Friday, May 12, 2006

Economist On Gas Taxes

According to Autopia, economist said that freezing and or reversing gas taxes would drive the cost of crude up. His resson being that he said cheaper gas will make people drive more. I have to disagree with him. I drive no less now with almost $3 gas as I did back when gas was $1. I'm sure that some people will drive a little more but not enough to cause a spike in crude demand. He said that the only thing that will help now is the letting up by government on the special summer blends of gas.

I called James Hamilton, professor of economics at the University of California, San Diego for his thoughts. Eliminating the gas tax is exactly what we shouldn't do, Hamilton says.

Why? Because the refineries and oil pumps are have limited resources that cannot be increased to meet demand. "We aren't going to be making any more gasoline," he says. Hamilton says if the gas tax were cut, consumers would consume more, and the demand would raise the price of crude oil even higher and further deplete the dwindling resource. Any temporary relief for consumers would start to erode.

Hamilton says no to any kind of rebate or cash-back plan. The only thing the government could do to help is to temporarily suspend the gas formulation rules so that less crude oil would be needed. Gas sold in some areas are during the summer have to specially formulated to reduce their emissions, and the scarcity of this special fuel is one of the factors driving up the cost now. If we use winter gas everywhere, less fuel is needed. Pennsylvania governor Ed Rendell has asked the federal government for this type of waiver on special fuel for his state for this summer.

However, this will increase the emissions during the summer when people tend to drive more. which won't be good for people in smoggy urban areas.

I suggested raising the federal gas tax would be a good idea to discourage consumption, and if there were to be any "relief" granted to consumers over gas prices, I proposed simultaneously creating a tax credit for work travel.
BTW the writer suggested increasing taxes and creating new taxes to discourage driving.

posted by David at 11:15 AM :: Permalink ::

Comments on "Economist On Gas Taxes"


Anonymous Anonymous said ... (15 March, 2007 20:27) : 

Cool blog, interesting information... Keep it UP »


post a comment