What The Government Might Do If We Don’t Curb Demand On Our Own
May 17th, 2007 | by Brian Carr |After May 15th’s failed gasoline boycott, hopefully we have all come to the realization that the only way we will ever be able to effectively reduce gasoline prices in the United States is by reducing demands.
(As a side note, it shouldn’t have taken a failed boycott for you to realize this, but that’s an economics lesson that I’ll save for another day.)
Unfortunately, since it seems that many of us don’t want to listen to or enact simple ways to reduce our demand for gasoline - i.e. not driving, using public mass transportation, driving more fuel efficient vehicles, being better drivers - it appears that more drastic measures will be required in the future to force us to limit the amount of gas and oil that we consume.
Here are some ways in which the Federal Government could step in and curb our demand for gasoline:
- Increase the minimum driving age to 18 or 21. In most states, the minimum driving age is either 16 or 17, so raising the age people would be eligible to get their license would probably slightly decrease the number of vehicles on the road. Less cars on the road would probably mean less demand for gasoline. And if the Federal Government has the power to set a drinking age (technically it is left up to each individual state, however the Federal Government has threatened to withhold funds from states that try to drop the drinking age), I would assume that they would also have the power to set the driving age.
- Tax penalties for owing fuel inefficient vehicles. Part of the reason why there are too many large trucks and SUVs on the road today is because of the tax loophole the Federal Government set up in the late 1990s and early 2000s where some people were actually able to purchase an SUV and write it off as a tax deduction. In order to correct this mistake, the Federal Government could just as easily make it tax prohibitive to own these gas guzzlers, as I’m sure a hefty tax penalty would be more than enough incentive to move to something a little more practical.
- Increased gasoline taxes. Most of the reason why European nations pay so much for gasoline is because they pay incredibly high sales tax for their fuel, not because of lack of supply or higher refining costs. Increasing these taxes in the U.S. would not only be a great way to increase tax revenues for Federal, state and local governments, but it would also be a surefire way to quickly decrease demand.
- Slow economic growth. Much of the reason why demand for gasoline hasn’t fallen in the face of rising prices is because, for the most part, we can still afford to pay. However, if the economy were to slow down and money became tight, chances are we would buy less gasoline. All that would need to happen is the Federal Reserve raising interest rates by a couple of percent, and our economy would likely come to a grinding halt.
- Rationing. This is something that we saw back in the two energy crises during the 1970s - people were limited to buying fuel on certain days of the week and could only purchase a certain amount each time. Amazingly, people learned how to survive on a limited fuel supply, and I have a hunch that this will be one of the first things that the Federal Government revisits if they ever decide to step in.
Don’t get me wrong, I’m not saying that I’m particularly for any of the items I’ve mentioned above; all I’m saying is these are things that the Federal Government has at their disposal to force our demand for gasoline and oil to drop.
But, whether we like it or not, if we don’t reduce the demand for gasoline on our own, we may ultimately force the government’s hand.
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17 Responses to “What The Government Might Do If We Don’t Curb Demand On Our Own”
By Brian on May 17, 2007 | Reply
Great read and idea’s I completely agree with. However, many of them are political suicide. In Maryland, an increase in gasoline tax has been tossed around in the recent months and people are too busy complaining about it to really see the benifits the tax would have. As a side note , it has been shown that the group hurt the most by a gas tax increase is the more affluent who is driving around in their large gas-guzzler.
By Brian Carr on May 17, 2007 | Reply
Brian, I agree with you that most of these ideas are political suicide, but at the same time, the solution to this problem isn’t going to be a quick or easy one. However, considering the budget deficit that we’re currently running, not to mention the potential social security crisis - having a standard federal tax on all gasoline sold would be a great way to increase tax revenue.
By Anonymous on May 17, 2007 | Reply
I would think the easiest one would be to just hike the CAFE standards up.
Also, #1 could have some problems, especially at 21. It would be hard for many collage students and young workers to function in today’s world.
By Denis on May 18, 2007 | Reply
Although I agree with all your points, raising the driving at this time would cause a great deal of problems for many individuals and might not be as environmentally friendly as it would seem, think about the increase in round trips parents will be making to drop off and then pick up their child. Therefore, I think that increasing the availability of public transportation along with better city planning will have more benefits.
By Dude on May 21, 2007 | Reply
Increasing taxes on gas could also have an adverse effect on prices. Oil companies probably won’t eat the losses from the taxes, and the demand won’t go down very much (if at all) since gas is such a necessity for America. It seems like finding a widely-used alternative fuel source or simple increasing the amount of fuel efficient cars would most likely have more of an effect on lowering prices.
By Oigen on May 21, 2007 | Reply
It appears that you and your readers have little idea what the affect of supply has on prices, or you believe higher prices are good. If the price is too high for your comfort on oil, or any other product, work to increase supply!! Adding cost to a product through government taxation, or legilslative interference, won’t solve the problem of high prices.
The oil companies estimate there is 100+ years of oil known about now: oil is not in shortage. Common sense and accurate info is.
GEB
By Brian Carr on May 21, 2007 | Reply
I can’t speak for the others who have left comments, but I’m well aware of supply and demand economics and how it will affect prices. In fact, if you go back and re-read the article, I think you’ll see that the point of it was to show that the only way prices will ever drop is if our demand drops (thus causing an inverse reaction for supply).
Granted, as increase in taxes is pretty much a catch 22; our prices will go up, demand will then drop, but because prices have jumped $1 or $2 per gallon, we’ll still be paying more than we are now.
By rnk on May 22, 2007 | Reply
Thanks Oigen!!! Some of the people that left posts along with the article writer speak as if they understand supply and demand, as well as try to justify the current high prices. Truth is the oil companies are doing this because they can. They know that people rely on their transportation to live. Not all of us are lucky enough to be able to take public transportation and/ or be close enough to walk or ride to work. Public transportation is great if you work downtown, but for those who work in the burbs you are SOL. I know that I am not the only one who is in this situation. The solutions listed in the article would cripple my family and continue to squeeze the already tight budget that we live on. I know that we are not alone.
If you want to continue to believe the BS about higher production costs and short supply, go ahead! All I have to say is… If production costs are so high and the short supply is causing this then why for fiscal year end 2006 profit and sales results did the 5 major oil companies report the highest profit dollars individually compared to any other company in the world? Exxon led the group with 39 billion in profits. They also held the 5 of the top 10 spots for total sales compared to any other company in the world, most of which were in the top 5. Once again Exxon lead with over 300 billion in sales. This marks 2 years in a roll that the oil companies reported this kind of record profits and sales. WOW that is right around the time that prices started to soar. But how could that be? It must be supply and demand. Sorry that is just not true. If it were then how could the price per barrel be only $66 per barrel vs. the $75 dollars per barrel a year ago but in Chicago we are at an average of 3.59 per gallon vs. only 2.99 per gallon on year ago. Yep sounds like big oil is honest to me. They are doing it because they can and as long as the rich keep getting richer it will not let up anytime soon!!!
source forbes.com
chicagogasprices.com
By Paul on May 23, 2007 | Reply
Idiots. You are a bunch of idiots. The reason demand has not gone down is simply because we have become dependent on gas.
I for one, cannot change my driving habits. Most people are in the same boat.
Yes, we can make small changes to our driving (such as combining trips), but the bulk of the gas we use is for WORK. We go to work, and those who can use public transportation, already ARE.
The rest of use spend less money on other things in life, such as entertainment.
But guess what? When we spend less money on the things in life that bring us happiness, it does not save the planet, or reduce our dependence on foreign oil, it simply hurts the economy.
Government has already shown us the stick, now it’s time to show us the carrot. Give BIG tax breaks on the purchase of a car with better than 40mpg.
Push car companies (not just toyota) to make hybrids- real hybrids, not the garbage that GM is proposing. (to qualify as a real hybrid for the purpose of tax breaks, set the mpg threshold at 40mpg or better).
Encourage the US consumer with a $5k tax break for one of these cars, and watch the change. But don’t limit it to hybrids. Include diesel and anything else that can make the numbers.
Geesh, people, this is not brain surgery… You would think people in power would have figured this out by now.
Idiots.
By Annoyed Texan on May 23, 2007 | Reply
Raising taxes on inefficient vehicles is asinine. While I agree soccer moms driving Land Rovers is stupid, raising taxes on “gas guzzlers” would only raise the prices of every single consumer good in the U.S. You can’t haul hay to the farm with a Yugo. You can’t haul head to market with a hybrid. You can’t stock shelves without semis. Leave the farm and commercial vehicles alone, and tax the vehicles for consumer use, instead of hurting everybody, including yourself.
By Kevyn Miller on May 25, 2007 | Reply
If you can’t reduce the distance you have to travel then change the type of engine you use. Modern diesels are almost as smooth and quiet as their petrol cousins but a damn site more fuel efficient.
Oh, and the Le Mans 24 Hour sports car race was won by a diesel. Twenty years ago Audi would have been laughed out of town if they had even suggested using a diesel engine in a race car.
By Sarin on May 25, 2007 | Reply
My god shoot the guy who wrote this.
We already pay 60% pluss in taxes!!!!!!!
And why should i suffer because i have a truck?
And also, I can’t afford gas at all, and i have a good paying job.
The only reason i can still drive is my company pays for my gas.
By rnk on May 25, 2007 | Reply
Here Here Sarin! Why do we keep talking about taxing the already over-paying consumer? The real evil is big oil!! We are not the one reporting record profits. I just don’t understand how people feel it is ok that the oil companies claim that there is short supply so they jack up the prices and rake in record profit and sales numbers, during all of this oil per barrel is almost $10 cheaper than it was a year ago. While all we do is talk about how we can further tax and cause greater expense to ourselves!?! What are you all on because it must be powerfull!!
By wigs on May 27, 2007 | Reply
Spoken like a true wealthy republican!! Believe me, those who can afford to pay these increased taxes are the only ones in favor for it. The majority of suburbanite soccer moms dont care if taxes are imposed for SUV owners because their husbands have been at work all day figuring out how to squeeze more money out of the middle class worker. If any taxes are to be levied let it fall on the supplier….not the consumer. After all, after reporting record highs in profits, should only be a drop in the bucket for them.
By rnk on May 28, 2007 | Reply
go wigs go!!
By Bubbahlo on Jul 13, 2007 | Reply
If we increase the circumference of the wheels would that not get better gas miliage ?
By dvalair on Nov 7, 2007 | Reply
if the american automakers would look more into the future instead of the now,,,,,,well they would have been doing like toyota and a ew other foreign car makers,,,,instead they keep making these gas hogs and look at gm today lost 35 billion 3rd quarter…….if i was the ceo of ford,gm,or chrystler,,,,,i would have put all moneys into what we have all seen comung for along time,,,,,major fuel crisis,,,,and trust me folks,,,,,we aint seen nothing yet…..
bring the jobs back to the us and put china in there place before its to late,,,,if its not already???