Mileage Requirements: The Wrong Way to Cut Gasoline Use?

August 25, 2008

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Political Death Warrant

Industry analyst Aaron Bragman, from Global Insight, thinks mileage requirements don’t work. “Trying to regulate consumer behavior from Washington only works through one way: taxation,” he says. “This is the path Europe followed—tax the hell out of gasoline, make diesel more affordable, and watch people flock to 1.0-liter hatchbacks. Change the supply of gasoline by making it much more expensive, and you’ll affect consumer behavior.”

But then Bragman drops the bomb. “Unfortunately, in America, you’ll also sign your political death warrant,” he says. “Any attempt to raise fuel taxes is viewed as something between treason and terrorism. It boggles my mind that politicians actively push for higher and higher CAFE standards for automakers, while at the same time (and sometimes in the same speech!) advocating measures to bring down fuel prices.”

This point was neatly brought home in a March 2007 meeting between the CEOs of GM, Ford, and Chrysler and US president George W. Bush. According to Business Week’s David Kiley, all three CEOs agreed that the best way to reduce consumption was a gasoline tax—offset by an income tax cut for low- and middle-income consumers. The president, says Kiley in an angry blog posting, “immediately dismissed it on political grounds.” The problem? It’s a new tax, and citizens wouldn’t understand the complexities of energy policy.

Fast-forward almost 18 months, and the public is way ahead of the automakers and the regulators. Consumers have responded to higher gas prices so quickly that automakers have been whipsawed. Toyota Prius supplies are measured not in days, but hours. Buyers who ordered a Ford Escape Hybrid last spring may get delivery before the end of the year—or not.

“High fuel prices,” says Bragman, “are doing in six months what 30 years of CAFE has failed to do: push people towards more fuel-efficient cars! And consumers are making the shift on their own, because (wonder of wonder) gas prices have driven them to make better, more responsible choices.”

Quite suddenly, the public now wants fuel-efficient cars—at least, this month it does. So perhaps the question after this fall’s elections will be: How can the current shift to more fuel-efficient cars be sustained, regardless of what happens to gasoline prices?

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  • Andy

    All too true. All these years of companies whining about how impossible it is to build more efficient vehicles evaporated in an instant when the price balance shifted. Now they are falling all over themselves to have efficient vehicles out yesterday. This has nothing to do with CAFE. The economy of this world is infinitely complex. There’s no practical way to microregulate efficiencies since they include carbon impact of construction, delivery shipping, parts shipping and construction, land impact of factories, employees health care, employees education and on and on. By having fuel price reflect the damage done at all steps along the way, all these zillions of pieces of the process will add in their ecological burden and the final price will steer us towards the least polluting choice.

    High fuel prices cause systematic improvements in technological efficiency.

    Anyone who wants to lower prices is going to damage the environment to do it. So don’t be fooled. You simply can’t have your cake and eat it too.

    Triple Pulitzer winner Thomas Friedman keeps revisiting this important topic from different angles.

    http://www.nytimes.com/2008/07/20/opinion/20friedman.html

    In a nutshell, he says oil is our crack cocaine. As an addict, our problem isn’t that the drug costs too much. It’s that it costs too little and we haven’t broken our addiction.

    Many green technologies aren’t advancing at full speed because financiers are at risk of oil prices dropping and undercutting their ventures. Far from wanting to cut gas prices, someone I read advocated legislation to *assure* prices never fall *below*, say, $4 a gallon so all these businesses can plan accordingly and move forward with confidence with new efficient products they know can compete.

  • Eric G

    To my mind the only reason to tax consumption is to pay for price externalities. The first without the second is just bloated government.

    As for Flint: pardon my cynicism, but he isn’t actually promoting taxes, but is using them to deflect support against CAFE. He is supporting an alternative that he thinks will never come to pass.
    I think his real motivation is that he realizes the new CAFE is the end of gas guzzling land yachts and muscle cars, and he bemoans the day. He gives himself away by first throwing out taxes as the best way to decrease consumption, but then says “Worse yet, if gasoline remains cheap, what they have to build may not be the vehicles consumers actually want to buy.”

    Logic like that, he could run GM.

  • johnny

    raising gasoline taxes to the same as europe but slowly over a ten to fifteen year period would help excessive consumption of gasoline and allow the automakers and consumers to adjust without adverse results. But realistically, I do not think our political leaders have the guts to do this.

  • chukcha

    Good grief… This is the worst possible suggestion I have ever heard. Taxes are never good. Simple supply and demand rules plus a mix of politics already did their job. Instead of raising taxes they should gradually outlaw gasoline as a transportation fuel! It’s poisonous for people, environment, and for foreign policy. We have electric motors and advanced batteries. We can quit gasoline forever. We don’t need it anymore. The infrastructure is already here! We have electric plugs everywhere. It’s that simple. If we fight for the removal of gasoline as a transportation fuel just imagine what kind of high tech cars we will be driving in 2020! That is the answer to this article. Outlawing of gasoline as a fuel will bring enormous benefits to public health and businesses too, because the auto manufacturers will have to produce a lot of electric cars! Diesel is still needed for trucks though, so we cannot get rid of diesel. I’m sure that by 2020 we will have better technology to get rid of diesel by 2030.

  • Tom

    I think we all agree less gasoline burned is better
    1) Less pollution
    2) Less Global Warming
    3) Less Dependence on others
    4) Less Cost to Consumers

    How do we get there?

    Mandate more fuel efficient cars
    Make Burning lots of gas less desirable ( cost/ taxes)
    Offer alternatives ( ecologically sound ethanol, mass transit electric vehicles, PHEV, Fuel Cell )

    I would think there is no one magic bullet for this complex problem and we will need

    Diesel is not mandatory for trucks, at least short haulers, I did not catch the entire segment but heard about a company getting SWAMPED with requests for electric trucks in LA

    Here is the link
    http://www.loe.org/shows/segments.htm?programID=08-P13-00034&segmentID=1

  • veek

    One disadvantage of a fuel tax, or assuming fuel prices will remain high, is the perception that they will come back down to a low level. A CAFE requirement does away with this problem, so would a requirement that utilities generate a certain proportion of electricity with renewables, and so would a government-decreed “floor” for fuel prices. Nevertheless, people will adjust to higher prices. As the article pointed out, it may be unrealistic to expect politicians to be honest and fair, and work out a tax without it being some kind of complicated income redistribution (and taxes are not always an unmixed blessing!). At a recent caucus meeting, we proposed a plank for our party’s platform that all government vehicles and all government-procured utilities come from renewable sources by 2014.

    Raising fuel taxes, say, by 50 cents one year at a time for several years into the future could allow people the luxury of planning rather than having unexpectedly high fuel costs rise as they have done recently.

    Well, no easy answer exists.

  • Armand

    I love it when they claim “Public Demand” caused congress to make changes.

    The public…is A) too stupid to realize what’s good for them…they swallow any BS pumped into their heads, B) the general public doesn’t give a rat’s ass about much other their immediate satisfaction and gratification, and C) these decisions ARE NOT in the hands of the public.

    Good luck in making the “general public” believe or understand that concept.

  • chukcha

    Hi Five Noz. You’re damn right about that one…

  • chukcha

    Tax is not a solution! Think about it; who will suffer the most because of this tax? The lower and middle class citizens. The wealthy don’t care as much about today’s gas prices. Extra 50 bucks per week that they will spend on gas for their Escalade is nothing. The rich will not feel the burden on this tax. [Which is fine by me...] The point is: Be careful what you wish for….you might just get it….

  • chukcha

    You’ve got to be freaking me!
    What do you think the government will do with those trillions of tax revenue dollars? I would bet they would want invest in ways to keep receiving those tax dollars….Can you say BUY MORE OIL! :) Suckers!
    I can’t believe you people. What are you thinking! Have you lost your minds…

  • Need2Change

    CAFE has been a joke. Congress asks the automakers what they can do, and the CAFE is set at those levels. Then automakers complain to make it appear they didn’t get their way.

    The current CAFE standards are still too low — even though automakers are complaining about them. Those who can’t make these standard will see sales decline.

    The U.S. auto industry would not have been in the current trouble if the U.S. had more agressive CAFE standards ten years ago.

    Gasoline tax should have been increased ten years ago, but it’s no longer needed. The price of gasoline wil continue to increase and the U.S. public will shop for fuel efficient vehicles without increasing gasoline taxes.

  • dedubbs

    Yeah, thanks Noz…for labeling yourself as stupid. I really chuckled at that one. I love finger pointing (there are always three fingers pointing back at you when you do…try it and see).
    Has anyone been to Europe? Taxing gas does solve a good deal of the problem. It may not be the ideal solution, but there is no real ideal solution because we live in an imperfect world. Please also read more closely, the tax that would be added to gas would be paid back to the middle and lower class based on income level so it would be negligible to them.
    I sense that people have not researched this subject enough to comment. Please keep digging. Maybe a search on “CAFE” and “proposed gas tax” would give you better idea of what people are proposing.

  • langjie

    I’ve been saying this for awhile now. They should raise the gas tax. My point of it was to raise it in Mass and tear down the tolls on the Mass Pike, but do find it effective to curb some of the demand as well

  • MJ77

    More Taxes needed!!! We need more taxes on gas. I don’t even care what the government does with the money, they could burn it for all I care. That said imagine if they used this to help fund alternative energy research.

    Anway the reason tax is good… It WILL cut some of the profit from the oil companies(if you don’t understand this take a quick economics lesson)

    And it doesn’t effect the middle or lower class as much. Here is why. #1 Mass transportation. No rich people ride buses to work. #2 Rich people tend to live farther away from where they work then middle or lower class people. It won’t effect them as much.

    Not even to mention we could turn around and use the taxes to help subsidize mass transportation. This is exactly what Europe does!

  • GR

    Chukcha, gas taxes ARE a good idea. The government won’t use it to buy more oil. They know that the majority of Americans are against both global warming and buying oil from foreign suppliers.

    Right now, we’re sending billions to foreign nations, with very little of that revenue staying in America. If taxes were higher, we could keep more of that revenue to and put it to good use here (did I hear someone say better roads and BRIDGES? Public transportation?).

    You can’t gradually make gas illegal anytime soon…there are hundreds of millions of cars on the road. That would take at least 50-100 years to replace the majority of those with electric, hybrid, and fuel cell vehicles.

    If gas prices go down again, many Americans may just go back to their SUV driving ways…something we don’t need. A modest gas tax increase + a slight income tax decrease for the lower (and possibly middle class) = problem solved.

  • Armand

    “”You’ve got to be freaking me!
    What do you think the government will do with those trillions of tax revenue dollars? I would bet they would want invest in ways to keep receiving those tax dollars….Can you say BUY MORE OIL! :) Suckers!
    I can’t believe you people. What are you thinking! Have you lost your minds…”"

    Indeed….people have lost their minds. As I said, they are merely puppets who think they are the one’s pulling their own strings….

    I can’t believe in this day and age there are people here who are actually sympathetic to these corporations and business…under the guise of “freedom”, “democracy” and this disastrous failure called capitalism.

    What a wake up call awaits them.

  • Armand

    DEDUBBS:

    Labeling myself stupid? Hmmmm….I think I touched a nerve with you…pray not because you’re in the huge hurd of people I spoke of??? I said…probably you are.

    I lived in Europe for half my life…don’t tell me about Europe. Europe’s system and the people’s mentality is different. They EMBRACE social ideas and a social system…people in the States RUN in panic and fear to the idea that they help someone else other than themselves. THAT’S the difference.

    When people are taxed in Europe….it is FAR more likely….although nothing is guaranteed….that their monies go to something useful. It shows. They have better transportation systems, they have more green initiatives, they live in safer countries, they have better healthcare coverage, they have better qualiities of life overall.

    It solves alot of problems THERE because the PEOPLE are INVOLVED in their GOVERNMENT’S activities. Can you say the same for here? This wonderful democracy that is a farce???

    Please..let’s here your explaination Mr. Dedubb.

  • Samie

    Why must I laugh about this. I agrued w/ some about adding fuel taxes in a post on this website just a few days ago, wc by the way is the wrong way to go. Do any of these people think of others like oh lower income people or families? Did they ever look at disposable incomes? Oh are all people under a certain income supose to ride on buses all the time?

    (To the first post) No, CAFE is having a huge impact already in new cars for 2009-2012, So please don’t make the argument that CAFE has no implications on the industry b/c that’s not true!

    Ok follow me hope this is where others are coming from
    Many driving habits and purchasing habits are human behaviors so no you can’t get everyone to check tire pressure or buy a Prius, next the market won’t just correct its self like some here believe. Historically, the industry including Toyota has kicked and screamed over new regulations, this even includes safety measures. So if conservation and industry don’t make the improvements needed you need some type of gov regulations. No CAFE is not perfect and it does encourage people to drive more often. A tax shifts the “burden” to the consumer instead of the industry. The industry has technologies that already have been proven to meet conservation efforts. Why they kick and scream and won’t regulation over their own industry is due to the money making V8-V12 luxury cars, SUV’s and Trucks.
    CAFE allows the industry time to adjust to new mandates and gives them the option of meeting CAFE by producing whatever vehicles they want as long as the fleet meets the standards. In a few years when EV or Volt type cars actually start making money we need to up CAFE to encourage more electric systems.

  • David Kiley

    I take exception to the characterization of my blog post as “angry.”

    Thoughtful. INformed. Provocative. Yes, indeed. Angry? Go screw yourself. Just kidding.

  • Dedubbs

    Hi Noz
    My reference to “stupid” was more of a joke. You stated that the “general public” was stupid. I think we are all considered “general public”. But I guess that others could consider themselves elitists if they wanted. : ) Much harder for me to type a joke. : )
    I am not going to get into a long drawn out explanation of my opinions on how to handle this. But let’s be realistic about this, there are basically three variables: the price of gas, the cost of a vehicle and the mpg of the vehicle. Now, create different scenarios of those variables and see what the outcome of each of those situations is. First, only vary one at a time. Then as you begin to see the effects, vary two at a time.
    To me, mandating the increase of the mpg of vehicles (which translates into a cost increase of the vehicle) is not an effective way to drop the demand for gas (LOL…I guess it could be if no one can afford them any more). If the mpg increases siginificantly, people will use that as a way to step up to the next size vehicle. If you want people to use less gas, you have to somehow increase the cost of the resource…or become more responsible as an individual.
    Increasing the cost of gas will drive people to use less gas, will advance terchnology and will increase mpg. If the price of gas drops in the other scenarios, you have a lot more negative side effects. Don’t take my word for it. Go through it for yoursleves.
    But who am I? I’m just the general public. : )
    BTW, if you choose to increase the cost of the vehicle, I’d be happy to oblige. It keeps me employed…just like one in seven of rest of the jobs in the US. TTFN.

  • Armand

    Dedubbs:

    People like you and me make no difference. We understand the situation…that’s great…but to think we can do something about it. You’re dreaming. That’s my point.

    The general public is the sea of stupidity out there that we (yes we elitists I guess who have a better grasp of things and who are…unfortunately…aware of what is going) are stuck with.

    We dont’ have time to vary things one at a time….we need to solve the problem by attacking it in all directions. But the key is for people to truly get involved.

    As it stands….we have no real power. We are merely being puppeted around and we are pretty much too stupid to realize it. You drill into people’s brains these farce concepts of “freedom” and “democracy” and people will actually begin to believe it. Current group of ignoramouses in the US generally…case in point.

    Nothing will change until we force it to happen. Why? because the people making money off of us don’t give a rat’s ass about us.

    The only way we will get involved is if we are pushed to the edge and begin to actively push back…we have a word for that….revolution.

  • Samie

    David Kiley where did that come from not sure where or what that was directed to.

    Anyways not seeing that people are getting the point on this at all!!!!

    Does a SUV that cost say $30,000 that has a V8 cost more if say the same model was switched to a turbo V6? The technology has been around for awhile so where are the added costs. Hybrid tech yes but simply offering a smaller engine no. Other basic fuel improvement tech may cost money yes but not thousands of dollars or out prices models! Also some of the most fuel efficent cars are priced at 12-15k so I’m not sure I understand your logic.

    Also do any of you know of anyone who struggles to pay for basic needs? Sounds like you don’t or you just assume that those who pay higher portions of their income on basic necessities don’t matter. Sorry to be shrewd but look at others before you try to project your ideas on to all of society. Do any of you remember what country your in and the history associated with it? No way even if a gun was pointed at a politicians head would he or she try to raise taxes on gasoline as way to keep prices artificially high. (And no don’t bring up funds for highways) Remeber what happened to old Bill and Gore in the 90′s with trying to add fed taxes to gasoline?
    Again today, you would get so many people opposed to the tax, bring those in power who like less regulation and screw up any real strides to move beyond petroleum for the future.

  • Collin Burnell

    I don’t see how raising the CAFE could hurt! If our politicians in the 70′s and 80′s were a little smarter they would have learned from the crisis in the 70′s and implemented a gradual but steady increase over a span of say 30 years and we could be driving much more efficient vehicles. CAFE has made no difference because (as far as I know) it has not been raised for a VERY long time.

  • Samie

    Agree thanks Collin Burnell
    Many here don’t really get it. But I would say new CAFE is starting to make the industry respond to higher MPG mandates. People often fail to see social and political problems in their arguments. Long-term thinking is important and a silly tax would only hinder any real gains that comes from any new long-term CAFE standards. You might as well say hello to Newt and the Carls of the world again if you support the artificial tax on gasoline.

  • Anonymous

    These comments seem a little silly. Raising the price of fuel will reduce consumption. That is evident today. But, it will also reduce quality of life, and hurt consumers that MUST commute. The writer suggests that car sales will reduce if we move to higher efficiency vs. higher pricing. This is just inaccurate. If we raise the price of fuel, people drive less, so their vehicles last longer. If the vehicle gets better mileage, then the consumer is more likely to drive, and will purchase more vehicles in their life time. So the solution is to reduce oil consumption without limiting the consumers freedom to travel. Higher mileage vehicles are a good start. Electric is a good future goal.

  • Armand

    Build more public transport for the people who MUST commute….no reason to sit in traffic with a huge SUV…that’s just retarded.

  • Crut

    I agree that tax is not a solution but not for the reasons you list. Tax is not a solution b/c our government can’t ever keep their hands out of the cookie jar. You start taxing gas at another 50 cents and even though it supposed to go for “green research” it will get siphoned off into all kinds of pet projects and programs. They will get used to it and if consumption really dies off they will come looking to the taxpayers to make up the “shortfall”. Your reason just doesn’t hold water, it’s the same weak excuse I’ve heard for not raising the tax on cigarettes – it will hurt the poor. There’s no mandate that says if you’re at or near minimum wage you’ve got to smoke. Granted the poor do need to drive to work but this excuse is trotted out for everything. Ironically enough, even for raising taxes on the middle clase and wealthy – whom alreaday pay nearly ALL the taxes in America. The top 1% paid 39.9% of the taxes. Now check this out. The top 25% of wage earners in America earned 68% of Americas income yet paid more than four of every dollar collected in personal income taxes. Now don’t tell me that is fair!! As a not for a 68K/year puts your family in the top 25% – - not too rich when youv’e got a mortgate, kids, car payments, etc… Aren’t you glad that most of you are wealthy!!!!

  • Samie

    Increase taxes on cigarettes vs increasing taxes on gasoline are way different my friend. Not sure I follow that one. I still say look at disposable income for all folks.

    Glad we put Gulf War 2 on the old Chinese credit card or there would be riots over the taxes. Sorry to my grandchildren about that one. Taxes are high but maybe some relief for the middle class will be there soon….

  • Samie

    Increase taxes on cigarettes vs increasing taxes on gasoline are way different my friend. Not sure I follow that one. I still say look at disposable income for all folks.

    Glad we put Gulf War 2 on the old Chinese credit card or there would be riots over the taxes. Sorry to my grandchildren about that one. Taxes are high but maybe some relief for the middle class will be here soon….

  • jvoelcker

    Here’s a piece from today’s New York Times that argues essentially the same point:
    http://www.nytimes.com/2008/08/29/business/29norris.html

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