Tax gasoline at the pump

Jeff vonKaenel

In recent weeks, the cost of a barrel of oil has been heading toward $100. That is a lot of dough for a product that two years ago was half that price. The ongoing upheaval in the Middle East will likely play havoc with the price of oil, and since there is a limited amount of oil and a steadily increasing demand (particularly from developing countries), it’s pretty obvious that the price at the pump will continue to go up.

The United States has an oil dependency. We spend less for a gallon of gas than the citizens of most other industrial countries. Today, we are importing around 4.3 billion barrels a year. This means that we are sending approximately $400 billion overseas every year to pay for our oil habit. This amount is equal to almost one-third of our total federal deficit.

The demand for oil at the current price soon will be much greater than the supply. This will cause the cost of oil to increase until it becomes unaffordable, which will then reduce the demand. And the more the cost of oil increases, the more money American citizens will be sending overseas to pay for it. This money drain will do a number on our economy.

But there is another option. Rather than waiting for the cost of oil to go up on its own, we could follow the European example. In Europe, gas costs more than twice what it costs here in the United States, due to much higher gas taxes. This higher cost helps to keep consumption down, and as much as 70 percent of the cost of gasoline stays at home. By decreasing the demand for oil by raising gas taxes, rather than just letting the price of gas increase on its own, the tax revenue stays in the domestic economy.

President Barack Obama’s deficit commission recommended that we raise the tax on gasoline. With the United States using nearly 25 percent of the world’s oil, an American oil tax could reduce oil demand and help to stabilize world oil prices. This would also result in less money going overseas to corrupt dictators. We wouldn’t feel the need to spend billions of dollars on military outlays to protect our oil interests.

While any increase in taxes will create some hardship, putting a tax on oil has additional benefit to our economy, by minimizing the amount of money sent overseas. Other types of taxes don’t have this additional benefit.

Rising oil costs will also spur more energy conservation, which will help the environment. And if these increased revenues stay here at home, we could utilize this tax money to encourage conservation and to provide better transportation alternatives. Since it’s inevitable that the cost of oil will go up, why not take this opportunity to prepare ourselves for the inevitable future?

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About the Author

Jeff vonKaenel
Jeff vonKaenel is the president, CEO and majority owner of the News & Review newspapers in Sacramento, Chico and Reno.