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.)