Pay Inside or Pay at the Pump?


The glories of spring are generally accompanied by rising gas prices—and outraged motorists. The price hike is usually explained by the fact that people are (or will be) driving more, which creates expectations of rising demand. This spring is no different, and we’re seeing the usual complaints about speculators and being fleeced at the pump.

But some things are different this time around—namely, that supply is way up and demand is at a 10-year low while crude oil prices have climbed 70 percent since January. Some blame the new pain at the pump, once again, on Wall Street banks and speculators for buying up futures contracts to hedge against inflation. These guys do seem awfully active in the oil markets now, and the big banks don’t have limits on those sorts of investments. A good question would be, “Why don’t they?”

One oil futures analyst defends his industry, naturally, by saying that:

Oil is going higher because of rising demand expectations. Oil is rising due to seasonal factors. Oil is rising because the dollar is weaker. Oil is rising because of the effect of quantitative easing. Oil is rising as countries and investors are diversifying themselves away from the dollar. Oil is rising because OPEC is cutting production. Oil is rising because rig counts are falling. Oil is rising because of India’s election. Gas rose on a refinery outage!

And these are only some of the factors, he says.

Still others want to see higher gas taxes imposed over time, and so it will be hard to see gas prices coming down any time soon. And they probably shouldn’t. Here’s why:

The Obama administration’s new standards, announced on Tuesday, are long overdue. But they will not come free of charge. Yes, the government has set aside funds to help carmakers with R&D, but buyers paying that additional $1,300 per vehicle will recover that amount only if gas prices go higher. And what’s the motivation to buy green cars at higher prices if gas remains inexpensive?

I think higher gas taxes are inevitable for a number of reasons: 1) To stabilize the price at the pump. It’s better to pay out front than inside, better to pay a defined than a hidden tax. 2) Tax revenues could be distributed in the form of rebates to those who buy new fuel-efficient cars, helping both buyers and the industry. 3.) Obscene oil industry profits should become a thing of the past. Gas taxes would constitute a form of control on these villains.

Gas taxes may be the sole means the government has to keep things fair, not only for citified hybrid buyers but also for farmers who buy pickups. This is a complicated topic, and we don’t pretend this will be the last word.

Where do you stand on gas taxes? Do you think their rise is inevitable?


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