of auto beat, get Americans to seriously invest in mass transit oustide of major cities.

Brendan Moore

May 19, 2007 1:19 PM

I think people should be able to buy whatever car/truck/tank they wish, and I find the whole premise of CAFE ridiculous.

I also think the retail price of gasoline should be much higher, for a variety of reasons.

Then all the cajoling for people to drive something smaller goes away. Motorists would "pay to play" since anyone that wanted to burn a lot of gasoline for whatever reason - driving an SUV to run errands, driving a Maybach to run errands, or some other permutation, would be paying a lot of money to exercise that sort of desire. And we would never have to discuss CAFE again.

Because, frankly, if gasoline was a sustained $5 or $6 a gallon, the demarcation between needs and wants regarding what people drive would become a lot more pronounced. Only families with 5 kids that lived on a mountain that got a lot of snow would decide they needed a 7-passenger AWD SUV to get around in, for the most part. Sure, there would be exceptions - people who could afford the gasoline and got a kick out of driving something big around, but not too many. Most people would not get enough pleasure from driving something that got 10-12 MPG to justify the cost of the gasoline. Purchasers of such vehicles would be confined to people that just couldn't make a smaller vehicle that got better gas mileage work for them because of their particular (real) needs.

Gasoline is cheap in the U.S., and until it is more expensive, there will be no migration towards highly fuel-efficient vehicles. Most Americans do not respond to efforts to save gasoline for the good of the planet, they don't respond to efforts to induce guilt, if they're not forced to buy the cars made as a result of CAFE, then they won't, they don't respond to societal pressure, they're not conservationists, and national security is an issue to them, but one they can usually only think of in tangible, military actions. It's tough for many of them to connect the dots - paying money to people that have oil, who in turn give the money to people who want to kill us; that really doesn't register with a lot of people as something we should minimize. Particularly when they want gasoline for their vehicles. So, none of those things are going to make Americans use less gasoline.

But Americans do react to economic forces, and fairly quickly. A large increase in the retail price of gas, implemented over a few years, would get everyone moving towards the same goal of reducing gasoline consumption. You could make it tax-neutral overall by reducing the federal income tax rate a small amount.

And then we could get focused on all of the other things that use petroleum-based fuel and put out pollutants - it's a long list, and it is the lion's share of our problems in this area, but at least we'd have the part with passenger vehicles being worked on, and that's a good start.

B Moore -

Richard Gerard

May 21, 2007 1:34 PM

This website:
suggests people combine errands.
This website:
suggests stocking up on groceries and cut back on trips saves gas and energy.
I invented a product that makes both tips easier to do for less then three bucks, delivered. Check out


May 25, 2007 1:21 AM

I agree with "Mad American" about us consumers being ripped off by the fat cat oil companies. Anyone remember the movie "Network"? Best picture of the year, it reflected attitude concerning rising oil prices. A famous expression came from that movie: "I'm mad as hell, and I'm not going to take it anymore!!!" What's the alternative? Sit back, do nothing, and let the oil companies dictate our lives year after year after year. God help the poor folks, and those who are about to become poor!!! Let's do something America!

Steve Simmering

May 26, 2007 7:57 AM

The fact remains that higher gas prices hit rural areas and lower-income families the hardest. As you move into the higher income brackets, the price of gas is a smaller percentage of your budget, and while those with higher incomes may grumble a bit, it won't change their habits one bit. And now you're advocating adding additional pain to the lower 1/3 income levels? Don't poor people deserve to drive?

Instead. how about hiking the tax rate on those making over $100,000?


May 26, 2007 8:45 AM

Mr. Kiley,
Are you daft? Don't you realize that taxing the he** out of gas is only going to shrink the purchasing power of the middle and lower class and put a burden on already financially struggling families. Guess what folks, the whole world runs on oil. I agree that alternative sources will help, but until a cheap efficient and permanent alternative is found, oil is it. I agree, we need to cut consumption, but not at the expense of a "punishing" tax on Americans. Here is an idea. Lets force, yes thats FORCE, the oil companys to come off there RECORD OIL PROFITS, and build some more refinerys to help ease the demand. These oil companys have us under there thumbs. They don't want to reinvest in any new refinerys to boost productions when they can pocket those RECORD profits. The real problem here is corporate GREED.

Frank Stephens

May 26, 2007 5:03 PM

I didn't realize Business Week had such a Socialist bent that it belived social-engineering via taxation was a cure-all for our energy problems. Congress IS the problem. The U.S. has plenty of oil on our soil -- more than enough for our domestic needs. Environmentalist/Democrats refuse to allow anyone to drill it.

We can, and have been, purchasing oil at very high prices. But, the issue is we do not have sufficient refinery capacity in the U.S. No refinerys have been built in over 30 years. In California, one refinery seeking to expand capacity by several hunred-thousand barrels was recently sued by Jerry Brown to halt construction. No surprise here -- we know where Jerry Brown (Moonbeam) comes from.

Alternative fuels solutions -- yeah -- right now we're having riots in Mexico City, milk prices, along with all dairy and meat products are skyrocketing. Why? Because corn (a staple in Mexico) is being turned into fuel and is driving prices through the roof. Now the choice is do we eat it or burn it.

How about telling environmentalist to shove it, drill our own oil, build new refinerys in their back yards, and tell the Saudis to go pound sand.

Frank Stephens


May 26, 2007 9:49 PM

As someone who loves freedom, I find taxation often abused. Usually when someone writes an article that suggests we need to increase a tax I groan.

But this article's suggestion is worth investigating if we consider two things:
1) The least objectionable tax is a consumption tax, of which this a perfect example.
2) All revenues from this taxation must have defined uses strictly related to transportation, at least 80% for expansion and maintenance of our current road network, with the remainder invested in alternative transportation technologies and appoaches.


May 27, 2007 9:54 AM


W. Adair

May 27, 2007 1:28 PM

What stupid logic. We are not only talking about oil prices here we are talking about our economy in general. If we raised taxes as you suggested it would be a catastophe to our economy. We have problems but you dont turn the whole economy upside down to solve it. Right now everything is moved by truck or some fossil fuel combustion engine and prices would reflect such a change. Many people are hardly making it now. Do you suggest we do like Europe and all drive little cars that are very expensive an all live in 900 square foot homes? You sound to me like someone that doesnt own a car and lives in New York and uses mass transit. That is a system that is not available for most of the country unless they live in an area where people are living on top of each other. Think it out and if you are honest with yourself and look not only at your personal situation you will surely agree. Regards, bj

Jim King

May 27, 2007 9:47 PM

Raising gas taxes will do nothing to deter most Americans on the road. How much has the skyrocketing price of gas over these last months stopped folks from driving? Sure, some may drive less because of the high cost of fuel, but most are just figuring more $ for gas in their budgets.

Taxes on fuel already comprise a huge chunk of the cost of a gallon of gas. Instead of adding yet more taxes to drain Americans' wallets (and, ultimately, to be wasted on yet countless other wasteful, bloated Big Government social programs which end up failures), why can't the auto companies take the initiative ON THEIR OWN to build smaller, more fuel-efficient vehicles? Why is it that so many seem to think that The Government, by adding more taxes on an already over-taxed population, will FORCE the vehicle makers to be more responsible in what they roll out their doors?

I just can't understand why so many seem 'happy' to pay higher taxes, be it on fuel or any other commodity. To think that simply raising taxes on things will 'cure' all ills is foolhardy and socialistic. Seeing as how leading nations world-wide have elected conservatives into power in recent years, maybe it's time some in the U.S. look for other solutions to our problems and strongly consider LOWERING taxes, an excellent conservative idea.

Oh, and this: Say gas taxes are raised a dollar per gallon or more. Just when will those taxes be lowered or taken off of the cost of a gallon of gas? NEVER!!!!!!! So, in the end, in 10 or 20 years, when the auto companies ARE building three-cylinder cars which get 50 miles to the gallon, we still will be paying bloated prices for fuel, thanks in large part to the big gas tax increase that, years earlier, all were so eager and 'happy' to pay. Gotcha'!!!!!

Squeezed Consumer

May 28, 2007 10:00 AM

Higher gasoline taxes? David Kiley and the folks at BusinessWeek better be careful for what they wish for - they just might get it and suffer the consequences. What Mr. Kiley seems to forget is that most consumers have a limited income and most drive because they have to get to work and perform other trips for life's necessities. Most are struggle to make ends meet. So when gasoline goes to $4 a gallon because of taxes and costs the average motorist an extra $500 year (500 gallons @$1/gal increase), I don't see millions of people trading in their vehicles for ones that get an extra 5 mpg. What will happen is that cuts will be made in other non-essential areas such as Oh, let's see - maybe magazines? Let's see where can I save some bucks - let's start with BusinessWeek! I can save $50/year if I get rid of this subscription. This will offset at least $0.10/gallon of the rise in gas taxes that BW and Mr. Kiley so desperately wants.

John Bopp

May 28, 2007 11:02 AM

Raising the gas tax to force Americans into more fuel efficient cars is not only ridiculous but unnecessary. The Federal Government has mandated minimum safety requirements for vehicles (for those of you old enough to remember, seatbelts where an option, not a required safety feature). Why not do the same for fuel economy? Artificially raising fuel prices through taxation will have long-term negative effects on the American economy. Everything from the price of milk to heating oil is affected by the price of oil. When gas prices first broke the $2.00 per gallon mark a few years ago, heating oil prices tripled. Additionally, when is higher MPG high enough? Do we stop at 40 MPG, why not 100 MPG or 200 MPG?

Using ethanol for an alternative fuel source is not a real option either. Bio-fuels do not provide as much energy as fossil fuels do, which results in lower gas mileage. Most people have notice a drop in fuel economy when using the 10% mixture. My SUV gets 25 MPG on the highway on regular unleaded. It drops to 18 MPG with the 10% ethanol additive. Many scientists and engineers are realizing that bio-fuels are not the answer to our energy or pollution woes as once thought. The gain in using bio-fuels translates into a net loss when the entire process of refining a bio-fuel is considered.

Furthermore, what’s the problem with dependence upon foreign oil? The entire US economy is dependent upon other nations. Hardly any consumer products are made in the US anymore. Why is oil singled out? Granted, that the largest oil reserves are in nations that have ideological differences with the US—which poses a problem. However, these nations love the US dollar as much as we love their oil.

And finally, raising fuel taxes for environmental means is unnecessary as well. The Federal Government already has laws in place that require lower auto emissions. As an engineer at GE Healthcare, I am forced to design products that comply with local, state, Federal and International laws. The same applies to the US automakers. Enacting Federal Law to mandate high fuel efficient cars provides a better solution. Companies either conform to the laws or are faced with severe penalties.

For those of you that think paying higher taxes is a good idea. You are more than welcome to pay mine!!

Eric Mason

May 28, 2007 11:09 AM

What kind of "business" minded person would suggest the answer to greater fuel economy is to manipulate the market with socialist government controls like taxation to control supply and demand. The market will bear what it will bear. Why is it the answer to moral questions like better fuel economy for the sake of the environment and oil independence is using the tyranny of tax? The real answer, as distasteful as it may be, is a change of heart. Social pressures are the only true means of moving people toward better use of fossil fuels in a democracy not brutal pressures and artificial controls by the government in the form of regressive taxes on the poor(That's what the gas tax is you know...a tax on the poor.) Just look at the damage caused by artificial controls on the corn farming idustry and the fact that the average grocery bill has risen by 25% in the last year alone because of the increased demand for ethanol. There were riots in Mexico this year because the cost of corn nearly doubled. Think of the poor Mexican worker making 16-20 dollars a week and the price of their tortillas doubles because more rich Americans want ethanol but the Government has been paying farmers not to grow corn!!
When the government uses regressive taxes to control peoples values it is tyranny and nothing less.
A typical liberal solution to a social people more.
Here's a solution to oil independence. There is more oil in America than in Saudi you didn't know that. In fact there is in the form of oil shale...look it up. We should encourage R&D on developing Oil Shale tech. in the same way Canada has for Tar sand. Today nearly half of the oil processed at the BP Indiana plant ...comes from Canadian Tar sand.

In addition, the consumer must change their mind about large vehicles...and it can start with the rich and famous rather than a tax on the poor like a gas tax.


May 28, 2007 11:27 AM

Kiley may be on the right track with higher gas prices, but for the wrong reasons. The implication is that it is up to our brilliant ethical leaders to bludgeon the dull masses into enlightened action through punitive taxation, which economists call 'externality charges'.

The truth is gasoline should cost $100/gallon, for that is the cost of recovering it and returning it to the ground, responsibly leaving Nature as we found it for future generations.

But that aside, people are not so crass as Kiley seems to think, and would gladly pay almost anything per gallon IF - and it's a big if - it were guaranteed by law the taxes would be used to convert to a low-cost solar, methanol, and hydrogen economy, according to a strict budget and timetable enacted by Congress. Start with a 1GW solar power plant on government-owned desert - perfectly feasible with today's technology, as Germany has proven. A portion of the output can be used to produce methanol for fuel out of water and air, reducing CO2 in the offing.

Otherwise, these taxes are simply punitive. Politicians will pocket the money as usual, so the taxes will shift behavior only slightly and grudgingly, creating more resentment than solutions and impeding progress. We need a national analog to the TVA, and the hell with incompetent, greedy private enterprise. But what politician would approve THAT message?

The problem is not ignorant citizens, nor fuel technology, but corrupt, treasonous politicians.

Peter Couture II

May 28, 2007 12:00 PM

If fuel goes up..what else goes up..? All transportation costs go up...air travel, up. Costs of goods will go, clothing, housing will go up. The poor will suffer as they will have less cash to spend on items other than gas. It is in our interest to have lower fuel prices...look at the economy in is DEAD. Unemployement is 20%. think about it a little. How many more children will be killled in trafic accidents...because they were riding in a ford focus and not a Yukon...

Who makes the biggest profit from gas..$.13 per gal for the oil company compared to $.50 for the government...

Strati Vourakis

May 28, 2007 2:55 PM

Wow, I cannot believe such socialistic blather has made it into a publication titled "BusinessWeek".

It is sad to see what was once a respected Business publication become infested with socialists like this.

Joseph Conrad

May 28, 2007 8:02 PM

David, you do make some good points. Yet missed twice as many as you made...because you 'Beleive'!
The US auto industry, oilmen, Congress and Venture Capitalists have collaborated quite effectively to keep 'clean', effective auto innovations on the drawing board and away from the light of day. The reasons why are simple.

The Wealthy who appear on the list of the Trilateral Commission and the Council on Foreign Affairs include the leaders in the US Oil, Auto and Political arenas. They're on the list because they're Wealthy and powerful - with myriad
'minions' to do their bidding and keep the Wealthy's Gravy Train running smoothly.

It's quite simple to create and install a kit to enable 'Unleaded' cars to run on 85% Ethanol. But the US doesn't have enough Ethanol. Why? The Oil Boys are still divvying up that Market. Keep in mind they will take their time...They want to ensure they get all they can (Financially) out of the present 'system' of overcharging citizens of the US 'Banana Republic' ('00 & '04 did the trick) and creating 'failed states' to get other nations' Oil cheaply. Ah yes. The US has 149 or so refineries over 55% are operating at less than 60% capacity and 10% were just plain been taken out of service in the '90's to drive up prices - and Oil company revenues...

The answer to the current 'Oil Price Chaos' is uncomplicated. It will merely require American Citizens to behave as if this 200+ year old
'Representative Democracy' means something after all. It will also require the Democrats to act like they are in fact 'the party in power'. But time is short because if the Republicans put up Frank Thompson, Hillary - and America - will lose.

The strategy is dierect. Dismantle US Oil companies because - if nothing else - they've violated every SOX, SEC, Human Rights, Price Fixing and Fraud law on the books! Their executives have collaborated to fix prices since the early '70s and the WEB is replete with documents proving that fact...Heck, just look at their cellphone bills since 2000 and you got 'em!

After dismantling the Oil companies, stop the Congress and the Pentagon from marching over Africa & the Middle East creating 'Failed States' so the US and EU armed forces can step in and take over their Oil and Gas for a pittance!

Consider these documented facts. After the US and EU Oil companies take over Iraq's Oil fields using the new 'Hydrocarbons Law', they will have access to over 375 BILLION BARRELS OF IRAQ OIL presently hidden in Anbar Province and Mosul-Kirkuk. With just a 50yr. PSA in place, the US and EU Oil companies would reap PURE PROFITS of $800M to $1Tr. PER YEAR FOR 50YRS.!

The energy issue facing America is NOT one of price. Nor is it a matter of Ethanol, Ethanol Blend or Biodiesel. It is one of who US Citizens will permit- using the Vote, Public Donstrations
and Direct Action - to manage and control their energy system. Right now, they appear quite satisfied letting Oil companies, their president and his cohorts and their elected officials in DC ROB THEM BLIND, CONSISTENTLY & CONTINUOUSLY. Yet I am hopeful they will soon awaken from their torpor, rediscover their political Power, reclaim their nation and put the phoney issue of 'Oil and Gas Price' to rest.

In the meantime, US citizens will continue to sit quietly and take their Castor Oil from the Oil companies as the Wealthy get wealthier and the
90-95% Non-Wealthy continue to grudgingly pay their way.

Ben Wyse

May 28, 2007 9:16 PM

I am a member of a voluntary gas tax group. We are a small group of people who started taxing ourselves 50 cents/gallon in late 1999. We decided that if the politicians weren't ready to increase taxes we would just do it ourselves. Our web site is I am a bike mechanic and bike messenger and think that one day more people will walk, take public transportation and ride bikes to get around town. Great Article

C. Zoller

May 28, 2007 10:53 PM

To James and and the "Mad American" -- understand a little about how commodity markets work before spouting off non-sense. One day, or one week is not enough to impact gas prices. Everyone has to consume less for entire year. Its all about supply and demand. Market set the price of oil -- demand sets the price of gas. Right now your food prices are being impacted more from the stupididty that is Ethenol than the price to transport the food -- farmers cannot afford to feed their stock. Even the production of milk is being impacted. Should we sue the corn farmers as well since they are making record never before seen prices on corn?

The only thing we should sue oil companies for is not keeping refineries maintained. You can also blame congress for not allowing another one to be built.

All that said -- I agree. Raise the taxes to force people to change. Raise gas tax, charge local taxes based on engine displacement and use a scaled gas guzzler tax so that only cars with min of 30mpg combined Hwy/City pay no additional tax. Then slowly raise the bar 1 Mpg every two years.

I also agree -- politicians do not have a backbone and any usefull or unique thought does not come from govt.

Just imagine -- given they don't have the balls or the smarts to deal with this rather simple problem, how are they going to handle social security, healthcare, immigration and falling dollar -- answer -- they will not be able to and we will get more obtruse and stupid legislation.


May 29, 2007 1:35 AM

Not a bad piece in concept, but gets some of the facts wrong. Try getting diesels past the sensitive noses of the EPA or the California Air Resources Board. It's been very difficult. That's right, clean enough for Europe, not clean enough for here. Only recently have European emissions standards come close to ours and before that they tended to lag 10 years behind!

Diesel fuel is taxed at a lower rate in most European countries and therefore the pump price is 30 percent lower than gasoline. On the other hand, Europeans have ALWAYS driven smaller cars and fuel economy is only part of the reason.

The other reason is larger cars simply don't fit, with older, narrow city streets and limited parking in urban areas. Everything is smaller in Europe because everything is closer together. That's also why their public transportation tends to be better. We have a lot more open space between cities here, with some exceptions.

Also, the standard of living in Europe was way behind North America until the 1970's when the gap began to narrow.

A closer comparison would be Australia, a country equal in size to the United States with five percent of the population, or Canada, larger than the US with less than 10 percent itself. Neither is small-car country and both tax gasoline at a rate close to what we do.

And what do you do about safety? Many people buy the big, gas-guzzling SUV's because they feel safer in them, whether they actually are or not.

So you raise the price of gas and have no real recourse to offset the cost with better fuel economy because the environmentalists don't want diesels and the safety and insurance people don't want small cars. Compromises have to be made, folks.

Until then, could someone please expose the oil companies for this sham they're putting on about refinery capacity and low inventories? It doesn't justify the price of gas going up by 50 percent every summer, especially with the price of crude staying within a much smaller window.

Dan Luria

May 29, 2007 7:10 AM

Fuel prices are indeed too low, and it's hurting suppliers.

In 1978, the U.S. had a population of 222.6 million; 15.2 million cars and light trucks were sold. Those light vehicles averaged 18 mpg and, in dollars of 2006, gasoline cost $1.55 a gallon; the on-road fleet used 8.2 million barrels per day (MBD). In 2006, the US had a population of 300 million; 16.5 million cars and light trucks were sold. Those vehicles averaged 25 mpg. Gas cost $2.65 a gallon, and the fleet used 13.2 million barrels a day of it. With only 8.6% more vehicles sold, and with real gas prices 70% higher, how did we use 5 MBD more in 2006?! We drove lots more miles, despite all of our bellyaching about how expensive fuel had gotten. And it helped that nine of the 13 largest automakers had lower fleet-wide US fuel economy in 2006 than in 1996.

In 1978, sales were 69 units per 1,000 of population. In 2006, sales were down 20% to 55 units per 1000 of population. Had it not been for population growth, 2006 sales would have been only 12.2 million units. Put another way, demand for light vehicles didn’t just rise from 15.3 million to 16.5 million; it actually fell from 15.3 million to 12.2 million, but that drop was more than offset by population growth. Conclusion: a record number of Americans aren’t buying new cars and light trucks. Why is that? Two reasons: (1) Many of them have less money, and (2) There are fewer non-luxury vehicles to buy.

As the table below shows, 6.6% of money income – or $346.5 billion – moved from the poorest 80% to the richest 20% of families. All of that – and $47 billion more – went to the richest 5% of families. (Much of it went to the richest 300,000 Americans, whose average income topped $4 million.)

Billions of 2005 Dollars
Share of Income 2005 Income 2005 Income at 1978 Shares Income Shift
Income Range, 2005 1978 2005
Poorest Fifth $0 - $19,178 4.3% 3.4% 178.50 225.75 -47.25
Second Fifth $19,179 - $36,304 10.3% 8.6% 451.50 540.75 -89.25
Middle Fifth $36,305 - $73,191 16.9% 14.6% 766.50 887.25 -120.75
Fourth Fifth $73,192 - $91,705 24.7% 23.0% 1,207.50 1,296.75 -89.25
Memo: Bottom 80% 56.2% 49.6% 2,604.00 2,950.50 -346.50
Richest Fifth $91,706+ 43.8% 50.4% 2,646.00 2,299.50 346.50
Richest 5% $165,989+ 16.6% 24.1% 1,265.25 871.50 393.75
All 100.0% 100.0% 5,250.00 5,250.00

Historically, about 5% of income is spent on new motor vehicles.
o 5% of the richest 5%’s $394-billion income shift gain, or just shy of $20 billion, would be expected to go toward new vehicle purchases. Dividing by, say, $50,000 per luxury unit, that would total about 400,000 more luxury sales per year. That’s almost exactly the amount by which the luxury segments grew between 1978 and 2005.
o Now let’s look at the second, third, and fourth one-fifth of families (since the bottom fifth are not likely to be in the market for new vehicles). Their combined income shift was -$299 billion. Five percent of that is almost exactly $15 billion. How many light vehicles would 5% of that money have bought? Well, that depends, of course, on how much vehicles cost. At 2005’s average transactions price ($26,500), $15 billion buys 566,000 more vehicles. But consider this …

The average new light vehicle transaction price in 1978 was almost exactly $5,000, and more than 60% of vehicles sold that year sold for less than that. From 1978 to 2005, average consumer prices tripled. Correcting only for inflation, then, 60%+ of 2005 vehicles should have sold for less than $15,000. In reality, fewer than 5% did. Why? Because of the changes in income distribution just discussed, automakers offer relatively few such vehicles. Had the middle 60% of American families in 2005 still enjoyed their 1978 income share, and had automakers offered them more sub-$15,000 vehicles, at least a million additional units would have been sold every year. Moreover, lots of families with one or two $25,000 vehicles might have had two or three $15,000 vehicles. (This is an important point to which we’ll turn later when we get to towing.) So maybe that million is more like two million … or more.

In brief, then, the change in income distribution has made the US market a good deal smaller, in effect trading perhaps two million-plus lower-end units for 400,000 more luxury units. Until about a decade ago, the luxury market was a wonderful cash cow for both US- and Europe-based automakers, which also piled more and more luxury content onto light trucks as their share of the market grew. With incremental profit of $10,000-$20,000 on each such unit, the 400,000 additional luxury units probably padded automakers’ bottom lines by as much as $6 billion a year. With money like that to be had, it was hard to generate much interest in a measly two million lost units that wouldn’t have earned them anywhere near that much.

But there was a problem with this seemingly waterproof logic: automakers the world over saw the same thing, and went after the same market. Margins eroded, as more and more feature content was required in luxury vehicles. Units per model plummeted, raising fixed costs. Nor was there any relief to be had in near-luxuries, vehicles in the $35,000-$50,000 range. There too, more and more models competed, forcing automakers to have more variants, more choices, each with lower volumes and, hence, higher costs. In short, chasing the rich raised costs and shrank the market. As long as there wasn’t much competition or, in the 1985-98 period, a boom in light trucks fueled by low gasoline prices, a smaller market was no problem for most automakers. (It was a serious, though undiagnosed, problem for many suppliers. Their volumes stagnated despite a growing population and, as competition grew in every segment, profitless customers squeezed them relentlessly for price cuts.) But today there is both competition and a strong possibility that high fuel prices are permanent. To top it off, the same forces that made the auto market smaller (and, temporarily, more profitable for automakers) may now be faced with the ultimate payback: serious regulation of vehicles’ carbon footprint.

What’s going to happen?

First, some good news. Many automakers – not because they care about U.S. income dynamics but out of a desire to win a place serving much poorer consumers in Asia and Eastern Europe – are starting, or will soon be starting, to produce affordable small cars. Hyundai has ambitious plans for India-made very small cars. Tata Motors plans a $2,500 car by the end of 2008. Toyota is working on a sub-$7,000 car to be built in India and/or Brazil. Suzuki is #1 in India, and exports its India-built small cars to Europe. Chrysler is in alliance with Chery in China for future Chrysler and Dodge models. VW is close to a smaller variant of its Polo to compete with Renault’s Romania (and soon multi-country) -built Logan. GM is building sub-$10,000 cars in Korea. More important, there are small but serious cars being made, or planned, closer to home. GM will build an Astra-based small car at San Luis Potosi. Ford plans a sub-Focus “B” car. Most such platforms will eventually generate small CUVs as well as cars. Even today, one can shop for a Nissan Versa, a Honda Fit, a Chevy Aveo, or a Toyota Yaris.

How well these, and future small, vehicles sell in North America will be partly about their price bringing more middle-income consumers into the market. MMTC’s frequent collaborators at The Planning Edge think these vehicles will sell well here, and have raised their forecast for 2010-2012 to reflect a market made larger by the availability of these models.

US Units Sales at Retail

OEM Group 1978 1988 1998 2006 2012
GM 7,078,112 5,549,929 4,569,384 4,047,599 3,847,000
Ford 3,948,636 4,204,729 4,222,417 3,167,460 3,035,000
Chrysler-AMC-Jeep 1,968,130 2,211,247 2,510,011 2,132,505 1,940,000
Toyota 544,548 935,966 1,361,025 2,532,825 3,155,000
Nissan 432,700 642,530 621,601 1,019,461 1,190,000
Honda 274,876 768,985 1,009,600 1,509,358 1,809,000
Other Japan-based 266,266 460,092 486,704 433,547 470,000
Europe-based 688,615 419,352 586,913 902,404 1,020,000
Korea-based 0 264,282 173,110 749,821 994,000
Total 15,201,883 15,457,112 15,540,765 16,494,980 17,460,000

Source: The Planning Edge

But the real driver of these and future vehicles will, of course, be fuel prices, to which we now turn.

We begin with a crazy-sounding question: Is gasoline much too cheap?

We can hear some of you asking, “What are these guys smoking? Gas too cheap?! It cost me $70 to fill my Expedition yesterday, and you’re asking if gas is too cheap?! “

No, we’re not kooks, and one of us spends $140 a week filling his 2005 Dodge Ram (No, it doesn’t have a Hemi; that would cost $160). But let’s look dispassionately at what cheap fuel has gotten us, besides the ability to afford to continue using what are in many cases – let’s face it – 1950s-1970s materials and powertrains:
• US-based automakers have had to capacitize to produce two fleets – one for North America and the Middle East, and a second one for Europe and Asia. Some have estimated the cost penalty of this duplication at $2-4 billion per year. (Indeed, part of why we are not sold on a future of Japan-based automaker dominance is that cheap fuel is also forcing them to build a second fleet, especially in trucks. Nissan looks particularly exposed in this regard. Of the Japan Big Three, only Honda has, so far, resisted the move into US-centric framed V8-powered vehicles, but even they are making noises that they want to get involved.)
• And that $2-4 billion is just the automakers’ penalty. Many North America-focused suppliers paid not only in needless duplicate investment, but also in lower volumes or – to avoid that investment -- through being shut out of the Europe-Asia parts market on both an OE and aftermarket basis.
• We import 60% of the petroleum and petroleum products we consume. Instead of paying ourselves – which is what fuel taxes do – we instead send dollars offshore, among them some of the most undemocratic (Iran, Syria, Saudi Arabia, Indonesia) and unstable (Nigeria, Iraq) regimes in the world.
• We also spend tens (and, lately, hundreds) of billions each year to maintain the industrial world’s access to foreign oil.
• The federal government taxes income (FICA and income taxes) more heavily and fuel less heavily than almost anywhere else in the world.
• We defend our voracious appetite for cheap fuel by saying that higher fuel prices would hurt the poor most.” But many of the poor don’t own cars, and those that do don’t typically buy big, low-mileage ones.

We aren’t saying that the case for, say, a $2 federal gas tax is a slam-dunk. We are saying that there’s some pretty good math behind it. Follow the logic a little further, please. A big tax-induced drop in US fuel use would almost certainly cause world oil prices to drop. That means that we could keep prices at the pump stable, and get even more tax receipts that would finance cuts in other taxes. In other words: stable gas prices, albeit at $5 a gallon including higher taxes, with deep cuts in income taxes triggered by oil price declines. A fleet of ever-more-attractive small vehicles that – even at $5 a gallon – would cost us half as much to buy and no more to fill up than our Expedition or Ram.

Towing your boat/snowmobile/ATV? At first, this seems like a valid concern. But there are two classes of solutions:
o Purchasing specialized vehicles for specialized purposes. Many European families own one or more high-mileage vehicles for commuting and everyday driving, plus one larger (often older, because it is only driven on the order of 2000 miles a year) vehicle that they use for family vacations and other special occasions.
o Renting specialized vehicles for specialized purposes. Just as middle- and upper-income city-dwellers regularly rent vehicles for weekend and vacation trips, one can foresee an expanded short-use market, both retail (you rent a “Suburban”) and wholesale (you sign up for a service that gets your boat up to the cabin).
Today, Americans also commute in the Suburban that they justified by the need to tow the boat a few times a year. And, compared to a 35-mpg car, they pay only about ten cents a mile in extra fuel to do so. But that dime penalty is about to go up -- whether through increased gas prices, higher fuel taxes, gas-guzzler taxes, CAFE standards, or CO2 emissions charges.

Unless we want to compound the error of paying through the nose to keep fuel looking cheap when it really isn’t, the alternatives to paying ourselves more to use it all look much worse. Let’s look at some of them.

Fully electric cars don’t make sense. The current US electricity-generation capital stock would fuel those vehicles by burning more coal, and hence producing more CO2 than the internal combustion engines they displace. Fuel cells aren’t ready, and won’t be for a decade or more and, in any case, the hydrogen would at first be made from natural gas. Hybrids do make sense, because they use less fuel and don’t require more natural gas- and coal-burning to generate the electricity they use. But supply is limited and to save fuel, we don’t need 50-mpg Priuses that use only $350 a year less fuel than a 35-mpg Corolla; we need hybrid or small-diesel-powered pickup trucks that get 27 versus today’s 18 mpg. Do the math: 15,000 miles at 27 versus 18 mpg = $765 at $2.75 a gallon. So every such pickup saves as much fuel as 2.2 Priuses. (That’s GM’s thinking in offering hybrid versions of their large pickups and SUVs.)

What about “alternative fuels”? They sound good, and their expanded use is invariably cloaked in high-sounding rhetoric about “energy independence” and “eliminating the need for imports from the Middle East.” But look a little deeper. First off, energy independence isn’t all it’s cracked up to be: if all we do is curtail oil consumption to equal domestic production, we might as well call the policy “Drain America First.” Oil is oil, and any foreign oil we don’t buy will be bought by Europe, Japan, and China anyway. And if the world price of oil goes to $100 a barrel, the oil companies will charge us the same $100 whether the oil’s from Alaska or the Arabian Gulf.

As for biofuels, they’re really a Trojan Horse for huge subsidies to agribusiness (“farmers”) and higher prices charged to everyone that consumes corn and other biofuel feedstocks. Ethanol from corn is a particularly poor choice, and not just because of its impact on corn prices. Ethanol has only about three-quarters the energy value of gasoline by weight and volume, and its fuel cycle (farm to pump) is heavily natural gas-intensive. While a few refiners are using methane from crop waste instead of natural gas, most big ones aren’t. So not only would large-scale ethanol production mean higher home heating costs, but with US natural gas production falling since 2003 it will soon require hugely increased (and highly explosive) liquefied natural gas imports from – you guessed it – the same countries that sell us oil.

Ethanol is also part of a regulatory program that may actually increase gasoline use. The CAFE calculation counts each “flex-fuel” vehicle as using 50% less gasoline when, in fact, only 1% of flex-fuel vehicles are actually using E85. To the extent that automakers use flex-fuel vehicles to inflate their CAFE figure, they are being allowed to field a less gasoline-efficient fleet.

Worst of all, biofuels may, on balance, turn out to be worse for the climate than the fossil fuels they are supposed to replace. As rainforest is cleared to grow biofuel feedstocks, less plant life remains to absorb CO2; so more of it ends up in the earth’s atmosphere.

What about higher CAFE standards? Like it or not, they’re coming. A sure sign: John Dingell, a supporter of the Detroit Three if ever there was one, has been grumbling that some increase in CAFE is probably necessary. But let’s think about that. The last round of CAFE standards (basically, 1978-85: we’ve been treading water since then) led to both intended effects (more small cars, more cars with 4- versus 6- and 8-cylinder engines, and higher mpg) and some unintended ones (a big shift to light trucks: from 27% to 52% of the market; and, thanks to higher mpg, much more driving). Any future CAFE regulation must directly address total fuel consumption, probably by manufacturer. It’s not easy to see how that would work, and one could imagine some bizarre outcomes: strong large-truck sales in a low-gas price year might mean that an OEM couldn’t sell any in the last few months of the year.

Or, one can imagine a market in the right to consume gasoline, analogous to buying the right to emit pollution. The government could issue every driving-age American the right to buy X gallons of fuel a year. People with high-mpg vehicles, or who don’t own private vehicles, could sell their “coupons” to the highest bidder (taxi companies? people with Hummers?). This might induce a number of effects: it not only saves fuel but reduces poverty and transfers resources from suburbanites to cities. But it’s also complex and bureaucratic, perhaps to the point of impossibility (coupon theft, coupon forgery, policing gas stations that accept cash and not just coupons).

The bottom line? If we want not only to influence the choices that consumers face but also need to reduce aggregate gasoline consumption to curtail CO2, isn’t the simplest, most efficient strategy simply to raise the tax on fuel?

If we’re right that some form of carbon-reduction regulation – whether done with fuel taxes or in perhaps a politically safer ways (e.g., E85) – is in the offing, then we know that the future portends a larger, but potentially less profitable, automotive sector in which smaller vehicles pay a larger – and larger vehicles a smaller -- part. Many observers think that this future inevitably means a greatly diminished Big Three and a dominant Toyota and, perhaps, Honda. Not necessarily. If the Big Three commit heavily to new small cars and CUVs (as they are doing outside North America), they could safeguard their share against further serious erosion.

But like the rest of the transportation sector (airlines, railroads), it will not be a high-profit future. That should prompt some serious thinking about cars, trucks, and how we use them. We’ve built a whole continent on a set of unsustainable prices, and made the problem worse with expensive government subsidies. We built the highways that allowed suburbanization, and let railroads fall into disrepair. We built airports and permit fewer than two million airline passengers to use as much fuel as 35 million drivers. We built but then deserted many of our cities, with their public transportation and relatively energy-efficient buildings, for suburbs of under-insulated frame houses and the need to drive to work and school and to get groceries, DVDs, and everything else. There’s nothing intrinsically wrong with those choices, but let’s be clear: they are choices driven by prices and a view of the planet that – thanks to oil and gas reserves and gathering climate change – are highly questionable for the future.

The good news is that, if it is embraced, the changes that will have to take place will provide big opportunities for the “early adapters.” Looking ahead, we could see:
• A larger market for suppliers, thanks to the new very small vehicle platforms. And because these will mostly be “world platforms,” they may provide some suppliers with a golden opportunity to hook up to the whole global industry and not just the North American piece of it. How this hook-up is made is, of course, a huge issue. Much of the initial wave of very small vehicles will be, first, imported and, later, Mexico-assembled. But especially at Toyota and Honda, we see a real chance for these vehicles to join others in flexible US and Canada plants, making the US a viable part production location. Remember: These vehicles are, in a carbon-slashing world, the future of private transportation for the bottom half (or more) of the income distribution. And with only about 50 labor-hours in parts, stampings, and final assembly, the difference between the US and Mexico is at most $1,500 per unit, with a third of that offset by shipping.
• A smaller market for true trucks, as non-commercial use is reduced by sharply higher fuel prices due either to taxes or carbon charges. There will continue to be high-volume truck platforms, but their volumes will gradually decrease. In general, many suppliers need to rebalance from larger, framed vehicles toward smaller unibody vehicles. In doing so, they will need to understand thoroughly which applications are platform-wide, and which are associated only with certain variants.
• A possible premium on weight reduction. As the world’s automakers struggle for less fuel use, they will still try to milk past investments as long as possible. Supplier-generated innovations that allow vehicles on existing platforms to lose weight may earn premium prices or, at least, credits to apply against future price-down requirements.
• A smaller Big Three share. The Big Three will hold barely half the US market in 2012, and so they merit only about half of suppliers’ attention. But thanks to more small vehicles, their unit volumes should hold up, reducing supplier risk.
• Changes in the ways in which vehicles are consumed. As we have noted, we anticipate more, but perhaps smaller, fleets stocking vehicles that companies and individual consumers lease or rent for specialized, short-term purposes. In the same vein, we expect there to be new opportunities in extending the utility of smaller vehicles, e.g., suspension and transmission innovations that permit three-liter front-wheel-drive cars to tow more weight.

Peter Epping

May 29, 2007 12:10 PM

Re: $4 gas
I'm sorry to say this, but you and people that think like you are idiots.What do you think our wise men in DC are going to do with that extra cash? As far as Europe is concerned, I wouldn't mind paying higher gas taxes. Why? Well in Germany for instance most medical procedures are covered by the government, Drs. make house calls, its very hard to get laid off by companies. If you are, the government will pay your full salary for years until they find you a new same type of job (same salary)or they will retrain you for a new job (same salary)If you don't like it you don't have to take it. If you tell your DR. that you are stressed out from work,he can prescribe a rest cure at the ocean or mountains for you.The government pays.I could go on ,but I hope you get the idea


May 29, 2007 12:18 PM

This guy is an idiot. I would love nothing more then to buy E85 gas or Bio diesel but none is available in my area. I would love to buy a hybrid car but I can't afford it. I would buy a smaller car, but can not afford a
smaller car either. So I sit at home with my kids, going out of my mind, unable to take them to the library, to the park or play dates because the gas prices are so high. I can't afford to work because gas prices and childcare prices are so high. And you are talking about the price of gas should be higher!?!?!? That might work in your perfect little world, but for the rest of us living in reality, that is the stupidest idea I have ever heard.

Angry NC Housewife and Mother of Two small children

Angry NC Housewife and Mother of Two small children

May 29, 2007 12:41 PM

This guy is an idiot. I would love nothing more then to buy E85 gas or Bio diesel but none is available in my area. I would love to buy a hybrid car but I can't afford it. I would buy a smaller car, but can not afford a smaller car either. So I sit at home all day with my kids, unable to take them to the library,the park or play dates because the gas prices are so high. I can't afford to work because of gas and childcare prices are so high. And you are talking about the price of gas should be higher!?!?!? That might work in your perfect little world, but for the rest of us living in reality, that is the stupidest idea I have ever heard.

Mike Scappa

May 29, 2007 2:43 PM


Don't take this the wrong way, but I guess your logic is fine assuming everyone stay at home and writes blog articles all day.

I, for one, drive a 4cyl manual car. I drive 30+ miles EACH WAY to work every day, putting no less than $12 or so in gas each morning. My driving starts in the very secluded areas of the southern jersey suburbs, then over the bridge into western Philadelphia. Public transportation is not an option for me, nor can my car get much more fuel efficient.

Your article is very narrow minded. My family and I cannot afford to spend any more money on gas as we are living paycheck to paycheck as it is. Our commutes cannot be trimmed at all either, and we both drive 4 cyl vehicles.

If gas prices went up any higher, we'd have to start trading off food. I can't afford $20 per day in gas for myself, not to mention my wife's commute. That would run us around $600+ per month on GAS!

You think gas should be $4 per gallon? Fine, then why don't YOU pay for my gas.

To think that raising gas prices would make people more gas concious is just stupid. Those who drive gas guzzling $30,000+ SUV's do so because thats what they want. An extra $1 per gallon won't make them stop driving them. But an extra $1 per gallon WILL have consequences to MY family.

Think a little more practically before you write an article like this in the future.

David Kiley

May 30, 2007 4:46 PM

I'll respond here to your comments on my blog entry.
Most of you think I'm an idiot for being insensitive to the needs and problems of working class peopl already struggling with current gas prices.

Maybe I should have elaborated more in my entry. But I did say that some of the taxes paid would go back to lower and middle income households in the form of payroll tax relief.

In other words, people of lower and middle income, with a theoretical cutoff of $40K per year would get back as much or nearly as much as they are spending in gas taxes in the form of payroll tax breaks.

That still leaves an incentive in place for those households to buy more fuel efficient vehicles when they buy a new car, because the money they save on gas will go into their pocket even though they are getting the payroll tax break. The more people earn, the more they would pay in the way of gas taxes without getting the same level payroll tax relief. Socialistic? You can charge me with that. But there are alot of people who would see gas surcharges that went directly into energy independence measures as an investment in America's future, and not simnply another onerous tax.

I hope that's clear.

Jim Klockow

May 30, 2007 6:53 PM

Totally agree. It's heartbreaking and sad that the real solution to our energy, environment and sprawl problems is so politically unfeasible.

Angry NC Housewife and Mother of Two small children

May 30, 2007 11:18 PM

Your idea for tax breaks sound great on paper but not in reality. Completing your Taxes is complicated enough already. I spend weeks collecting and organizing all my medical expenses, prescription receipts and donations receipts. Then I sit down and spend a week using turbo tax to do my taxes. The "normal" American has their taxes completed by a tax preparation service, where they are in such a rush to get their customers taxes completed, that they often miss available tax credits and write offs. How many poor people to you think actual took the tax credit that was available this year for the Federal phone tax? Probably not everyone who was entitled.

If you want to tax the people who are buying and driving SUVs why don't you suggest a large Federal tax on SUV ownership. That would be much more logical way to deter people from buy these excessive SUVS. Then they could take that tax money and use it to give Hybrid grants to people who want to buy a hybrid. Or they could use the taxes to create larger grants for people who want to open E-85 and Bio Diesel gas stations in areas where they are not any or to open refineries who specialize in the creation of E-85 and Bio Diesel. Then they could even give a tax credit to people who sells or trades in their SUV for a more fuel efficient vehicle. I think this is a much more logical alternative then to tax everyone and make all Americans have to fight with the IRS to get there money back.


June 1, 2007 10:27 AM

This is the most idiotic article I have read in quite a while. Mr. Kiley, you obviously have tons of money to burn if you're advocating higher gas prices by means of increased government taxation. Your idea of redistributing the tax money to lower class income people is nothing more than socialistic wealth redistribution. Therefore, I openly encourage you to send me a check. If we're going to be redistributing wealth, why don't you lead the way and start with yours?


July 11, 2007 7:54 PM

Not surprising this was going to happen to Americans-I kept shaking my head over the last few years the endless push to sell heavy fuel-inefficient SUV's. I consistantly resisted this pressure knowing that soon, and very soon this was going to change: Guess what people-you've offshored everything to China, and they are consuming and will MAJORLY consume oil in for the forseeable future. So gasoline prices will not likely return to back to the silly $1.00 range. As a Canadian I haven't paid that cheap of gas up here since the mid 80's-now gasoline up here folks is $5.50 a gallon. Welcome to the real world....


December 4, 2007 1:55 PM

I agree


April 12, 2008 11:57 AM

It is wonderful reading all these articles and knowing that America is waking up from its dreams in the world of cheap oil.

The human genius can solve this problem … but it will take time, the pain will have to be endured till the solutions are in place.

In some way or another all the articles are correct and offer some solution or pitfalls to avoid.

Forward looking politicians are not in place to prevent the current nightmare … who knows if the ones to come will work in the interest of the people or allow insider lobbying to benefit business at the expense of the public?

However … the answer is probably in all of the above ….

All Governments working at all levels to bring down the real cost of fuel.
Promotion at Universities to get the most creative minds in the country focused on ways and ideas of solving the current energy problems.
Promotion and incentives for businesses to come up with more efficient energy solutions for everyday use … auto’s, trucks, homes, transit systems, airplanes etc etc.
Government and state incentives and mandates for fuel efficient cars zero energy homes and businesses – and mandate mass transit for all cities.
As above government promotion of clean alternative fuels. - There are massive swaths of this country ideally suitable for solar other areas suitable for wind and thousands of miles of coastlines suitable for tidal power.
There are massive reserves of energy oil (shale), coal, bio and nuclear – all can be exploited responsibly and quickly to make us energy independent.


May 24, 2008 11:31 AM

New or more tax .no Technical advances for vehicles ,coal,wind,tidealpower,solar power,atomic power,bitimues oils,update rail roads to ontime useages both local and distant destinations.

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