The Do-Nothing Energy Tax: $3 Gasoline Dead Ahead

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"The Do-Nothing Energy Tax: $3 Gasoline Dead Ahead"

1gas-prices-arm-leg-bothAs long as we keep taking no serious action on climate and clean energy, there’s nothing to stop the energy bills of Americans from rising.  Daniel J. Weiss, CAP’s Director of Climate Strategy, explains what’s in store this summer.

The mounds of snow blackened by auto exhaust have barely melted in Washington, D.C, yet the Energy Information Administration’s Short Term Energy Outlook already predicts that:

Average U.S. pump prices likely will exceed $3 per gallon at times during the forthcoming spring and summer driving season.

EIA projects gasoline consumption will begin to show modest, but consistent, increases over the previous year, growing by 60,000 bbl/d in 2010 and 70,000 bbl/d in 2011.

This is a price increase of 17 percent compared to summer 2009, along with a consumption increase of six-tenths of a percent.  It means that American drivers will spend an additional $174 million per day on gasoline this summer compared to last year.  This could be as much as $16 billion more during the months of June, July and August.  Total daily spending on gasoline this summer could be more than $1 billion per day.

The higher gasoline prices reflect higher oil prices.

EIA expects WTI prices to average above $80 per barrel this spring, rising to an average of about $82 per barrel by the end of the year and to $85 per barrel by the end of 2011.

This will mark a rise in crude oil prices from a $39 per barrel in February 2009 to $82 by the end of 2010 – a 110 percent increase in two years.  Oil prices have already closed above $80 this week.

Higher gasoline prices are like a tax on consumers – they pay more for the same amount of product, with the additional funds enriching big oil companies and foreign oil suppliers.

[JR:  I would add that $3 gasoline will just be a pit stop on the path to $4 and $5 gas (see “Deutsche Bank: Oil to hit $175 a barrel by 2016” and World’s top energy economist warns peak oil threatens recovery, urges immediate action: “We have to leave oil before oil leaves us”).]

Since one of every four barrels of oil comes from nations that the State Department classifies as “dangerous or unstable,” more oil consumption and higher prices further enriches these states.  And a $1 increase in oil prices provides an additional $1 billion dollars to the Iranian government – even though the U.S. buys no oil from it.  This can only help Iran incite unrest and attacks in Iraq and elsewhere.

Short-Term Energy Outlook, March 2010:

2outlook

EIA also predicts an increase in U.S. coal consumption compared to 2009.

Anticipated increases in electricity demand and higher natural gas prices will contribute to modest growth in coal-fired generation in 2010 and 2011.  Forecast coal consumption in the electric power sector increases by about 3 percent in 2010, though staying under 1 billion short tons.  EIA projects coal consumption in the electric power sector will increase by 1.6 percent in 2011

And with more oil and coal consumption comes higher levels of carbon dioxide pollution after several years of decrease due to the 2007-2009 recession.

Projected improvements in the economy contribute to an expected 1.5-percent increase in CO2 emissions in 2010.  Increased use of coal in the electric power sector and continued economic growth, combined with the expansion of transportation-related petroleum consumption, lead to a 1.2-percent increase in CO2 emissions in 2011.  However, even with increases in 2010 and 2011, projected CO2 emissions in 2011 are lower than annual emissions from 1999 through 2008.

Carbon Dioxide Emissions Growth Chart:

3co2growth

Clearly, efforts to reduce oil dependence, coal burning, and global warming pollution cannot begin a moment too soon.  The bipartisan American Clean Energy and Security Act, passed by the House of Representatives last summer, would cut oil use by at least 600,000 barrels per day by 2020.  It’s the Senate’s turn to pass comprehensive bipartisan clean energy legislation that reduces oil dependence.   Senators who care about Americans’ pocket books, national security, and a healthy future must  join efforts by Senators John Kerry (D-MA), Lindsey Graham (R-SC), and Joe Lieberman (I-CT) to solve these problems.  We can’t afford to wait much longer.

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13 Responses to The Do-Nothing Energy Tax: $3 Gasoline Dead Ahead

  1. caerbannog says:

    Let’s try some global-warming denier logic here:

    Gasoline prices have been declining since June 2008!

  2. BillD says:

    The oil companies are going to be raising a stink if energy taxes are increased. For my part, I would much prefer to pay an energy tax, much of which goes to the government than higher gasoline prices based on higher oil prices, much of which goes to our friends in the Middle East and South America.

    Why isn’t energy efficiency considered patriotic?

  3. gingoro says:

    Suggest congress boost the fuel price to $4 a gallon by adding a dollar a gallon tax, to help pay for some of the ever increasing expenses and to force people to begin to conserve energy and cut down on CO2 emissions. Most of the rest of the world pays considerably more than residents of North America for fuel and therefore their CO2 emissions are less than ours.

  4. Chris Dudley says:

    Gasoline is ripe for rationing since we already have a congressionally approved rationing plan that can be invoked by the administration at any time. Our rationing plan includes a “White Market” where you can sell you rations if you don’t need them so shortages are completely avoided. Applied with enough vigor, gasoline rationing can drive down the price of gasoline so that the net effect is economic stimulus while controlling demand for carbon. It is probably the cheapest approach to economic stimulus available.

    http://www.osti.gov/energycitations/product.biblio.jsp?osti_id=6307185

  5. Doug Bostrom says:

    It’s been over $3 here for some time, at least in the neighborhoods I pass through. If I were prepared to waste gasoline by driving around looking for cheaper gasoline, I could perhaps buy a gallon for $2.90 or thereabouts.

    A nice system. Shock consumers with a price bounce to $4 plus, let ‘em think they’re getting a bargain when a gallon drops to $3. My prediction is, not far in the future we’ll see a spike to $5, then bargain gas at $4 until the -next- round of shareholder value bingo.

    Carbon tax or more fat in fewer wallets– the atmosphere does not care as long as folks drive fewer miles, that’s what Dr. Pangloss would say.

  6. malcreado says:

    Not again. . .just how many countries do we have to invade to get cheap gas?

  7. Shiden Nakajima says:

    It’s been well over $3 in Hawaii for a long, long time. Even got well into the $4 range during that last bubble, dropped into the $2 range for a few months at the start of ’09… but yeah. It’s been consistently over $3 for years.

    $3 dead ahead? $3 way back in the rearview mirror.

  8. J.A. Turner says:

    After the November elections, it might be possible to get a gradually-increasing gasoline tax, but not if the current partisan gridlock persists and not if the fiscally irresponsible anti-tax fervor keeps up. One possible way to get it past the ideologues would be for the proceeds of the tax to go to something that will appeal to the ultra-conservatives, maybe to fund the military or to be used to reduce the capital gains tax.

    It’s blazingly obvious that we’d all be better off if money going abroad for oil were kept in the domestic economy, but it’s not clear how to actually achieve it, given the special interests and ideological opposition to any policy solution that involves taxation or government spending.

  9. charlie says:

    Sigh. Such an easy argument to make. We will either get $4 oil — with half that money going overseas — at a market rate, or we can tax ourselves to get there.

    $4 oil is painful, but if we can use it to cut down the monthly amount deducted from our paychecks we have a chance. Also need to move trucks/buses over to CNG. With limited e85 as well use we could easily knock off 1-2 million b/d.

    China is now Saudi’s largest customer. India is right behind us. Gasoline is precious stuff.

  10. I was happy when gasoline was $4 a gallon and will be quite pleased when gasoline is $5 – $7 a gallon. Whatever it takes to get the SUVs off the road and impose some sort of restraint upon American hyperconsumerism and waste.

    I spent time watching a bald eagle nest today and there is at least one baby eagle in the nest. It was a wonderful thing, too, since while I spent so much time watching the nest I discovered that plenty of people in the neighborhood love their bald eagles — these nesting birds have spent the last 22 years on this nest — and they are also aware of how close the bald eagles went to extinction.

    I’m very much in favor of the bald eagles surviving and the automobile going extinct. I’m very much in favor of Nature surviving and technological civilization collapsing and ceasing to exist.

    Humankind’s long war against Nature must and will end.

    Until that day comes, thogh, I’m going to spend every single day immersed in Nature and in love with every living thing. The Earth is too beautiful a planet to neglect.

    I feel so sad for all those people who spend their time inside and fantasize about driving a large or expensive or fast vehicle. From a technological standpoint an automobile cannot compete with an eagle.

  11. Greg N says:

    Hmmm. Here in England petrol costs £1.15 per litre.

    That’s $6.50 per US gallon.

    My car gets 52 mpg (US gallons) though, which is probably twice as efficient as some of you achieve. Hence my cost per mile ends up close to yours.

    If the price of your gasoline doubles then make sure your next car gets double the efficiency to leave your motoring cost unchanged. Or drive half the distance. Or both!

  12. charlie says:

    Steve:

    There is lot left unsaid.

    1) Yes, the W-M doesn’t do much to lower gasoline consumption. That why it was popular. It didn’t tax consumers enough. A simple gas tax would do the trick.

    2) A tax on oil, rather than a tax on gasoline, would also do the trick nicely.

    3) I’ll all for off-shore drilling of natural gas — but the points about oil is that even with increased domestic production — which is not easy – we are funding Saudi Arabia and Iran.

    The real issue that need debating is HOW much of a tax. The UK example is a good one. People still drive — a lot — in the UK. Even with a $4 gas tax (or $8 gasoline) the average car gets about 9K miles a year.

    Increased CAFE requirements are not the answer either.

    Moving the US to UK levels of driving is doable. WIth an increased tax on gasoline comes an opportunity to lower taxes elsewhere.

  13. Jonathan says:

    Joe:

    We have already seen $3/gal gas several times. I worked as a car salesperson from September 2006 to September 2008. AutoNation’s CEO Mike Jackson was quoted at the time as saying that $3/gal had no impact but $4/gal gas did. That was exactly what I saw at the store that I was working at in spring 2008. I expect the same to be true for $3/gal gas this time. In this weaker economy $4/gal gas will probably also have the same more dramatic effect.

    I remember that there was a time, I believe April 2008, when the price of gas was going up every week and we finally reached the point where most people who walked in the store had the same first question: what do you sell that has 4 cylinders? I did not see it after gas peaked later that year. I was very surprised that so many people could/would not look as far ahead as the length of their financing at what the price of gas might be.