Obama is right: Higher gasoline taxes to boost efficiency would be “a mistake”

I couldn’t agree more with PEBO on Meet the Press Sunday: New gasoline taxes aren’t the way to boost the energy efficiency.

Remember, European gas taxes have long been more than $2 a gallon higher than ours, and as of 2002, the average fuel economy of European Union vehicles was 37 miles per gallon, which is just a tad more than what the 2007 Energy Bill requires of new U.S. cars in 2020 (see “Why a carbon cap won’t solve our oil addiction“).

Of course, it would be politically impossible to raise gas taxes even $1 in this deep recession, even if you promised to give all the money back to taxpayers. A smart politician will instead focus his or her efforts on jumpstarting the transition to high fuel economy and plug in hybrids, while leaving higher gasoline prices to the inevitability of peak oil (see “Science/IEA: World oil crunch looming? Not if we can find six Saudi Arabias!“).

Obama’s answer to Tom Brokaw’s question is here:

MR. BROKAW: Let’s talk for a moment about consumer responsibility when it comes to the auto industry. As soon as gas prices began to drop, consumers moved back to the larger cars once again, to SUVs and the big gas consumers.


MR. BROKAW: Why not take this opportunity to put a tax on gasoline, bump it back up to $4 a gallon where people were prepared to pay for that, and use that revenue for alternative energy and as a signal to the consumers those days are gone.


MR. BROKAW: We’re not going to have gasoline that you can just fill up your tank for 20 bucks anymore.

PRES.-ELECT OBAMA: Well, keep, keep in mind what’s happening in–to families all across America. Yes, gas prices have gone down. But, in the meantime, maybe somebody in the family’s lost their job. In the meantime, their housing values have plummeted. In the meantime, maybe their hours have been cut back. Or if they’re a small-business owner, their sales have gone down 50, 60, 70 percent. So putting additional burdens on American families right now, I think, is a mistake. What we have to do long term is make sure that we have an energy strategy that focuses on fuel-efficient cars, that focuses on providing incentives for fuel-efficient cars. Same applies to buildings. We have a enormously inefficient building stock, and we can save huge amounts of energy costs and reduce our dependence on foreign oil by simple things like weatherization and changing the lighting in, in major buildings. That’s going to be part of our economic recovery plan. It actually allows us to spend some money, put some people to work right away, but it also creates a long-term, sustainable energy future. And I think making some of those investments in ensuring that we change our auto fleet over the next several years, that’s going to be important as well.

Yes, I know that many Climate Progress readers think a higher gas tax would be a good idea. Readers know I am not against proposing things that are politically impossible today — like, say, stabilizing at 450 ppm.

It is, however, one thing to tilt at advanced wind mills. It is another to squander huge amounts of political capital pursuing policies that won’t pass through Congress and that would make exceedingly little difference even if they did.

If Obama is going to pursue politically difficult policies, at least they should be ones that have very high impact. And again, peak oil is probably going to drive a gasoline prices back above $4 during Obama’s first term — unless this recession morphs into a genuine depression.

The only thing they can stave off peak oil is massive demand destruction. Only two things cause massive demand destruction:

  1. A severe global economic downturn
  2. A major global transition toward using oil more efficiently and replacing it with electricity (see “Why electricity is the only alternative fuel that can lead to energy independence“)

Assuming Obama can get us out of the first, the second is simply going to take too long to avoid $200 oil. But in any case, Obama will need all of the political capital he can to jumpstart that transition.

So I think his answer to Brokaw was spot on.

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21 Responses to Obama is right: Higher gasoline taxes to boost efficiency would be “a mistake”

  1. paulm says:

    Thats why he’s president elect now.

  2. Carol says:

    The private sector has shown little foresight to invest in efficiency while oil prices are low, so what’s to stop them from repeating these same mistakes now? Setting a price floor on oil would help the private sector by guaranteeing long-term returns on energy efficiency and facilitating the business case for energy efficiency. How can the private sector make a case for energy efficiency when the assumption on the price of oil is so variable?

  3. Rick C says:


    If taxes are not the answer then how do you overcome the problem of Jevon’s Paradox, which is, the more efficiently you use energy the more energy you will use because the operating cost is cheaper?

    What will counter this effect?

    [JR: 1) The effect doesn’t exist. 2) Peak oil.]

  4. charlie says:

    actually, this is exactly the time to raise the federal gas tax to $1. At $2.50, gas would still look cheap. It would make sure when the price swings back, demand destruction would increase at an earlier point. Euro gas taxes are only part of the equation on why Euro cars are smaller: parking, regulation (forcing used cars off the road), sales tax, and other things are all factors.

    If you think CAFE is the answer, here is chance to lock in some savings. Politically risky? Hell, yes. The right thing to do — probably.

    We are going to have to increase taxes to pay for all this stuff, and we might as well start with a gas tax.

  5. Bob Wallace says:

    This is the wrong time to raise the federal gas tax to $1. We could have gotten away with setting a “floor” price of $2.50 or so when gas was over $4. People would have accepted that.

    But now people are very worried about how they’re going to get through the recession and increasing gas tax would cause a lot of political damage. And don’t forget, gas taxes are regressive. They impact people at the bottom of the economic ladder more than those from the middle and up.

    Personally I’m for drastically increasing income tax for those making over $200,000 a year. Give “one shot wonders” such as entertainers and sports figures back the ability to average over years, but make the “$10 million bonus boys” squeal like the pigs they are.

    As for increasing overall gas mileage, why not a tax credit for cars that get better mileage? Make it so advantageous to buy efficient cars that manufactures would see the market swing strongly to that side.

    Why not governmental support for technologies that can make our cars lighter while maintaining safety standards? Weight and aerodynamics are the issues involved in gas mileage. (Time for plastic cars and surrounding air bags? Get the metal out….)

    How about limited time purchasing help for battery packs? (I’m assuming prices would come down with economy of scale and some financial help would get things to scale up quicker.)

    If you want to raise money via fuel consumption it’s probably more likely to happen if you tax oil in the barrel. That’s less obvious to the guy standing at the pump.

  6. scruss says:

    Joe, I’m hoping there’s a typo here. In the first paragraph, you’re effectively saying that high gas taxes didn’t bring about Europe’s 37mpg average in 2002 – something that the US *might* reach in 2020. From where I’m sitting, looks like the gas tax works wonders.

  7. David B. Benson says:

    I want enough of a fossil carbon tas to raise about $30 per tonne of carbon dioxide. That looks to be eough to remove about 150% of the emitted CO2.

    SInce I want the climate of the Holocene back.

  8. Alan Heyduk says:

    I have to agree with scruss’ comment above. The data that you present makes it look like the European’s are about 20 years ahead of us on fuel efficiency. Of course the other side to the tax argument is the benefits of the added tax revenue. I would strongly favor an added $1/gal tax on gasoline if the tax revenue was set aside for alternative energy research and development. On the other hand I would not favor it if the tax revenue was used to give ExxonMobil another tax break…

  9. David B. Benson says:

    So about $0.30 per gallon of gasoline appears to be enough.

  10. Joe says:


    What I thought I was communicating is that even if it were politically possible to increase U.S. gasoline taxes by more than $2 a gallon, it wouldn’t accomplish more than what the 2007 Energy Bill already requires. And it certainly wouldn’t happen any faster since 1) if such attacks were possible, it would certainly be phased in and 2) vehicle turnover rates just aren’t fast enough.

    The issue is actually more complicated than that because the Europeans used subsidies to push people into diesels, which is where they got a lot of their mileage gain. The Europeans have now embraced emissions/fuel economy standards to get higher gains. Price simply has a limit to what it can do.

    Since we probably need 100 mpg plug ins to meet climate target, the possibility that a politically plausible gas tax could get us even a fraction of the way there is tiny.

  11. Joe says:

    David: Huh?

    I don’t know where you got your numbers, but IEA says 450 pppm requires $190/ton of CO2 by 2030, and everything I’ve seen elsewhere supports that analysis.

  12. llewelly says:

    Personally I’m for drastically increasing income tax for those making over $200,000 a year.

    Hm. What was the US economy like back when the tax brackets ran up to 90%?
    That’s right. It was the strongest it has ever been.
    Contrary to the popular mythology of the liebertarians the record of history implies that harshly taxing the rich is correlated with a strong economy.

  13. David B. Benson says:

    Joe Romm — Ex situ enhanced weathering of olivine will permanently remove one tonne of carbon dioxide for every (about) one and one-half tonnes of olivine mined, crushed and ground to rock flour, then baked with air and water in an autoclave into limestone and other stuff. The resulting powder would make a fine soil amendent, by the way.

    Somewhat to my amazment, this looks to cost only about $20 per tonne of CO2 permanently removed. This means doing everything right at the olivine formation; there is a more than ample supply of formations in India, Brazil, Papua New Guinea, New Caledonia (off the top of my head; this does not end the list). Either peridotite or dunite will do, but so will aptite in mine tailings:

    I don’t know what IEA is talking about, but I suspect they are estimating the cost to cause fossil fuel users to switch to using something else. If you provide the link, I’ll attempt to check.

  14. Bob Wallace says:

    I didn’t say raising taxes that high was logical. I’m just mad at people who get paid millions and millions of dollars a year. ;o)

    (I also don’t believe that correlation proves causation.)

    We would, I believe, benefit from some ‘wealth leveling’. People should be able to do well by doing a good job. But it sure seems to me like things have gotten out of hand.

    A $20,000,000 annual bonus when your company has had a loosing year? On top of a multi-million dollar salary?

    And the people 2-3 grade levels below you are making less than $100,000?

    And just a few more steps down people who are working hard are barely able to earn a living?

    Something just isn’t working as it should….

  15. KLA says:

    Re: fuel taxes.
    There was some discussion earlier about europeans enjoying higher average fuel economy than the US.
    That is true. Actually many of these efficient european cars are made by the subsidiaries of GM and Ford in Europe.
    It would be easy to import them, or build them here, but it isn’t done.

    Nobody in this discussion has asked why.

    The higher efficiency of european vehicles is simply due to the fact that europe’s car fleet has a high diesel percentage. But the cost of the higher efficiency is higher pollution in NOx, particles and so on.
    Europe’s pollution laws are less strict than those of the US. Especially those in CA and those states that follow CARB regulations.
    Although progress is made to make cars more fuel efficient worldwide, to the tune of about 1% per year for the last 20 years, these gains are continuously offset by stricter emission and safety requirements, which add weight and therefore fuel consumption. Especially in the US.

    The laws of physics simply can’t be legislated out of existence.
    I am very familiar with the european situation, the fuel taxes there were NOT put in place to increase mileage. They are simply there to increase revenue for the government. In fact, there are now laws in progress in several european countries, to tax the efficient diesel cars MORE than the less efficient gasoline cars via registration tax, as even higher taxes on diesel would not fly politically. The (more or less admitted) reason is to offset the loss in fuel-tax revenue by those more efficient cars.

  16. Ronald says:

    Tastes great, less filling, tastes great, less filling. what you get is a great marketing slogan and sell a lot of beer.

    But what it gets you is the synergy of the to. The sum is greater than the parts.

    Why do I put on my seat belts. partly that bell that goes off if I don’t have them on. Partly because I know that I’m at risk of getting pulled over by any of the police officiers around and I sure don’t need that. Partly because of the pictures of the people who didn’t have their seat belts on when they should of had them on. Partly because of the 5 year old will remind me every time.

    It adds up. Can it be done without the increase in the price of fuel, sure. But it will be harder. other programs to decrease gasoline fuel use will be less effective.

    If we were to have a 2.60 dollar gasoline tax on, we could eliminate all property taxes in the United States. (142 billion gallons, 2007: Property taxes 2.6 percent of GNP, 2002: 14 trillion dollar GNP)

    Or this. The United States uses more fuel for transportation than europe, japan, china and India combined.

  17. Michael says:

    The very first point of your analysis is ridiculous. You equate the average fuel economy of Europe in 2002 with America’s 2020 ‘goal,’ which is only a goal, not a reality.
    In 2002 there were not hybrids like there are today, there was no oil crisis like there is today, fuel-efficiency was simply not nearly as big a deal as it is now and will be in the coming years. To dismiss Europe’s 2002 average as “just a tad more” than America’s will supposedly be in 2020 just makes no sense. Europe achieved this solely through the gas tax. If you want to raise American fuel-efficiency, the gas tax is the way to do it quickly, rather than a far-off goal for 2020.

    [JR: You should not call other people’s analysis ridiculous, when yours is amount at least as detailed. In fact, Europe has had high gas taxes for a quarter century, so their strategy isn’t faster. More to the point, Europe did not achieve this solely through the gas tax, unless you are including a significant relative fuel subsidy for diesel (along with a much weaker set of air pollution standards than the U.S.). It was the transition to diesel as much as anything else that boosted Europe’s fuel efficiency.

    It is ridiculous to say a gas tax would be any faster. But then again, it is ridiculous to say that America would embrace gas taxes anywhere near as high as Europe has now. And Europe is still turning to fuel economy standards to lower greenhouse gas emissions.]

  18. kiwichick says:

    Why not increase the petrol tax incrementally?

    I understand the tax is 18 cents/ gallon? The tax in Australia is approx. 55 cents/litre ie approx. $2/gallon but we still drive long distances ( eg 1.5 hours @ average 90 kms/hour to go the nearest city)

    How about increasing the tax to 30 cents/gallon to start with and then increasing by 10 cents every 3 months, with the goal of $2/gallon while at the same time
    a) making public transport say 10% tax deductible and
    b) making sports equipment(jogging shoes, clothes. bikes,gym fees and sports clubs fees ) 50 % tax deductible

  19. kiwichick says:

    Unless the price of petrol is underpinned by a much higher tax Detroit will die as it falls further behind Asian countries

  20. Brian says:

    Another example of Obama’s unwillingness to do anything that’s unpopular. The wrong question was asked. The right question is, “why don’t we raise gasoline taxes and lower income taxes?”

  21. BOB says:

    The only reason there is low supply of gasoline in this country is, the BIG FAT OIL COMPANIES, are refining less oil on purpose to keep prices artificially high. It has nothing to do with the price of oil, and operational cost are the same no matter what. Yes they always increase prices before a holiday, but gasoline has increased $.70 per gallon in one month. No one is driving much any more even during the holidays. traffic is down 50% where i live. I believe the BIG FAT OIL COMPAnIES, not the sellers of oil, but the refiners of oil into gas are the real problem, plus idiot gas-stock speculators trying to speculate $3.00-$4.00,and even $5.00 per gal gas prices by end of summer. They, and the ones who agree or support high gas prices are destroying the entire USA economy, because our entire
    USA life style is based on gasoline prices. Transportation of ourselves, food,and all goods, and places in our country that depend on people being able to travel, by car bus train,,etc, depend on the price of a gallon of gas. The thing that bothers me the most is that our represensitives,and our “change is coming” president is saying or doing NOTHING!!, about the price of a gallon of gas.DON’T TELL THE ME THEY CAN’T BECAUSE THE CAN!! I HOPE by winter people in this country will have cut back so far on travel,that gas prices will have to fall, and this time the BIG FAT OIL COMPANIES WILL THE BE THE ONES wanting A BAIL-OUT!! Give me the $.18 sales tax, but stop these extremes in gas prices, or our econmy will go down the drain for good.