Ride Boldly!

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Cheap Gas Encourages Dependence


Simple economic wisdom suggests that as prices for any commodity go up, price helps dictate demand. The Economist took a look at gas taxes and relative gas use, specifically in light of current rising oil prices.

Per the article:

Petrol prices in America are substantially below levels elsewhere in the rich world, and this is almost entirely due to the rock bottom level of petrol tax rates. The low cost of petrol encourages greater dependence; the average American uses much more oil per day than other rich world citizens. This dependence also impacts infrastructure investment choices, leading to substantially more spending on highways than transit alternatives. And this, in turn, reduces the ability of American households to substitute away from driving when oil prices rise.

Obviously, there are a few challenges to comparing the US to many of the countries in the graph — the geographic scope of the US creates issues not necessarily in scale to those experienced in smaller nations like Japan, the Netherlands, or (yeesh) Luxembourg. Some of the nations on this list also were able to significantly retool systems after WWII as a result of their infrastructure being rather trashed by the whole affair.

The Economist suggests that raising the gas tax — and not even so high as that seen in other rich, first-world nations — would provide valuable funds for highway construction and infrastructure investment. A rise in the gas tax would hit consumers, but as gas prices rise consumers generally try to minimize usage.

Tom Friedman of the New York Times suggests a $1/gallon gas tax, phased in at 5 cents a month beginning in 2012 — although he suggests that all funds be used to reduce the federal deficit. He calls unrest in the Arab world a wake-up call to reduce foreign oil dependence.

Of course, the challenges to such a plan are many, not the least of which is that it is, yes, a tax — and many elected representatives have no stomach for raising taxes, even if there is clear economic benefit to doing so. And no one would suggest going straight to European-style taxation overnight — the chart above shows that even $1/gallon would not bring US taxation up to similar levels — as the infrastructure isn’t there in most of the country to fully support movement away from gas usage. At the same time, it’s clear that the present demand for gas is unsustainable in the long-term, so action needs to happen now to prepare for the inevitable.

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Author: julie

Julie Kosbab is an online marketing consultant and active transportation advocate living in Anoka County, Minnesota. She was one of Minnesota's only League of American Bicyclists Certified Instructors when certified in 2005. She is a past member of the National Bicycle Tour Directors Association. She has 2 children and 4 bicycles. Find her on Twitter as @betweenstations.

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