I WANT $7 GAS!

  Americans don’t like $4+ gas. I would like gas to be $5, $6, or even $7. I’m not joking.

  First: Many think gas prices are a big rip-off by price-gouging, greedy oil companies. That’s wrong. In reality, it’s mainly a matter of supply and demand. Demand has been growing faster than supply.

  When Exxon Mobil earned a record $40 billion profit last year, the word “obscene” was widely invoked. But rare was any mention of Exxon’s sales level: over $400 billion. So Exxon was making a great big dime on the dollar. Oh, and Exxon paid $30 billion in taxes. Not to mention the additional taxes its shareholders paid on their returns.

  Anyway, oil company bashers don’t seem to realize that around 90% of the world’s oil (and hence the price) is controlled not by private corporations but by governments.

  And those governments black with oil are often black in other regards: the Iranian mullahs, the authoritarian Putin regime of Russia, the phony populist Chavez of Venezuela, the blood soaked al-Bashir regime in Sudan, the Nigerian kleptocracy. When I fill up at the pump, it’s not oil companies I clench my teeth at—it’s those regimes. High oil prices are keeping all these bad guys in fat city.

  Oil wealth, for a nation, is not a blessing but a curse. It empowers the rulers rather than the people—who tend therefore to be less free, and poorer, than in other countries where circumstances impel them toward development of entrepreneurialism, industriousness, and accountable government. Those are the kind of countries we want to share the world with.

  That’s why I want a big gas tax, to raise prices at the pump—to create a huge incentive to reduce usage—which (because of supply-and-demand) will make the price at the well-head go down. We use so much oil because it’s (relatively) cheap. Make it costly, and the free market will do its thing. Pretty soon we’ll have cars getting 60 miles to the gallon, because the market will insist on it. And we’ll have more nukes and wind and solar power replacing oil-fired power plants.

  That’s good with regard to global warming. Climate change is a real problem. But I believe we can deal with it—not by shutting down our industrial economy and making people poorer—but by evolving it to use less fossil fuel, which can be done, and pushed along with proper economic incentives—like $7 gas.

  Europeans already pay gas taxes, and prices at the pump, at the levels I’m talking about.

  But, you say, you hate taxes? Me too! But the fact is, we’re already paying a big gas tax. We’re paying it to Chavez, Putin, Iran, and Sudan. I’d rather be paying it to our own government than to those creeps. Right now we’re just empowering troublemakers.

  And a $2 tax might, conceivably, ultimately reduce demand enough to pay for itself by knocking $2 off the cost of the gas itself. Oil’s price has doubled within a very short time; it could be halved by the same market forces working the other way. Admittedly, demand from rising nations like China is a bigger factor than U.S. consumption, and I’d hesitate to predict that anything we do will serve to reduce oil prices that much. However, if the U.S., once and for all, showed it is serious about reducing oil dependency, that would undoubtedly have a tremendous psychological impact on the market.

  But maybe it’s not rational optimism to imagine Americans going with my proposal.

  (Acknowledgement: author Thomas Friedman has been saying some of this stuff too.) 

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26 Responses to “I WANT $7 GAS!”

  1. freedom101 Says:

    I totally agree! I just wrote a blog saying almost the very same thing! You have my support. I was asking people not to be short sighted. And telling them we should ask our government officials to raise the gas tax at the pump another 3-4 bucks. To force a boycott. The demand will decrease the surplus will explode and the result will be lower prices. My plan also socks it to your so called black Power Mongers who have us over the barrel. I only hope both yours and my blogs reach the people and that they are inclined to write their congressmen to raise the taxes. To call any other kind of voluntary unified boycott would just never happen without our government stepping in to choke us at the pump.

  2. freedom101 Says:

    P.S. I think $8.00 per gallon would work better!

  3. David Says:

    The difficulty of this, of course, is that the US cannot succeed in acting unilaterally. A comment about how this hasn’t stopped us before may or may not be in order. 😉

    But in all seriousness, Americans would have paid more at the pump for a longer time if Europe didn’t tax gas so much for so long. In a way, the European gas tax subsidized oil for the US, where consumers faced the conditions of reduced demand, thus driving larger vehicles. If the US were to jack gas taxes up by $3 a gallon, fuel usage would certainly drop in the US (although one could argue that because of the complementary purchase of a vehicle that demand would be if not inelastic than at least sticky).

    The problem, though, is that the rapidly growing Chinese and Indian markets would gobble up the then-reduced gasoline prices, like the US did with the high European gas costs. Assuming that they are not unwilling to deal with such governments as Russia, Venezuela, etc, there is no reason to think that this would take care of the problems addressed in this post, unless reports of surging economies in China and Japan are either highly exaggerated or doomed to some sort of failure.

  4. Paulie Says:

    No! $9!!

    The combination of oil revenues and a lack of democracy is, indeed poisonous. But where there is a democracy in place, they aren’t a cakewalk either. In the 1980s, the effect of tax cuts on public spending were cushioned by North Sea Oil revenues in the UK, giving the government of the day the kind of space that they needed to promote wholesale privatisation.

    And I’m not opposed to privatisation that much either, but in the UK, the family silver was given away to commercial investors rather than any of the more ‘social privatisation’ models.

  5. Chris B Says:

    David is right. Taxing gas in the US ultimately subsidizes gas prices in China and India by reducing demand here and lowering the wholesale price worldwide. That will make chinese good even cheaper than they are today and draw even more jobs away from the US towards China. But that does NOT mean I am opposed to a tax. In fact I agree with Frank and Thomas Friedman and all the others who have written letters to the editor calling for a higher gas tax. The solution to the problem is a tax shift that addresses both consumption and the trade imbalance. Jack Kemp once upon a time actually said something sensible, “You tax what you want less of and you subsidize what you want more of.” We want less CO2 in the atmosphere, so we should tax it. We want more jobs here at home, so we should use the tax revenues to subsidize those jobs. How else can we compete with Chinese prices? With jobs subsidized by a gas tax, we’ll move closer to our work and there will be more work. Of course, another way to provide revenues to subsidize jobs is to raise the tariff on chinese imports, but this would not deter gas consumption, and would lead to complaints of unfair trade practices.

  6. Richard Says:

    Hmm

    First of all, many Americans have no alternative means of transporation –beyond their auto — to get to work, school, church, shopping, family, friends, etc.

    Second of all, many Americans would not be able to afford paying $9+ for gasoline and would have no viable alternative for transportation. Thus they would be cutting into their money for food, housing, utiliites or medicine.

    I am sorry, but this sounds like someone who has a lot of income at his disposal and is out of touch with the economic realities of many Americans who are not at the top of the economic ladder.

    FSR COMMENT: I hear you, and I do sympathize. However, we really have to think of the big picture rather than just what’s good for the moment. I didn’t offer my suggestion in brazen disregard of the fact that higher pump prices will pinch for many of us. But, if we don’t get a handle on this very big problem, we will ultimately be pinched in much more unpalatable ways. “Biting the bullet” can hurt — but sometimes you gotta.

  7. Robert Leslie Fisher Says:

    The problem with the proposal is that we do not really know the actual outcome of a sudden huge rise in gasoline prices. One possiblility, alreadu seen in Europe, Indonesia, and other places where gasoline prices rose quickly, is rioting. Ha anyone estimated the damage in property, injury, and loss of life from rioting caused by sudden vast increases in the cost of living for people who depend on their cars to get to low paying jobs? I doubt it.
    Yes, the market would eventually adjust to high gasoline prices. Industry has been making great strides towards reducing its energy costs. People will find ways to deal with a world of stratospherically expensive gasoline. We may actually have a sensible discussion about nuclear energy without the histrionics of people worrying that the power plant will blow up or everyone will be poisoned by nuclear waste trucked through their bucolic suburban neighborhoods. We may actually start learning how to conserve resources and stop wasting them in the profligate way we have been used to. The key word is “eventually.” In the short term, however, high priced gasoline is a nightmare scenario. It could lead to international tensions hardly dreamed of by the gadflies who are trying with their “modest proposal” to get us to think. My guess is that Chavez, Ahmadinejad (and certainly his patron Khamenei) have already thought about the pros and cons of $7.00 gas and decided that “salami tactics–small steady raises that we can adjust to–are optimum from their standpoint as well as ours.

  8. Malcolm Muir Says:

    Frank,

    I am going to disagree with you on this one.

    I once was a believer in man made Global Warming but the bulk of the credible scientific evidence now seems to be pointing to totally natural causes while much of the pro GW case seems to be based on junk science, together with attempts to discredit or otherwise silence the opposition. The mediaeval warm period was significantly warmer than now, with farms in Greenland and great prosperity in Europe. We have polar bears, so they survived.

    There is even some evidence that high levels of CO2 in the air is actually beneficial. CO2 along with water are the two primary plant nutrients and there is good research indicating that high levels of CO2 spur plant growth.

    Given the above our best bet would be to work seriously on energy independence in ways that actually work such as building lots of nuclear plants,and drilling for oil at ANWR, in the Gulf, on the East side of the Rocky Mountains and wherever else we find oil and/or gas. As we find new oil we can also loosen the regulations enough that we can build some new refineries.

    Iran exports about 4 million barrels of oil a day. We use about 20 million. If we had opened ANWR in 2000 we could now be getting a million bbls. per day from there alone.

    We need to encourage energy research in ways that actually work. We have seen in the history of aviation that prizes spurred innovation. Direct government funding of research does not seem to work at all well. Therefore I propose a $100 million prize for the first working fusion plant.

    Reducing demand with a huge gasoline (or carbon) tax will slow down the economy, cause unemployment (who buys a new car when they are facing unemployment?), reduce our supply options, give politicians more money to waste and generally cause a mess.

    Mac.

  9. Craig Goodrich Says:

    “Climate change is a real problem.”

    Umm, apparently not.

    Very high fuel prices will be total disaster for poor countries, since it will greatly raise food prices, due to increased costs of transportation and fertilizer, and will encourage diversion of food grains to ethanol and vegetable oils to biodiesel and the like.

    I’m completely with Mac on this one, except I’d make the prize a nice round $1 billion; nowadays $100 million is in the general ballpark of the cost to build a conventional nuclear plant.

    As to renewable sources of energy, it’s worth remembering that it’s because of our shift to fossil fuels that there are now many more acres of woods east of the Mississippi than there were before the Civil War. Burning anything at all produces CO2 — whether it’s coal, natural gas, a scented candle, or a coed’s bra. All of the putative solutions to the “Global Warming” hysteria amount to giving politicians complete control over all the energy use in the world — and since energy use is basic to every economy, it really amounts to giving these guys control of everything. No thanks.

    Craig

  10. Brad Isbister Says:

    The thing I wonder about raising gas prices to the level you propose Frank, is can your country, given it’s current fiscal/economic situation, afford at this point in time to implement such an increase? Would you raise taxes to the levels you want in a quick manner, or do it slowly? If you suddenly raise them I’m optimistic you’d have instant mayhem. Do it too slowly and will the extra funds be around to implement anything effective?

    What would the impact be in the short term for(one) example, if trucking companies were suddenly hit with a huge (and it would be) increase in fleet fuel prices? Assuming they could survive, passing costs on to the consumer would be potentiallydangerous as well, no? There is a lot of stuff trucked all over the place. I could see food costing an awful lot more than it does now. Everything would increase dramatically.

    In the long term, I do think that every country has a responsibility to look beyond it’s dependency on fossil fuels. If alternate forms of cleaner energy can be developed, then by all means they should be explored and implemented if it’s feasible to do so. And it should be done at a faster rate than what’s currently being done. Such technology could then be marketed abroad.

  11. Andy Armitage Says:

    The trouble with high petrol prices is that, while it may discourage too much car use, is hits people in rural areas where there are no trains and a bus service that is once a week at best. I write from West Wales in the UK, and our household’s little Citroën Saxo is invaluable – but our petrol is now anything up to £1.20 per litre, and then some; diesel is even dearer. I don’t know how much that is per gallon, then converted to account for the currency difference, but it’s a lot more than our cousins over there are paying, although I realise yours has been a culture of inexpensive gasoline, and that creates a big shock when it goes up in price.

    Our situation means it’s hard to get to doctors’ surgeries and to the nearest town for shopping without working out how much we need to spend on petrol, and deciding how many trips we can afford to make this month. And, of course, the diesel cost works its way through to food and ohter groceries, because so much is transported by road. We need good, cheap and plentiful train travel in this country, and then people might get out of their cars and onto the rails, cutting their carbon footprint.

  12. hessilverdollar Says:

    Top down government regulation, not supply and demand as it should be – this is what the initial blog and others like Friedman are arguing for. Rubbish. I recall the push for a BTU tax by people like Mr. Gore in 1993; strangely Mr. Gore’s opinion in 2000 was to go about investigating why gas prices were so darn high after many of his traditional supporters complained! (and this some years after the BTU tax failed).
    The price of fuel reflects the price on the world market, largely due to emerging economies, such as India and China (where, if I am not mistaken , several million cars a day are produced and a superhighway system is in the works which will soon greatly surpass that of the U.S.
    I see how the government controls things with “trickle-down” economic and other policies and my response is “No thank you”. How ironic that a purported libertarian suggests this government intervention. Let the free market work. Oil reserves are finite. Drill for some more here – at very least, and even if that petroleum goes to places like China, it might well serve to depress the price of petroleum.
    High gas prices harm a multitude ot things and people – (i.e. those who have a long commute and don’t have the financial resources to buy a hybrid vehicle) Those same economically – pinched folks have to then turn around and pay high food prices as well. Another ironic thing is that many of these working folks are supporting Democrats bankrolled by radical environmentalists and who want to have this country basically shut dowm because we will not drill for more petroleum resources! Go figure!
    Look, I like to view the fuel situation in sort of analogous terms to my insulin-dependent Type I diabetes. To have the government mandate high prices in the short term to try to better things in the long term is like someone saying to me “Hey , they will have a subsitute for insulin , so stop taking insulin” Okay, needless to say, I would not be around to see the day of the insulin substitute. In the same manner, the financial situation of many folks paying seven or nine dollar-a-gallon gasoline would ruin those people, before it would resolve anything with regards to gas. If you are a libertarian, or are libertarian- leaning, alllow the market to work, instead of the Imperial Federal Government to impose its will upon the citizenry another time; It already imposes itself in so many ways already!

  13. Lee Newberg RO Says:

    Some day I’d like to hear more on why you consider Chavez to be a fake populist. Much of the criticism I hear in the US press is merely corporations wining that Chavez doesn’t yield to them as quickly as other leaders do. Sure he tried to expand his own powers, but that was via a legal referendum. The referendum lost and I haven’t heard that he tried to overrule that in any sort of extralegal way.

    Thanks!

    FR COMMENT: The Economist magazine has covered Chavez in some depth for a length of time. It seems abundantly clear that his main objective is simply to get as much power in his own hands as possible and rule Venezuela like Castro, his idol, ruled Cuba. And, just as in the case of Castro, the populist rhetoric about lifting the poor is transparently empty posturing. The average person in Cuba is FAR poorer today than he/she would be if Castro had not been in power the last half century. Because these insane economic policies are guaranteed to impoverish a country. Same is true for Venezuela & Chavez. He is destroying the economy with his idiotic “Twenty-first century Bolivarian socialism.” Any intelligent person today knows that socialism is all a crock of you-know-what. The only reason Chavez has been able to retain the allegiance of Venezuela’s poor is because he has been buying it with the oil money he floats on. When oil runs out or falls in price, it will be clear that there is no longer any productive economy in Venezuela to keep the wolf from the door for the country’s poor. Like all leftist tyrants, Chavez is doing those people no favor.

    NEWBERG response:

    It sounds like I’ll need to do more Chavez research on my own! Unfortunately, your response that it is “abundantly clear” that Chavez wants to be like Castro (and the subsequent rant about Castro) tells me diddlely squat about what Chavez actions have been in the wrong. On the other hand, your statement “He is destroying the economy with his idiotic ‘Twenty-first century Bolivarian socialism.'” is helpful; it tells me that I should explore how the Venezuelan economy is going. If you have actual facts and figures, about the failure of that economy to do as well as it would have done under a better leader, please let me know.

    Please feel free to insert the above paragraph as a comment to your comment, though I admit it has little to do with the price of gas.

    FSR reply: As noted, I have followed the Chavez story pretty closely from the start, but I have not made a fetish of it to the point of collecting materials & facts and figures. I will only say that Americans of a certain ideological proclivity tend to be suckers for foreign demagogues who claim to “fight for the poor.” I even know a guy who (last I heard anyway) thought Mugabe was a great guy. (Not you, Lee, I’m sure)

  14. Lee Newberg RO Says:

    I tried to make this comment earlier, but I don’t see it, so here goes again. If this is a duplicate, please accept my apologies.

    What if we replace the general sales tax with a gas tax in a revenue neutral way? That way the average person will not suffer significant financial burden and yet we’ll actively be encouraging conservation. Sure, some folks who have to drive a lot, to get to work or whatever, will hurt nonetheless, but perhaps not as much.

  15. Al Barnes Says:

    Great idea Frank,

    I’m seeing people park their suv’s and riding bicycles and motor scooters where I live. I hope for 9 dollar per gallon gas, sharing the road with suburbans and hummers was getting old (have you noticed the driving manners of some of these people?). Put these road hog drivers on motor scooters and the road will be a friendlier place. Hopefully electric cars will make a come back!

    Part of our high gas usage is due to personal choice. I chose a house 1.2 miles from my work. The nearest grocery store is .5 miles away. If I require any item from the big city it is ordered from the internet. I ride bikes or drive my 70 mpg motorbike if I want to go longer distances.
    My car gets 27 mpg and I fill it up once every 2 months

    The downside to high gas prices are the high prices that we pay for food and other products. Airfare is getting up there. Maybe the government can drop the gas tax for airlines, commercial trucks, ect.?

    Hopefully the gas prices continue to increase. Excellent blog Frank…

  16. Steuart Bowling Says:

    Horrible idea Frank!

    I apologize in advance for the length of this post–but look on the bright side–I don’t mention religion or the soul even once…except for just now.

    I’m with you on not blaming the oil companies. 10 cents a gallon is less than the current gas taxes. I’m with you on the need to quit feeding these corrupt regimes the fruits of our productivity. Just overlay a map of the world’s insurgencies, repressive regimes and political hotspots with one showing oil reserves and you’ll see what I mean.

    I break with you on the tax idea. Asking the federal government to solve this issue by taking even MORE money from people should be considered bone-headed without further explanation, but it’s clear from the comments that further enlightenment is needed.

    Let’s rephrase the idea:
    You want the US Congress–the same body that has promised for over 30 YEARS that they would wean us from dependence on foreign oil, the same body whose wisdom enabled the savings and loan crisis of the 80’s and the current credit market meltdown, the same body that is currently running a deficit of over a TRILLION dollars, the same body that taxed gasoline to rebuild our infrastructure and then was shocked by the Interstate 35 bridge collapse, the one filled with people who vote against their own proposals and can’t even tell you what the laws they do vote for actually do, the same body that exempts itself from Social Security and then squanders what the rest of us put in–you want THAT body of compulsive liars addicted to self-destructive excessive behavior to manage this crisis by giving them MORE money? Excuse me for a moment, but I can’t type and laugh hysterically at the same time.

    I’d also like to point out that interfering in the “free” market by setting an artificially high price is the very antithesis of what a free market is. It’s even more bizarre to expect that market to work properly after you rig it not to. The money you siphoned off in tax does NOTHING to solve the problem. It buys no more efficient methods of production or distribution. It locates no new sources of supply. I suppose it might buy some R&D but any research program has to be approved by the same blithering fools that passed this mess along since the oil embargo. How the heck do you expect “free markets” to work when supply is controlled by cartels and artificially created refinery chokepoints anyway?

    More disturbing are the selfish elitism of the premise and the echoes of agreement. Only the rich can afford to support this idea or pricing gas out of reach in order to reduce demand. Consumption taxes always hurt the lower income people because they are forced to pay exactly the same cost as the richest of the rich. Somebody earning $25,000 a year and burning 10 gallons a week would part with over 4% of their income paying the Frank Gas Tax. A person earning $100,000 could waste 3 times as much fuel in a guzzling Humvee and still pay only pay about 3% of their income. Who do you think can part with the money more easily? The latter guy won’t be riding any buses either.

    Lower income people tend to be much more efficient because every resource is very limited to start with. Wealth brings waste, and it may shock you to realize the vast majority of people make much less than $100,000 a year. I support a family of 4 on far less. You may have noticed the drop off in my coin purchases and list bids–I feed my daughters first; the coin dealer has to wait. Despite my love of ancient art, that’s reality.

    The higher costs will set off a round of inflation which will only force higher prices across the board. Higher prices will be passed along until the weakest are hurt. People on fixed incomes and those just above the poverty line (no government help) will be hit the hardest. Doctors, lawyers, judges (Ahem!) and perhaps a few coin dealers (coff! coff!) may have money to get all giggly at the thought of $7 gasoline, but this is going to end up killing people who may have to choose between money for the doctor or money for the gas to see the doctor. (Don’t get me started about what that chain of fools has done to health care–I can’t afford the stroke it’ll give me!)

    While the rich may enjoy passing the Grey Poupon between their Hybrid cars (which now cost about a third of what I paid for my house), these won’t be an option for most if you force the issue. The money reserves at the lower end of the economic ladder will have been siphoned off by the taxes and the resulting inflation long before prices for these vehicles start to move down. You can’t save up for the purchase if inflation eats away the cushion between income and costs. All you can do is demand more money for the same work–that’s where the inflation comes from.

    Maybe the urban elite may find a bicycle ride or a trip on a motorcycle a self-satisfying adventure, but which one of you will pedal 70 miles to the nearest hospital during an asthma attack and how do you propose to strap your 5 year old to the Harley (filthy, polluting machine that it is) for a trip to the government-required kindergarten class during a rainy 38 degree day?

    If you want the tax-free answer, Google Changing World Technologies and look into a process now called the Thermal Conversion Process (formerly called TDP). It turns garbage, farm and landfill waste into usable heating oil at marketable efficiencies. The oil it produces can also be refined into other fuels at greater efficiencies because the product starts at a level of higher refinement that crude oil.

    This is not a theory–at least two facilities already exist. Implemented in conjunction more efficient fuel consumption and conservation efforts and refined as the technology advances, it can solve the imported oil dependency issue and resolve many landfill and waste disposal issues. It leads to a net reduction in carbon output and we can use existing refining and distribution networks.

    We don’t have to make drastic and reactionary changes and force people into the kinds of social turmoil that spark wars. Congress needs to quit exploiting the current problem for political gain and provide incentives for local governments to work with these facilities. Placed adjacent to the roughly 3100 active landfills in the U.S., the energy they produce could be sold at a profit to local distributers with a portion set aside to fund free or low cost heating oil programs for those in need. If the majority of home heating oil could be produced this way, refineries could concentrate on meeting the demand for gasoline. Since less new carbon is taken from the ground and released into the atmosphere, we can still cut those boogy-man scary carbon emissions without resorting to speculating in cap and trade schemes that are little more than corruption bait.

    Why won’t the government mention tout this process as an alternative to the current situation and ramp up some funding?

  17. LarryH Says:

    Before any finger pointing toward other goverments the finger should be pointed at our own and the travesty inflicted by the Bush regime [You know, the guys that lied because THEY wanted to control ME oil]

    You failed to comment Frank on the hardship that many americans are facing with the continued increase in oil prices and the effects that is having on their pocket books [not on the middle class] but the millions of people in this country struggling to make ends meet.
    Oil hikes effecting the grocery bills, healthcare, education, rents and mortgages etc.

    And yet it’s incredible that very few question the trillions wasted on the american military machine, deluded that harmony comes from the barrel of a gun or a million dollar rocket!

    ps please understand that europeans travel less distance to work than the average american.

  18. B. Peterson Says:

    Frank,
    Your optomism has clouded your vision!

    In a global economy, how would the US compete if gas were $7 and general price inflation were held constant?

    For those who forgot – remember how the economy was jump started last time – it was with $1.00 gas.

    $4.00 gas is pulling the economy down. In the short term this is a good thing because artificially low interest rates are causing price inflation, $4 gas sucks excess money out of the system.

    If gas goes back down to $2 and interest rates stay the same, inflation will return. Right now we have stagflation. European banks are talking interest rate rises – so the Fed announced the end of lower interest rates to settle the dollar exchange rate. $7 gas will cause the dollar to fall off the charts. $2 gas will bring it back towards recent levels UNTIL inflation returns, and then it the process will resume UNLESS the Fed raises interest rates back up to their equilibrium rate. Bingo! Then the economy will crash again because interest rates will be at or above stock returns.

    We are in for rough times no matter what happens because our military spending is too high relative to GDP. We are the USSR, and it’s 1973. The USSR went bankrupt of hard currency in 1978. We will last longer because we have a convertable currency, but there’s that nasty China problem… they own our debt, and we will surely not pay them back, will we???

  19. B. Peterson Says:

    In summary, I am pessimistic about the near future because I postulate that real interest rates are at or above the real rates of return on stocks in the US. Higher gas prices will only increase the gap in a negative manner.

    B. Peterson

  20. B. Peterson Says:

    After some thought, I calculated the most politically likely plan to add a $3 per gallon federal tax upon gasoline.

    It goes like this: corporations are exempted fron paying the new tax, but everybody else has to pay it, so corporations go into the business of transferring their gas over to their preferred customers by calling these transactions “capital tranfers”, creating the same duel markets that existed in the USSR during the 1970s and 1980s, and there will probably be “gas prizes” offered as retail promotions in the place of reduced retail prices.

    Doesn’t sound very optimistic, does it? Corporations should not be treated better than people.

    B. Peterson

  21. Allen Barnes Says:

    I love it! Oil prices jumped 9 percent in one day!

    We Americans use far too much gas per capita when compared to the rest of the world, and it’s time to let go of the petroleum titty. We’ve been spoiled for far too long and now the dragon’s head of oil has come around and bit us on the backside. Our food and other necessities are getting more expensive in part because of this dependency. Our air, environment, and national security have suffered because of this addiction (and we are the top oil junkies per capita compared with the rest of the world).

    ENOUGH ALREADY!!

    I know all this change can be viewed as pessimistic (“how do I take my child to the doctor 30 miles away ect…”) Believe me, Americans can rise up and deal with the challenges. Yes, prices will rise…Time to learn about rice and beans. Drop your cell phones, credit cards, cable TV, trips to Micky D’s. Living cheaper is sooo easy once you put your mind to it.
    Ever been to Asia or Latin America? They make do with far less than us spoiled Americans.

    Consider the good side of these misfortunes. GM, after killing their electric car a few years ago have now made plans to introduce a “hybrid with plug-in capabilities” in 2009. The auto makers are shutting down SUV plants. Alternative energy prospects are now being taken seriously? People are getting out of their cars and walking! All of this has got to be good for our country.

    Yes, I know that some of us will be strapped (I will have to stay home this summer and make a few spending changes) sorry Frank! This is happening so fast that many Americans will have a hard time adjusting. It’s a matter of tightening our belts, living near where we work, and getting out of our cars. One poster mistakenly insinuated that I lived in some sort of elite setting, but he was mistaken. I am a teacher, and a single parent, making less than 40,000 per year, in a town where the average adult makes less than 30k annually. People here ride bikes and walk as much as possible. Even when there is two feet of snow and 0 degree temperatures, many people are still walking, or riding the bus (I can’t afford a Harley I’m not a lawyer or Dentist). This is not Martha’s Vinyard over here. What we have in Northern Utah, are a lot of cheap people, who don’t live beyond their means, enjoy exercise, and try to improve our country by not donating our hard earned money to Chavez and the rest of OPEC.

    This country has needed this change for many years. We will meet this challenge and wind up better for it as a result. It will also be painful but worth it in the long run.

    Make a change! Be optimistic and do it!

    A. Barnes

  22. B. Peterson Says:

    Allen Barnes – despite my previous posts, I am an advocate for using less technology and I agree with much of what you said.

    Why do we need computers in elementary and middle schools? Why do we allow cell phones and pagers and pdfs in schools? The big push right now is to get wireless technology in the schools. Why?

    Force the children to interact with each other at school. Teach them social skills. Don’t let them drive their own cars to school unless they are in 12th grade. Make the chidren walk and exercise at school. Stop cooking their school lunches in microwaves and stop serving McDonalds and other fast foods inside the school buildings! Remove those automatic vending machines and make the children appear before a live person to purchase snack foods.

    All these things will help change our lifestyles and enable us to use less gas.

    B. Peterson

  23. James A. McGaughan Says:

    Wow, Frank, so sad you bit on Friedman. That guy is still trying to find who he is and sways from week to week. Certainly, OPEC’s cartel artificially inflates the prices of oil buy refusing to meet the worlds demand(which they could). Nonetheless, there are market forces at play which will allow us to transition(more comfortably) to alternative energy sources over time(long run). Regardless of whether the price goes back down, billions more have been invested in the private sector. When it is perfected to the point where the energy is efficient enough to get to the market at a competitive price and there is long run profit potential, the despots in the Middle East and South America will be broke because they have artificial economies with very little productivity.

    This reliance on government to solve the problem is just naive. Gas demand is extremely inelastic. Raising the tax would just eat into disposable income, especially on the lower scales of income. Some people would give up second jobs due to the lowering of their compensation through the tax which would lower productivity and standard of living. We can’t be compared to Europe; we live in a huge country with far more commerce and travel.

    Subsides are also bone-headed. Subsides would mainly line the pockets of the aforementioned despots because you let them do this world wide longer and inhibit natural market forces, which we also do not want to do. I understand distortions, but in my opinion, doing nothing is the best solution. The private sector will find an answer and in the mean time the transition will be less painless than an artificial one. Stop the knee-jerk!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! That is what got us into this mess starting 79 years ago;-)

  24. Steuart Bowling Says:

    My apologies to Mr. Barnes if he felt my previous post was directed specifically at him. My intention was to use extreme stereotypes and contrasting images to highlight my point. I didn’t mean it to be taken personally–even when I was ribbing Frank about his tax idea. I tend to use sarcasm to underscore a point. While I did push ideas taken from many of the prior posts to the extreme, I never intended to mischaracterize you or criticize you personally.

    What bothers me the most and led to my response was the glee people have expressed over the situation and the scramble to come up with the most punitive short-sighted solution to drive home the “Ah ha! I told you so” mind set. Why all this happiness over the thought that people will suffer? Yes, poverty does force greater individual efficiency, but driving people into poverty in the name of improving the nation sounds like something Pol Pot would have thought up. If anyone out there aspires to achieve personal suffering and poverty, contact me—I can help!

    Raising taxes doesn’t take one dime away from Chavez, OPEC or any of the world’s oil despots either. For every gallon you refuse to buy hundreds of Chinese will line up eager to pay with no strings attached. China doesn’t tax gasoline at all and doesn’t link access to global resources to the behavior of the supplier governments.

    Sure, the USA uses 25% of the world’s resources while having only a small fraction of the population, but stop and think of what we DO with it-we’re not just flushing it down the government mandated low-flow toilet! Each 1% of world energy consumption used by the US produces roughly 1% of world GDP.

    No other major economy matches that level of efficiency. Japan comes in at about .8% GDP per 1% of energy use and China is around .6%. Every gallon of fuel denied the US economy will be burned by another country in a far less efficient and far more polluting way. Yes, we can be more efficient, but we’re already leading the world and trending in the right direction, so again I ask why do so many people want to reverse course? The problem is not the just US consumption of oil—it’s the world’s consumption of oil and the inability to process it quickly enough to meet demand.

    Damaging our economy with reactionary short-sighted ideas will only exacerbate the problems we seek to fix. What is needed is a cheap fuel that can be produced and distributed in a manner that eliminates cartel-style control and can be consumed in a manner that minimizes environmental harm. I still believe the Thermal Conversion Process, properly implemented, will provide these benefits and is the best short-term solution until better technology can be developed.

  25. DandyDon Says:

    This is a great discussion. However, both sides are right–as a Rabbi once said to both the antagonist and the protagonist on a religious issue. But, Rabbi, a third party quickly complained, “They can’t both be right.” The Rabbi thought very long and hard and then said, “You are also right.” The continuing discussion is more important…than the outcome. People change, governments change, tyrants change, the wealth of a nation will change, and our opinions will change. Change is the only constant.

    Basically this is a debate of whether Government policy (taxation) or the “invisible hand” or free market is best to solve the problems and the changes we face. Problems and changes that include evil regimes in the world, a deteriorating environment, the rising cost of living, a changing life style, and not the least of which is a rise in oil and gas prices.

    I am not a wise man, and therefore, I defer to those who many believe to be–our Founding Fathers and an economist named Adam Smith, who wrote “The Wealth of Nations”. Jefferson, Madison, and Franklin worked on a document that established the principles upon which free men were to be governed. They were ever mindful, of the tyranny of Kings, tyrants, and taxation. The power to tax is the power to enslave men. So, they started this unique experiment in government with the Constitution. Men in government, are sometimes good and sometimes evil. But, it is evil you have to guard against. So, they established an elaborate system of checks and balances.
    In their minds, governments that govern least; govern best.
    Government has a role but a limited one.

    The question is will government by arbitrarily setting a higher price for oil through taxation be good or evil. Both will occur. But, it will also have unintended consequences. A transfer of wealth and income will occur. Consumption and exploration will go down; cost of living for the middle class and the poor will skyrocket in the short term until adjustments are made by all parties. This restructuring of wealth and income will be an inefficient process because government will increase. For example, who will ensure that this added revenue goes into alternative energy? More bureaucrats will be hired to coordinate, control and keep records. These costs have zero value added benefits and consume a part of the taxes. Thus, it is an inefficient process.

    Adam Smith believes, as do I, that a free market process is the most efficient method to allocate supply and demand. As it stands nows, a free market does not exist. Oil companies are subsidized with tax breaks and many other benefits. Oil is taxed differently among states and among nations as are consumers. It is the most efficient way to determine price of oil as a greedy buyer, who wants a low price and a greedy seller, who wants a high price will compromise in a trade unfettered by government edict. In the seventies, the US controlled the price of gasoline due, in part, to the Arab Oil Embargo of 1974. The price of gas was frozen at the price of gas existing on 15 May 1974. It was increased with incremental Oil Company costs validated by the Energy Department. The incremental costs were manipulated by the Oil Companies by trading back and forth to each other with incremental costs added on every trade. But, the oil never moved. It was simply a scam to up the paper costs of oil. Thus, in time, they could charge whatever price the consumer would bear. On the DOE’s side, during the winter of 74, oil was diverted from Florida to the Northern states for heating fuel for humanitarian concerns. Sounds humane and smart, right? But, to the chagrin of motorists and DOE bureaucrats, Northeners headed south to Florida to avoid the cold in record numbers. They were met with long lines and fuel shortages because the government diverted the supplies to the North. This is a typical example of why central planning is inefficient and does not work. There are many more examples in our Nations history.

    Government that governs least; governs best.

  26. Craig Goodrich Says:

    Going through my old email, I found a very nice note from Frank thanking me for my comment even though he disagreed with me.

    I appreciate the note and the courtesy, Frank, but the only addition I’d make to my entry above — other than a lengthy and boring explanation of why the “global warming” business is totally fraudulent — is to say that not only am I with Mac, I’m also completely with Stu. But I know nothing at all about ancient coins, even though my old man was a classicist/archaeologist; my archaeology is confined to revivifying classic stereo equipment of the 1970s.

    Best wishes.

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