July 27, 2010

WE ARE ALL NEOCONOMISTS NOW:

Our view on gas tax: Price holds key to ending nation's addiction to oil (USA Today, 7/27/10)

Consider what happened when gasoline prices spiked in 2008. It was painful for just about everyone, and particularly hard on lower-income people and those who had to drive long distances. But it did more to change habits and reduce oil usage than anything Congress and a parade of presidents had done in decades.

In June 2008, Americans drove 12 billion fewer miles than in June 2007, part of the longest
sustained drop in driving since high prices discouraged driving in the 1970s. Car buyers suddenly wanted smaller, more fuel-efficient cars and began to try to shed their SUVs. Sales of Toyota's 50-mpg Prius hybrid shot up by 69% in 2007, exceeding those of the popular Ford Explorer SUV. The Toyota Corolla was the No. 1 selling car in the country in June 2008, while the Ford F-150 and Chevrolet Silverado pickups — traditionally best-sellers but comparative gas guzzlers — had dropped to fifth and sixth place. But once prices fell, so did sales of the Prius and Corolla. The F-150 and Silverado again rose to the top of the heap.

Four decades of experience suggests the only way to wean the nation off its ruinous oil addiction is prices that go up and stay up. And, although it's a political non-starter for now, the simplest and best way to achieve that is to gradually raise the federal gasoline tax, now 18.4 cents a gallon, where it has been since 1993. [...]

Ultimately, higher taxes could help drive alternative technologies that would slow the flow of money to finance some of the world's worst regimes and multinational oil companies, such as BP.

Posted by Orrin Judd at July 27, 2010 3:12 PM
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