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America Is Unusually Vulnerable To Oil Price Shocks Because Of Our Scandalously Low Gas Tax

By Matthew Yglesias  

"America Is Unusually Vulnerable To Oil Price Shocks Because Of Our Scandalously Low Gas Tax"

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Very reputable public opinion analysts tell me the voting public is absolutely obsessed with the high price of gasoline and thus that any suggestion of the (accurate) information that gasoline is far too cheap in the United States will lead you to be torn limb from limb. Nevertheless, as the BBC’s handy chart here shows, gas is extremely cheap in this country thanks to our inadequate taxation of it:

If we had higher gasoline taxes in this country offset by, say, lower retail sales taxes then on average people would have the same amount of money in their pockets. But we’d have somewhat less driving, and the driving would be done in somewhat lighter, more fuel efficient vehicles. The result is that the overall economy would be much less vulnerable to sudden shocks in the price of oil.

If you think about, say, the Netherlands they clearly have no ability to significantly influence geopolitical events in the Middle East or the extent of Chinese economic growth. Thus, it’s very smart of them to have tax policy that’s designed to leave them less vulnerable to these kind of events outside of their control. But if you look at the USA, it turns out that for all our military might we can’t control these things either. But thanks to our bad public policy, we’re extremely vulnerable to these shocks and thus have to observe the spectacle of politicians blaming each other for high gas prices even though they have very little ability to impact this on the short-term and cheap gasoline is undesirable in the long-term.

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