It Takes an Oil Crisis

Are you ready for a quiz? Here’s a quote. Guess who said it and when.

“Our growing dependence upon foreign oil sources has been adding to our vulnerability for years and years, and we did nothing to prepare ourselves for such an event as the embargo of 1973.”

Answer: Gerald Ford in 1975.

Frank G. Zarb, who served as the assistant to president for energy affairs in the Ford administration, offers this quote in today’s New York Time Op-Ed section. He reminds us that Ford proposed a number of steps to reduce our vulnerability, including more nuclear power plants, coal mines, refineries, drilling, and the sale of millions of new cars that use much less fuel. Congress debated the plan—but the crisis eased, oil supplies returned, prices came down, and we fell back into complacency. A few measures were passed, like the establishment of a strategic petroleum reserve, but it was “far short of what was necessary,” according to Zarb.

30 years later, with gas prices matching all-time highs in both nominal and real dollars, government officials and the driving public are busy pointing their fingers at oil companies. Zarb has a few more practical ideas. For example:

We could levy a truly substantial gasoline tax, something like 50 cents per gallon to start, followed by 50 cent increases in each of the following three years, with rebates for lower-income taxpayers. The revenue from this levy could be used to pay for tax credits for fuel-efficient autos.

He also supports an increase in corporate average fuel economy of at least 4 percent per year. But judging from history, you can forget about any of these measures coming to pass unless the current run on gas prices takes an even more drastic turn.

Referring to our national response to energy policy two short years after the 1973 oil embargo, Zarb writes, “Without a crisis, a real national energy program could not get past normal political paralysis.” Today, we are even more aware of the dangers of oil dependence, as well as climate change. And the viability of fuel-saving technologies like hybrids is evident. Unfortunately, we haven’t learned our lesson. It will take another energy crisis before we even begin to change our direction.

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  • Hal Howell

    Mr. Zarb can keep his ideas to himself. How would a .50 a gallon tax help! We’re already paying a gas tax. When the price goes to $4-$5 a gallon the only ones going to be hurt are the poor and the middle class who need the gas to get to work. If he totaly wants to kill the economy that would just about do it. Rather why not tax gas guzzeling vehicles? Give tax breaks to owners of fuel efficient cars. This could be done at registration on a graduated scale based on engine size with fair but substantial increases for V-6s and above. Engine sizes below 4 cylinders would be rewarded with a smaller fee. This would reward those who have made the switch to fuel efficient cars and encourage those who haven’t to head in that direction. Another approach would be to have a tax credit for fuel efficint cars and a tax increase for large vehicles. Maybe the gov. could funnel this money to the auto manufacturers to subsidize hybrids making them more affordable for the masses and thus encourage the switch from huge vehicles that require little to no gasoline and phase out that fuel source. This could also perhaps help pay for the conversion of present hybrids to an alternate fuel source such as hydrogen.

  • TSB in LV

    Hal, I like the way you think. Reward those patriots who are using less gas – penalize those who are using more. I wonder how much of each dollar spent on gas goes to people who hate Americans.

    And yes, we need to to whatever we can to create new technologies for personal transportation that use clean, renewable, non-foreign energy. WHY DOESN”T EVERYBODY SEE THAT!?!?!?!?!

  • Gerald F. Shields Jr.

    But on vehicles under 30 MPG.

  • Dave K.

    I think a gas tax is a good idea, but only if income tax is reduced to make it revenue neutral. Giving tax breaks for high mileage cars is great but it doesn’t get at the root of the problem. If you’re driving a hybrid twice as many miles you’re using as much gas as you were before. Also higher petrolem based fuel costs will make alternatives more attractive, like PHEVs or biofuels.

  • dave

    yes if there were a 8,000 dollar tax to register a vehical with a v-8 engine per year, or one rated at less than say 30mpg, people would think twice about owning one

  • Bill Murdock

    Tax breaks for fuel efficient cars are complicated and only address part of the problem. We should also be incentivizing using mass transit, walking, etc. We should be incentivizing living closer to where you work. We should incentivize buying products that did not spend a lot of time on the back of an inefficient truck.

    Gasoline taxes do all this. I agree that too much taxation hurts the economy, but you can reduce other taxes to compensate. How is this for a plan: the government immediately (and every year from now on) sends every resident a n extra income tax refund of $2 times the _average_ number of gallons used annually by residents of the country; _then_ the government imposes a $2 per gallon national tax on gasoline. Businesses can also get a similar refund based on their size.

    Under this plan, average consumers of gasoline get their new gasoline taxes paid upfront. Below average users get free money, some of which they get to keep. Above average users get penalized. And everyone has an incentive to reduce their usage.

  • Dan

    I like the idea of a tax paid at registration time. To get a license the TAX is paid. Also MUCH more strict emissions testing would help as well. If your gas guzzler puts out over a given level you pay an extra tax. This way anyone under a given level does not pay the extra. But to be effective the standards have to be raised much high than they are now.

  • Poor Boy

    A tax on vehicles under 30 MPG, as suggested by Mr. Shields, penalizes those of us who drive older cars and can’t afford to upgrade (as much as I’d like to). Perhaps that tax could be limited to cars that are newer yet fail to meet that standard.

  • Stump

    Hal, I agree with most of what you said however, I must disagree with you on the idea of funneling any more money to the automakers. For too long they have refused to make any changes in their products with regard to economy or even safety without a law being passed. GM had a great vehicle that would have met the commuting needs of a substantial portion of this country. They could not figure out a way to make any money from a reliable efficient car like the EV1. Parts and repairs account for a large portion of their profits. US automakers continue to pump out unreliable, inefficient vehicles and have no plans to change. One good thing that the EV1 brought forth, is the vehicle you now drive. Japan saw the benefits in this technology and made the decision to invest in it.
    I saw first hand what the arrogance of the unions did to the steel industry in Pittsburgh, and if the US automakers refuse to get rid of this mind set, they deserve the same fate. Why should the taxpayers have to bribe the automakers into staying competative? The majority of businesses must constantly strive to offer the best product they can produce or go out of business.
    Now before you jump to any conclusion about my transportation choice let me explain it. I am a 49 year old male in poor physical condition, I took my gas guzzler off the road and purchased an electric bike (463 Town and Country Cruiser) from Liberty Electric Bikes in pa. ( realize that this is not an option alot of people have due to commuting distances. For me it is feasible and now every 1000 miles I travel costs me $1.50 in energy. The real benefit to this vehicle is that the more of these bikes and scooters that are sold, the easier it is for battery manufacturers to justify the R & D expenditures required to improve this technology.
    If the government ever decides to place a higher level of importance on environmental problems than they do on corporate profits, we may yet come out of this freefall and once again be a strong and respected country.

  • Charles

    How about carbon rationing? Each licensed vehicle owner gets a carbon allocation equal to 400 gallons of gas a year. In addition each licensed driver gets a carbon allocation equal to 200 gallons of gas a year. Those that use their vehicles for work would get an additional allocation based on miles driven for work and the type of vehicle needed.

    Because it is carbon rationing, and not gas rationing, drivers who use bio fuels could get a huge break. A government ration trading system would allow drivers who want to pollute more, could buy carbon allocations from low polluters. The carbon allocations could be sold in 50 gallon equivalent amounts, with the price going up significantly for each additional purchase. The government would skim off enough to pay for the system.

    Each year the ration amount could be reduced by about 4%. This would lead to people buying more eco friendly transportation, and reward people who buy the very best. Of course all of this falls apart when ethanol produced by burning coal is counted as being zero carbon or bio diesel is also counted as zero carbon. There will have to be different carbon allotments for green ethanol (example: solar distilled) and bio diesel.

    I know it will not happen, but it should.

  • Branden

    The gasoline prioces are outrageous. I cannot afford to drive anywhere. I think there should be a vote on the gasoline prices.

  • ETM

    Vote with your wallet?

  • michael a.

    Until we have 3rd Party, we only have two choices: Democrats and Republicans.

    It takes 60 votes (out of 100) to pass a tax increase in the U.S. Senate. The Republicans control 49 seats and they have proven to us that they will NEVER raise taxes of any kind – NOT EVEN TO PAY FOR THE WAR. (“The central ideological struggle of our time” – G. Bush)

    Fossil Fuel Taxes are THE way out Global Warming. Fossil Fuel taxes reduce demand for foreign oil and domestic coal.

    Any discussion of taxes that ignores the political realities of the Conservative Agenda in American Politics is pointless. Conservative Politicians don’t give a damn about climate change and they don’t give a damn about our 10 trillion dollar debt.

    So if you want change, Vote Democratic in 2008.

    And, by the way,I’m an independent, and I voted for Governor Arnold Schwarzenegger in 2006. He’s a Republican, but he’s NOT a conservative.

  • Lenny From Brooklyn

    Fossil Fuel Taxes are NOT they way to go. In fact the entire global warming “debate” is merley the greatest wealth redistribution scheme ever devised.

    Clinton was president for 8 years. Did he raise taxes? Did he bash the big bad oil companies? Did he raise the Cafe standards any real amout? Hillary won’t change anything and neither will Obama.

    Rudy for ’08. He’s a Republican, but he’s NOT a conservative.

  • lindsey

    Mars and Saturn and other planets as well are heating even more and faster then the earth. Oh sorry man does not live there. Do you tree huggers understand.
    CO2 does not lead heat it follows and comes from the great CO2 sink and source the ocean. The ocean in warming because of underwater volcanoes and the warmer water is releasing more CO2.

  • AP

    A higher fuel tax is the ONLY effective method to 1) encourage people to buy fuel-efficient vehicles, and 2) use them less. Any other way is extra complication and trying to avoid the real problem. I have more respect for someone who burns 500 gallons/year in an SUV than a Prius owner who burns 1000 gal/yr.
    Roll a $2 tax at $.10 every three months for 5 years to let consumers and manufacturers adjust, and refund the extra tax revenue as a credit from the IRS. Then consumers can weigh the cost of a more fuel-efficent vehicle vs. the fuel savings and make their own decision w/o stupid rebates and incentives.

  • noz

    Perhaps if we didn’t piss away over half a TRILLION dollars on war and invested that in ourselves, our technologies, develop new energy supplies, etc, we’d not be in the mess we are in.

    I’m amazed how stupid humans are…

  • Harry Boswell

    It seems the energy used to fight pointless and useless wars could be saved along with the people it maims.

    All the energy saving efforts I make in a lifetime are probably negated by one days ‘action’ in Iraq or Afghanistan.

  • Rob

    Ok what about people who need bigger cars likes v8s because they can not fit into smaller cars what are they supposed to do

  • FPL

    Additional points:
    1) There is a difference between price and availability. As soon as availability becomes a problem, the price increases will make the taxes increases you are talking about insignificant. The last availability crisis was 1972-3. The next one will be permanent. Price jumps will be measured in dollars, not cents per gallon.
    2) Consumer demand is vastly more powerful than government economic manipulations. A lot of effort is going into new electic cars (e.g. Tesla Motors new car plant in New Mexico) and new Lithium Batteries. This will allow electric cars to displace most gas cars in the next two decades. Bottom line here is that no money needs to be directed by the Government. A lot of businesses are leapfrogging the government, but very quietly.
    3) America has little gas domestically, but LOTS of coal. Bottom line here is that CO2 pollution needs to be solved, not necessarily energy availability.
    4) Government IS good at getting pollutions standards in place. Companies ARE NOT good at agreeing to standards, but do a rather good job of complying (but bellyaching loudly the whole way.)

    My Conclusion is do not tax, but make pollution limits that make sustainability the priority and enforce them. These will in turn drive new industries to make the autos of the future.

    My prediction is that 20+ years from now, it will be power plants that are the main concern, not autos.