Obama's (Gas) Taxing Problem

Goodness knows, President-elect Obama has his legislative hands full. Maybe that explains why he has taken the idea of increasing gasoline taxes off the table, saying that Americans had enough economic burdens at the moment. Nominees like Steven Chu, the Nobel Prize winning physicist who will become Energy Secretary, dutifully echoed Obama's view even though in Chu's case he has long supported higher fuel taxes.

But by failing to raise the gasoline tax, the president-elect risks complicating another problem: Fixing the U.S. automobile industry.

Here's the problem. Obama and leading members of Congress keep saying they want ailing automakers to make more fuel-efficient vehicles. But the automakers in the past made more money on the guzzlers; in the future, they will have trouble charging enough to make money on new cars using costly new technologies for plug-in or hybrid cars. So the car company of the future may be a money-losing operation, just like the car company of the present.

Raising the gasoline tax would increase consumer demand for more fuel-efficient vehicles. That could help automakers charge more for them and make more money on sales of plug-ins, hybrids or more efficient conventional engines. Not surprisingly, Ford and General Motors both belong to the U.S. Climate Action Partnership, which this week proposed a detailed blueprint for a cap-and-trade system for carbon dioxide emissions. Such a system would put a price on carbon and would effectively tax gasoline and all other fossil fuels.

After being burned last summer by sky-high gasoline prices, do Americans really need higher gasoline taxes to get them to buy fuel-efficient cars? Yes, actually. Americans have an astonishingly short memory about gasoline prices. Sales of the Toyota Prius have hit the skids now that gasoline prices are back below $2 a gallon. And sales of SUVs are relatively strong compared to many other models.

If Obama did want to raise gasoline taxes without imposing a hardship on Americans at a time of economic duress, there are (at least) two ways of going about it other than throwing it out the car window. First, he could cut other taxes to compensate people for the fuel tax. Second, he could delay the effective date of the tax, or increase it in small steps over time. A phased-in tax increase would still have a big impact on the choices people make when purchasing cars, which tend to stay on the road for 10 years or so.

A gasoline tax has a variety of other benefits. Harvard economics professor and former chairman of the Council of Economic Advisers under President George W. Bush, Greg Mankiw, listed them in an October 2006 Wall Street Journal article. (Full disclosure: I have known Mankiw since grade school.) The other benefits include: helping the environment by reducing fuel use; reducing road congestion by encouraging mass transit or car pooling; boosting government revenues and shrinking the deficit (unless other taxes are cut by equal amounts); reducing crude oil prices by reducing demand (as a result, the increase in retail pump prices would be less than the increase in the tax); and bolstering national security. If the United States cut consumption, it would also help the trade deficit; oil imports make up a huge share of the imbalance.

The list is more timely than ever. But the gasoline tax, while popular among economists and some columnists, remains one of Washington's most feared issues. Ever since President Clinton was burned for trying to raise it, the gasoline tax has been frozen in time, becoming smaller and smaller in inflation-adjusted terms. For Republicans who claim to rely on market mechanisms rather than regulation, the tax should be attractive because it might be more effective than the complicated CAFÉ regulations for fuel efficiency. For Democrats, it should be attractive for environmental reasons. Members of both parties should be worried about the deficit.

But for the moment, this is one good idea that seems destined to die yet again.

Posted by Steven Mufson on January 17, 2009 1:04 PM

Exxon Chief Embraces Carbon Tax

It says a lot about the changing climate in business circles and in Washington that Exxon Mobil chief executive Rex Tillerson yesterday came out in favor of a carbon tax in a speech at the Woodrow Wilson Center. When I asked him afterward how high a price he thought would be needed, he said the tax should probably start out "somewhere north of" $20 a ton.

That's enough to qualify as a serious suggestion. It's about what carbon has cost in the European Union for much of the time the continent has been using a cap-and-trade approach to pricing carbon emissions. And it's almost half as much as the price many people suggest would be needed to help spur carbon capture and storage at coal plants. It's also about the level that Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources Committee, once suggested as an initial upper limit on a price for carbon.

Yes, this Tillerson is from the same Exxon Mobil that for years gave funds to groups that denied the existence of climate change or mankind's role in speeding it along. It's the same Exxon Mobil that puts the carbon-breathing tiger in your tank.

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Posted by Steven Mufson on January 9, 2009 10:08 AM

Obama's Energy Department

Let the speculating begin. Not oil speculation, but job speculation for the new Obama administration.

Here's what I'm hearing, and thinking.

First, the Energy Department is an odd beast. Thirty six percent of its $25 billion budget is related to national security, dealing with nuclear materials from things like decommissioned nuclear weapons and naval reactors. Another 25 percent of its budget goes to environmental management and civilian nuclear waste management. Another sizable chunk goes to the national laboratories, over which the secretary exerts modest control at best. So it hasn't been the most sought-after cabinet post.

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Posted by Steven Mufson on November 6, 2008 12:11 PM

The Energy Debate From Abroad

Listening to the presidential debate last night, I couldn't help wondering what it must sound like to foreign ears.

First, here is the world's biggest energy hog struggling to get its oil and coal appetite under control. It talks about the energy problem. It IS the energy problem.

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Posted by Steven Mufson on October 16, 2008 3:42 PM

Energy Giant Weighs In on Latest Developments

Paolo Scaroni, the chief executive of the Italian oil giant ENI, stopped by the Post this week and chatted about the state of the oil world. ENI's revenues place it among the world's biggest 25 companies of any kind. The company operates in 70 countries, with exploration and production operations from the Gulf of Mexico to Nigeria to Kazakhstan. Much of Europe's natural gas imports flow through its pipelines, and it retails gasoline under the AGIP brand.

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Posted by Steven Mufson on September 18, 2008 11:01 AM