September 7, 2004

PLENTY OF ROOM FOR TAX HIKES:

Laissez-Faire My Gas Guzzler, Already (SIMON ROMERO, 9/07/04, NY Times)

The four-week average for gasoline demand for the week ended Aug. 27 was 9.421 million barrels, essentially unchanged from the period a year ago, according to the Energy Information Administration.

Part of the explanation is because gasoline prices actually declined during the summer, to a national average of about $1.86 a gallon, from a record of $2.05 in May, while frenzied trading in financial markets pushed the price for a barrel of oil to nearly $50 from $40. (The price of crude oil is still far from its inflation-adjusted peak of about $80 reached in 1980.) That is because refineries in the United States produced ample amounts of gasoline in the last three months, meeting demand from consumers even as speculators placed bets on future swings in the price of oil that may have had little to do with actual petroleum supplies.

"I don't think we're going back to $50 without a big supply disruption somewhere," said Juha Laiho, a Houston-based oil trader for Fortum, a Finnish oil company. "It's logical for gasoline to pull back a bit."

Of course, gasoline at $1.86 a gallon remains about 10 cents a gallon more expensive than at this time last year, according to the Energy Information Administration, crimping many drivers. Still, it would have to become much more expensive to instill a big change in driving habits.

Rebecca Lindland, a senior analyst for the automotive industry at Global Insight, estimates that gasoline prices would have to climb to a nationwide average of $3 a gallon for at least six months to alter consumer behavior.

"Gasoline is still incredibly affordable," Ms. Lindland said. "Even with inflation it's not much more expensive than it was five years ago."


If we're serious about reducing consumption and making alternatives feasible we have to fight the natural deflationary pressures via steep taxes.

MORE:
Price of oil expected to ease (San Jose Mercury News, 9/07/04)

The prospects for lower oil prices seemed to improve Monday as the head of the Organization of Petroleum Exporting Countries forecast that global crude prices would soon fall.

"International oil prices for the September to December period are likely to drop,'' Indonesia's mines and energy minister, Purnomo Yusgiantoro, told reporters in Jakarta.

Iraq supply should improve later this year as security there was likely to improve, Purnomo said. Iraq is a member of the 12-member OPEC grouping.

An expected resolution of the Yukos oil scandal in Russia, which is the world's largest non-OPEC oil producer, should also help tame sky-high crude prices, Purnomo said.

OPEC ministers are next set to meet Sept. 24 in Vienna, Austria. Huge demand from the United States and China, coupled with fears about terrorism, have helped push prices to two-decade highs this year.

But Bloomberg News reported Monday that Saudi Arabia, the world's largest oil exporter, lowered the official prices for crude it sells to the United States and Europe, a sign it may be struggling to find buyers for the extra supplies it's pumping.

Posted by Orrin Judd at September 7, 2004 11:47 AM
Comments

Enlighten me again. How are high gasoline excise taxes different than high income or sales taxes in making all the associated economic activity (i.e., all forms of transport) less economically viable?

And why should the government be looking for a replacement for an economically viable petroleum based economy when no such technology now exists? The Carter era boondoggles that funded "alternate" energy programs are obvious failures that produced nothing but tax writeoffs for otherwise unproductive wind and tar petroleum extraction projects.

And reading your associated Core/Gap posts ask yourself what other than energy related oil dependency is really going to motivate America's self interests enough to send men deep into the Muslim Gap to eradicate the two legged terrors inhabiting that region?

Much as I honor the men in service, even America's occassionally Wilsonian impulses are tempered by national self interest.

We have dual motivations on different occassions that serve to keep us laboring in the Muslim Gap to pull them thirteen hundred years forward to the present. At differing times both oil dependency and national honor in reprisal for 9/11 motivated the Gulf War as well as the Iraq and Afghanistan actions.

Finally, wishing for and even funding programs to produce alternate energy sources oofers no more assurance that such a technology will be discovered. Genius comes when and where it will.

Posted by: Ray Clutts at September 7, 2004 3:12 PM

"Gasoline is still incredibly affordable," Ms. Lindland said. "Even with inflation it's not much more expensive than it was five years ago."

And you cite this quote as if it were a bad thing?

Posted by: Ray Clutts at September 7, 2004 3:18 PM

Genius comes when it's profitable. Make gas expensive and people will put effort into alternatives.

Posted by: oj at September 7, 2004 3:19 PM

Orrin:
Repeat after me. Read my lips-no new taxes. Governments take they don't create. I'm from the government and I'm here to help you.

Posted by: Ray Clutts at September 7, 2004 3:22 PM

So you'd leave the old system untouched just because it's not new?

Posted by: oj at September 7, 2004 3:28 PM

Orrin:

It may not yet be time to "railroad". At this stage of our technological growth, there may not yet be an economically viable technology that can be called into existance no matter what the pecuniary incentives.

And, honestly, given the manifest failure of the government sponsored alternate energy programs at choosing "economic winners" is there any reason to believe that this will change no matter how much federal money we throw at the problem? It didn't really work for the Japanese MITI now did it?

Unlimited funding and mandated outcomes hasn't improved public education. Government mandates for althernate energy didn't succeed before when Carter tried to legislate genius into existance.

Come on Orrin even the Peanut Man Carter's notorious association with this policy prescription should be enough to make you think twice about the relative success of government programs v. market resoluctions.

Posted by: Ray Clutts at September 7, 2004 3:31 PM

If you want to consider helping America's foreign oil dependence then do what I did which is to buy into some limited oil/gas deals to reengineer old American wells by crosscutting to get more oil out of them with the new slanted drilling technologies.

Not that I did if for selfless reasons. I did it to make money.

Posted by: Ray Clutts at September 7, 2004 3:35 PM

Orrin's long had an irrational bug about this. I think it's because he regrets that being a conservative is incompatible with being an environmentalist.

Posted by: David Cohen at September 7, 2004 3:36 PM

Contradictory. How so?

Posted by: Ray Clutts at September 7, 2004 3:38 PM

David:

No:

http://www.brothersjudd.com/index.cfm/fuseaction/reviews.detail/book_id/1273/Conservative.htm


It's because if you tax something you get less of it. Taxing self-destructive consumption is entirely conservative.

Posted by: oj at September 7, 2004 3:42 PM

Ray:

Who said anything about giving anyone money? Make gas expensive enough and someone will replace it with something else.

Posted by: oj at September 7, 2004 3:43 PM

What liquified coal tar? Natural gas? Moonbeams and fairy dust? (No Defense of Marriage Act issues implicated in that last bit of sarcasm.)

Recite after me. The law of unintended consequences rules all acts of governmental mandates.

Posted by: Ray Clutts at September 7, 2004 4:12 PM

Ray:

Who cares what? They'll find something. Meanwhile we can reduce income taxes by taxing gas.

Posted by: oj at September 7, 2004 4:16 PM

I find your blithe optimism refreshing but unwarranted. Who might "they" be and "what" might it be that they may feasibly discover? Finally, let me know when "they" will discover it so that I can get in on the IPO.

And can you ever cite even one instance when one tax has been phased out in favor of another method? (Hey what about that Telephone Eexcise Tax. That one went away with the Spanish American War of 1898, didn't it? No, it's still around. Look at your phone bill dude.)

Government revenue producing measures are cumulative not transitional. Never, ever agree to replace an old tax with a new one. You'll just end up with two taxes, the old and the new.

Posted by: Ray Clutts at September 7, 2004 4:51 PM

Yes, that was exactly the post I had in mind. As you note, "It seems apparent that a conservative environmentalism would be much different than Environmentalism in tone and in policy." The gap is too wide to bridge, so that even George W. Bush, among the most successful of presidents when it comes to improving environmental regulation, is disdained by the Environmentalists.

Environmentalism has made itself into the enemy of conservative politics by willfully ignoring the record. On that record, the fall of the Iron Curtain at the latest should have sounded the death-knell of western lefty Environmentalism. As it turns out, capitalism is a much better friend to the environment than socialism. Nor is that unexpected. Capitalism creates and nurtures the bourgeoisie and the bourgeoisie is the well-spring both of conservatism and a desire to improve the environment. Now, empty Environmentalism has become yet another rhetorical club for the left to use to undercut modern civilization.

You come awfully close to hitting the mark in your reference to Kirk. Sane environmental policy can only be understood as a coherent part of conservatism. It is focused on our stewardship of the environment to promote our own best interests. Economic, certainly, but not exclusively. No conservative, looking at the environment, would say, for example, that in order to heal the Earth, we need fewer people. Environmentalists, thinking themselves "Gaia centric" say things like that all the time. Environmentalists fall into error by valuing the environment as "other," and preferring its interests to our own. (In fact, they define its interests as being contrary to our own.)

We see, thus, that there can be no conservative environmentalism, but only conservative answers to environmental questions. To ask, in effect, is some policy "good for the trees" or "good for the Earth" without anchoring that question in what is best for humanity, is to turn our back on conservatism.

You say, begging the question, that we should use taxes to reduce "self-destructive consumption." What makes our use of gasoline self-destructive? Says who? In fact, the gasoline age, to coin a phrase, has been one of great environmental improvement and material improvement in the quality of human life. It is Environmentalists, not conservatives, who judge any development as a fall from a pristine Eden. Conservatives should know that Eden is not the alternative. We were kicked out, and we're not going to recreat it through our own works.

So, what is the conservative position on gasoline taxes? The same as the conservative position on any tax: no higher than they must be.

By the way, higher gasoline taxes would not promote new energy sources. First, all the activity would be in increasing fleet fuel efficiency. As we have the ability to raise efficiency quickly (that is, we have lots of technology we're not currently using) the result would quickly be to raise consumption back up to about current levels, though we would be racking up much higher mileage. (This is our historical experience with increased CAFE levels.) As mileage is what actually correlates with most of the "destruction" caused by transportation, we would be worse off than now.

Second, you overestimate the effect of higher US prices on global consumption.

Third, higher taxes would not encourage investment in alternative technologies. Any potential developer would, wisely, simply assume that the new technology would be taxed as well.

Fourth, the price of gasoline has long been much higher in most of the rest of the world than it is in the US. (The US accounts for about one-quarter of world petroleum consumption.) That has not resulted in great technological leaps forward. It has resulted in smaller, more fuel efficient cars (see my first point) the best of which get sold here anyway.

Posted by: David Cohen at September 7, 2004 5:04 PM

Actually, what you probably need is a tire tax, somewhere on the order of $250 per tire. There would be some extra deaths among those who can't afford to buy new tires, concentrated among young families and senior citizens, but so long as it's good for the environment, we really shouldn't complain.

Posted by: David Cohen at September 7, 2004 5:12 PM

Tires are fine--it's gas we want to reduce the consumption of. I've no problem with just raising fuel efficiency standards so high that you force gas out of the picture, but we may as well reap the tax windsfall while were at it.

Posted by: oj at September 7, 2004 6:04 PM

Ray:

The catastrophic health tax on seniors.

Posted by: oj at September 7, 2004 6:18 PM

I've no problem with just raising fuel efficiency standards so high that you force gas out of the picture.

Hey, good parody of an Environmentalist.

Posted by: David Cohen at September 7, 2004 6:51 PM

Well, either dependence on gasoline is a problem or it isn't. If you don't think it is then any government action must seem oppressive. If you think it is then government action is desirable. Because of the failure of the petrostates to mature into healthy societies and because of the environmental degradation it causes it seems to me to be a problem.

Posted by: oj at September 7, 2004 7:00 PM

"They'll find something."

Your blithe recitation of that sentence indicates your innumeracy has gotten in the way. Stop by USS Clueless for a very analytical dissertation of the serious problems facing that something.

Problems are relative. Picking one that is worse than the one you have would seem to be a single-point IQ test.

Posted by: Jeff Guinn at September 7, 2004 9:17 PM

Orrin:

Pardon me for having lost the gist of your line of argument but what catastrophic tax on the elderly? From my perspective the only catastrophic health tax is Medicare and it's assessed on the young to support the elderly.

I have some very extensive personal knowledge of how our health system subsidizes the elderly by virtue of my business. I have a company (HFRI.net) that does work for hospitals resolving unpaid health insurance claims.

In essence, we are an outsourced hospital business office that resolves unpaid commercial insurance accounts on behalf of hospitals. My business grew out of a law practice that involved suing health insurers for unpaid claims (preexisting condition, out of plan treatment, "experimental treatment" exclusions for HDC-ABMT, etc...).

After writing the above posts the last thing I did before going home today was explain at agonizing length to a Chicago plaintiff's personal injury attorney why under the Medicare Secondary Payor rules his permanently disabled client had to pay my hospital charges even though she is Medicare eligable (she's Medicare eligble because of disability and not age). The net result was to drastically reduce her paltry recovery to a meaningless sum because Medicare is always deemed to be the payer of last recourse and her personal injury recovery must be reduced to essentially nothing before Medicare pays anything at all.

Just one more way the elderly have stacked the deck to support themselves at the expense of the rest of society. And I write this as a 47 year old man supporting his own mother in an assisted living facilty. It's still not right how much of our society's wealth the elderly have commandered beyond any actuarial contributions they made personally.

Posted by: Ray Clutts at September 7, 2004 10:24 PM

H.R.3607 : To repeal medicare provisions in the Medicare Catastrophic Coverage Act of 1988.
Sponsor: Rep Donnelly, Brian J. [MA-11] (introduced 11/7/1989) Cosponsors (4)
Committees: House Ways and Means; House Energy and Commerce
Latest Conference Report: 101-378
Latest Major Action: 12/13/1989 Signed by President.


Remember the geezers following House leaders cars and banging on them with their canes?

Posted by: oj at September 7, 2004 11:20 PM

Clueless is.

Posted by: oj at September 7, 2004 11:28 PM

Ray Clutts:

Here is the investment opportunity you asked for earlier:
Suncor, stock symbol: SU
They strip-mine Canadian tar-sands, processing the goop into usable crude oil. They are profitable with $ 24 a barrel oil, and have ZERO exploration costs/risks.
The Canadian tar-sand deposits contain an amount of oil second only to Arabia's known reserves.

Posted by: Michael Herdegen at September 8, 2004 10:58 AM
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