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Rewarding Gas Guzzlers

As I said in my previous post, a gasoline tax holiday wouldn't make much, if any, difference in the price of gas at the pump. But if it did lower prices, the U.S. would be joining much of the rest of the world in helping keep demand artificially high. That's a recipe for fiscal disaster, and it distorts the market in disturbing ways.

Many countries - especially in the developing world -- are actually directly subsidizing fuel prices. In the name of helping their citizens cope, they are subsidizing energy waste, subsidizing an addiction to imports, and subsidizing the growth of greenhouse gas emissions.

Of course, as oil prices rise, so do the costs of these fuel subsidies. Many of these countries are also trying to hold food prices steady as the prices of global food commodities soar.

This came up in a conversation I had this week with Rob J. Routs, executive director for oil products and chemicals at Royal Dutch Shell Group. "Half of the world is not seeing the real oil price," he said. He cited India, Indonesia and China, among others, who are subsidizing oil prices so that consumers don't pay the full amount. The subsidies, he said, create false economic signals. "In some countries," he said, "people have gone 12 months and they haven't seen an increase at the pump. That keeps demand up."

For more information I turned to the International Monetary Fund Web site where Amine Mati of the fiscal affairs department wrote a paper earlier this spring tactfully titled "Managing Surging Oil Prices in the Developing World." Actually, they're not being managed very well. "Less than half of a sample of 42 developing and emerging market countries fully passed through sharply higher world oil prices to retail customers in 2007," Mati writes.

The biggest culprits: Oil exporting countries. They can afford it, given high oil prices. But it's still bad energy and climate policy. Not surprisingly, the Middle East is the one area of the world whose increase in oil consumption rivals China's.

Some countries do tax fuel, but over the past couple of years they have used the McCain-Clinton approach to limiting the big increases in domestic prices. Lebanon, Mexico, and Peru have cut excise taxes and the Philippines and Ukraine have lowered import duties. In India, subsidies for widely-used kerosene are also important and the government floats special bonds to cover the losses oil companies have because of price controls. The Economist reported late last year that India's fuel subsidies might cost as much as $17.5 billion in 2007, according to Lombard Street Research, a British firm of economists. "That amounts to as much as 2% of the country's GDP," the magazine said. If that's right, then higher than expected oil prices this year will probably punch a $3 billion or $4 billion hole in the government's budget.

In all these cases, the dilemma for the governments is the same: Pain now or pain later. With rising oil prices, the pain deferred gets bigger all the time.

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Comments (54)


Let's start a revolution.

We can confiscate every Hummer, Surburben on the street of United States and China, crush them, and give them a hybrid car. I don't know how many Hummer's in China, 200 maybe. Definitely less that that in Washington, DC.

We can grab every Chinese and Americans and tell them to cut down their red meat consumption and eat healthy.

We can solve the food and energy crisis instantly. Anyone agree?


Oh right!

When professional protesters attacking Chinese torcher on wheel chair, you silent.

When riotors killed innocent people in tibet, you silent.

When 600,000 Iraqis civilian died since US invasion, you silent.

When Chinese young people protests against western biased reporting and China bashing, you silent.

When US army rapes young japanese girl, you silent.

Who's ugly?


The author seems to have missed Economics 101.

One basic concept in Economics is something called "price elasticity of demand". This is: when a product's price goes up or down, how much does demand of this product increases or decreases?

Gasoline is a PRICE-INELASTIC product, which means that changes in price does not have a severe impact on the amount of gasoline purchased.

Do you want proof? Easy: over the last few years, gasoline prices have more than doubled... while the demand for gas has been relatively stable.

So, a slight reduction in at-the-pump price (via the tax holiday) won't cause major changes in demand.

The bulk of that increase in gasoline prices has gone directly to Big Oil companies, which have been enjoying record profits, quarter after quarter, for several years. They can do that because almost all the oil sold around the world is controled by a handfull of companies, and they charge whatever price they want BECAUSE THEY KNOW THAT GASOLINE IS PRICE-INELASTIC, so consumers will have no alternative but keep paying those prices. That is called an OLIGOPOLY (you learn about that in Economics 101 too).


I know this question asks a lot, but I will fire it off anyway.

Hypothetically speaking, if all of those subsidies vanished overnight (or within a relatively short time period, like a year or two), what do you predict would be the impact on oil prices, global economics, etc?


It is mentioned about the oil subsidies given in India. Here the subsidy given to kerosene cannot be avoided. Kerosene is the fuel used by the poor people living in the cities. If it is not subsidised they will not be able to manage.

There is no necessity of giving subsidy for petrol, diesel or the bottled cooking gas. Petrol is used by those who can afford to pay and also an increase may put a stop to excessive usage of the petrol and reduce the co2 emission. Similarly the cooking gas is used by the rich and middle class. It is only given by the nationalised oil companies while private gas companies charge more as per the real cost of the product. So some of the consumers pay less while the others pay more. There is nothing wrong in increasing the price of the gas distributed by the public sector companies so that it will be at par with those supplied by the private ones.
The subsidy given to diesel is on the basis that it is mostly used by the trucks and if it is made costly the transportation charges of essential commodities will increase and such an increase will be a burden on the poor. But instead of subsising the diesel the food given to the poor can be subsidised so that the benifit of the subsidy will go only to the deserving people.


So far as I can see this is an ignorant tempest in a teapot. I'm betting with oilman T. Boone Pickins, who pointed out that the world production of oil is stuck at 8.5 million barrels a day and will be for some time since old wells dry up as new ones come on line. World demand is headed upward which, in time, will overwhelm subsidies no matter how rich the nation providing them. He also is investing in wind power from Sweet Water, Texas north to North Dakota and will be selling that electrical production to the grid in California. He also is investing in transferring natural gas out of electrical energy production and into the gasoline distribution infrastructure (gas stations) for use by highway vehicles. On the whole, a good long term profitable strategy that doesn't depend upon stupid politicians, right wing borrow-and-spenders, or left wing tax-and-spenders. It is simply where reality is going to force people to go whether they like it or approve of it. You can be smart and realize that's the way its headed, or stay stupid and poor.

William J:

Saudi Arabia subsidises fuel for its 28 million people and yet the bulk of the populace live like slugs on US$4,000 a year. Indonesia subsidises kerosene for its populace as this is their main cooking fuel and they survive on a fraction of that of the Saudis - interesting to note that Indonesia has long passed Peak-Oil and no longer exports oil at all, in fact they are now importers and still are members of OPEC (Organisation Of Petroleum Exporting Countries).
The "non-negotiable American way of life" is now hitting the wall as Peak-Oil production is becoming an embarrassing fact of life. Oil will not "run-out" anytime soon as can be seen in American production which peaked in 1971 (America still produces its own oil but is nowhere near able to supply its own needs). What this means is that oil will always be available for the ultra wealthy but the rest of us will have to deal with the consequences of depleting reserves, which
unfortunately means less transport and, more ominously, less food. You don't really think those Halliburton detention camps were built only for immigrants do you?
State-owned oil companies are now restricting exports for their own people's future needs, and who can really blame them. The same practice applies to rice exports that have been restricted and subsidised for the benefit of nations that are fearful of their own populations revolting and changing governments. Can you blame them?
What we are seeing now, across the entire range of human endeavour, is a reversal of economic values. The economics of depletion and decline is replacing the economics of eternal expansion and growth that has underpinned the world's economy for the last millennium, and without a concerted world-wide effort to manage the decline there will be resource wars, famines, economic depression and man-made disasters until there is nothing like a semblance of civilisation left.
Americans should become more aware of the energy decline as Mexico, the third biggest US oil provider, slips into negative production within two to three years, though I personally expect, and hope that other supply issues will finally awaken the sleeping US public before this time arrives.

Buck Batard:

Not to mention the millions of gallons that we here in the US use because of the Republican Congress and George Bush's tax credits to those business owners and companies who bought gas hogs a few years ago because they got a tax break to buy a monster vehicle. You had to be blind not to see what that was all about.


BILLD said "Too bad most Americans cannot visualize a better transportation system."

Are you kidding? Why do people like you say things like this? Do you even know me? No. So you know what most Americans can and cannot visualize. Pretty sick of folks like you grouping ALL Americans and saying things like this. Rethink it next time please. I am not like most Americans, whatever most Americans are like. Gees!

Working poor:

A policy issue has turned into an Obama defensing contest here. The fact is, if there is a gas station that sells gas 10c lower than the others, most of you will go fill your tank there, at least I will. 10 cents/gal means a lot psychologically to most people, especially when gas price reaches $4/gal. $4.09.99 is much more than $3.9999 to most people. I also don't know if all of you who cry for higher taxes have dumped your SUVs and replaced them with those expensive hybrids. I can only afford an old clunker and I have to drive 3 hrs to work per day so I do not have to pay $2500 per month for rent. Obama's long term plan will not work for me this summer, I need relief now!

Frank - American Patriot:

Its hard to argue that gasoline prices are too high in America when one sees many, many single drivers in giant SUVs & Confederate flag sporting pickups tooling down the road chit chatting on their cell phones oblivious to what planet they inhabit and then see those same folks or others like them in a 30 car line at the drive-thru Starbucks still chit chatting on their cell phones waiting to plunk down $4 for a latte while the 12 mile per gallon waste of resources they call "transportation" sucks up gasoline for no purpose whatsoever spewing thousands of pounds of CO2 and other toxics in the atmosphere.

Subsidize? We subsidize the entire paradigm in this country. From roads, to oil companies, to the auto manufacturers they all compete at the socialist corporate trough for our tax dollars. Yes its wasteful to directly subsidize the cost of fuel but we do it indirectly and it may even be more wasteful, encouraging Sally Suburb to think she needs that new cute Hummer 3: "oh I heard it gets better mileage than the H2!"

And don't fool yourself - yes many Europeans drive small cars but plenty of the rich ones are found tooling around the streets of London and Paris in their Range Rovers spewing the same toxic brew and getting the same poor mileage but at $10/gallon. I know of what I speak as I travel to London 2-3 times a year and to the continent at least once per year. Many Europeans have long commutes as well as we as the same forces that attract Americans to the exurbs exist in Europe. A major glaring difference is the public transport system. That we need to fund fast and furiously in the US.


The only way to discourage use of anything is to raise the price. To get a significant reduction of gas consumption, we ought to raise the taxes so the prices equal those in Europe. Eventually, we'd be driving the same types of cars sold there, and our mileage would average 35 mpg.

Does any politician have the guts to propose such a solution? No way!

Personally, when I go to Germany or England, I enjoy using their vast public transport system. You can take the train directly from the Frankfurt airport to Munich and do 250 kph while you relax.

Too bad most Americans cannot visualize a better transportation system.


Temporarily suspending the gas tax will not distort the market because it is a relatively small tax.
It is nothing like subsidizing gas prices as many countries do because those subsidies are huge and the people in those countries are only paying a small fraction of the real cost. All that it might do is give a small temporary relief while giving the dollar a chance to regain some strength and send the price of oil downward. In many markets, for instance, it just might keep the price of gas from hitting the dreaded $4 a gallon mark this summer and, lets be real, part of the economy is based on the perception of the consumer.

Jeff C:

When we ride our bikes and walk we have to breathe harder to ingest oxygen, and exhale with more carbon dioxide. How much carbon dioxide is created by animal breathing all day - 6.5 billion humans alone.

one man:

It can't understand all this whining about raising gas prices... wake up USA. Europe would introduce a national gas holiday having your gas price. Europe faces gas prices around $8 a gallon. People over there just don't drive useless pickups and SUVs in the cities just to show off. And no one would cope with a 2h commute to the office.

Gas is sill way to cheap to make people change.


hey lefty how much energy does it take to make a battery that you mine in canada, smelt in eastern europe, transport to japan to be sent to china for the final smelt then to japan to put it together to send to america so lefty can pretend he does not cause polution.

Zibble Snort:

No way! Let's subsidize gas! Sure, it may cost the US $15 billion, but that means an extra $40 (that's FORTY DOLLARS!!!!!!) in my pocket. Sure, it's spread out over the course of the year, but $1 per fill up means I can afford an extra small bag of chips each time I fill up! Yay gas holiday!

Mary Anne:

to Student41:

While I understand your plight, you can actually reduce the amount you drive. My husband and I have gone down to one car and go through a tank of gas in two weeks or more. We do this by both commuting by bicycle, and running as many errands as we can by foot or bike. We live in Texas, so NOT the most bike friendly, or public transportation friendly place. Obviously, a requirement is to live close enough to be able to bike. Like it or not, you choose to use lots of gas when you live 30 miles away from where you work.


wow you cant post rational arguments agains this lefty - how commie of you.


You know, it's hard not to rant during all discussions of the pros and cons of various solutions to the gas issue alone--much less other energy conservation policies.

As a nation, we seem oblivious to the option of public transportation. I have no choice except driving a car to work, to family activities, to run most errands. If public transportation were available, I'd use it. I certainly do in Europe.

Combining public transportation with commuter taxes as now happens in London and Oslo--you pay to drive into the city limits--are small steps among so many other possibilities. But those are effective steps.

In the meantime--rant begins--I am quite tired of being told to save gas when I drive a reasonable car and have no choices. Bluntly put, it's not my fault, so would somebody in charge please start thinking, encourage morality and economic responsibility in the transportation/energy industry, provide public transportation, and popularize alternate sources of energy under development for DECADES. AND, by the way, if one more SUV almost runs me off the road because first, they probably can't see me in their sideview mirrors and second, some kind of sub-conscious power-complex is likely operating, well...end of rant.


The book, "The Path Through Infinity's Rainbow: Your Guide to Personal Survival and Spiritual Transformation in a World Gone Mad" has a lot of information on the effects of peak oil for Western civilization. The book has a lot of specific recommendations for how to survive the oncoming crises by organizing at the local level for maximum survivability.


Gas should be taxed at 18.4%, not 18.4 cents/gal. The more expensive it gets, the less tax people pay. What other items do we pay a flat tax on? It's already a regressive system that rewards the biggest users/wasters. And yes, it already is a subsidy to car driving because the tiny amount of tax users pay does not cover the real costs of transportation in the USA.


re:Donald J. Dodd:
(How does this insanity end up in the Washington Post website? It is no wonder Al Gore has gotten away with talking up CO2 driven global warming during a time when the earth is entering a cooling phase. Changes in the sun’s energy output cause the earth temperature to rise and fall in cycles not CO2.

This junk is fraud – reporting requires that you challenge assumptions and discover truth not parrot propaganda.)

Obviously, Don is one of those scientific genius "naysayers" who think climate change is a hoax based on his observation that Ohio and Wisconsin got lots of snow this winter.

And he conveniently missed the news items showing the ocean temperatures around Alaska that are 9 degrees F above their normals, with natives of Greenland and Alaska buying air conditioners because of the noticeably hotter summers. And the increasing reality of ice-free shipping lanes in the Arctic Ocean and massive chunks of ice calving at phenomenal rates in Antarctica.

He doubts all this as "Gore propaganda" - possibly because he doesn't understand either the science behind these observations or the complex scientific thermal measurement apparatuses used to calculate the scientific facts underlying climate change.

These devices are known as "thermometers," Don.

Don Eisenstein:

Oil is a finite resource; this is a fact. Eventually, it will run out. What are we going to do when that happens?

Even though most of us (probably all of us) will be dead when that happens, now is the time to prepare for that day.

The silliness that is going on now is just an indication of how deep of a problem we have. There are so many things we should be doing to lessen our dependance on foreign oil...conservation, alternate energy, fiscal policy, public transportation, etc.

And what are two of the three presidential candidates proposing?...a reduction in the federal gas tax, to make it easier to keep using more gasoline...ridiculous.

The politicians need to step up to the plate and start to lead this country, instead of pandering to the public's childish wants and desires. And the public needs to wake up as to what is happening in the world, and demand responsible actions from its leaders.

C. Reaves:

Suspension of the gas tax rewards people who drive most. I ride a bicycle most of the time and drive very little to use as little gas as possible, so now I'm expected to give MY tax dollars to help out drivers who don't? No thanks.


Taking away a tax is not subsidizing gasoline prices. The price of gasoline without taxes is the "market" rate based in part on oil prices and the costs to refine and distribute fuels and also on the demand for fuel at a given price. The "natural" price of fuel is not the high tax prices common in Europe, but the high taxes do lower demand because they raise the price.


WE are indirectly helping to fuel the third world demand also. By continuing to send jobs to third world countries and buying cheap products made in these countries, we are feeding that demand.
Also, by continuing to ask other countries to pay for our wars and pays our bills, we have ensured that they will be receiving our tax dollars in the form of payment on the deficit for decades to come.


It is funny listening to everyone whine about oil/energy prices while parading around in their SUV's which there are never used in off-roading ever. It highlights Americas greed verses common sense like the WMD/Oil president in office.

Here is a flashback to someone who knew how to head off what we are experiencing today and the republicans of this country painted him as dumb. Just over 20 years ago, a president by the name of Jimmy Carter was faced with high gas/energy prices and warned Americans that they need to cut back.

He rammed through congress a tax rebate for solar and energy conservation that would save 20 percent in energy by the year 2000. The election came and Reagan was visiting the Saudi's and the prices dropped when Reagan went into office.

Everyone praised Reagan as a great man and SUV/Truck sales grew at exponential rate. Why? Reagan, just like all republicans represent big business and Wall Street profits and not sensible solutions to head off what this country is witnessing today.

Reagan ended the energy conservation tax rebate when he got into office putting and ends to a movement that would have slowed down energy consumption as well as green house emissions drastically. Carter was more worried about America’s ability to be a strong energy independent country than a weak oil junky selling its sole to other countries in the name of greed. This is what this nation has become.

Our free market society is being driven by Wall Street greed and our society is being spun off and drained of its resource because Americans do not want to give up their SUV's. You hear people say that it is not nice to blame the rich who make up less than 1 percent of our population, but they are the blame.

They are the only one's that can buy changes made to our society and in sharp contrast; you get to vote for the headache now in office. The rich write the laws, tax codes, regulations and yes, control Wall Street. Carter stood up to the demon now controlling your destiny and the Saudi's are no longer listening to this republican because their greed is greater than Bush and you.

Americans need to unite and shed their party affiliations and defend this country from the rich and powerful and stop the notion that rich/greed is good or continue paying higher prices for all goods across the board and draining your retirement if you have any left. Empower yourself America, take charge, take back what is yours and tell the few that manipulate you every day to pound salt. Oh yes, "I APPROVED THIS MESSAGE."

microft holmes:

global warming is a fact, and it is pretty amusing to see die hard wingers parrot their lame ditto head comments that no such thing exists.

i would hate to employ these people and have to rely on their judgment in the workplace!


Reducing gas tax is the only feasible way that the federal government could help with the gas price this summer. Some suggest rebates. The problem is collecting tax and sending rebates on national scale will cost at least hundreds of millions. It is hard to determine who gets the rebate and how much rebate would be enough, and sorting that out will cost extra. Another thing the government can do is to open up strategic reserve, but since there is probably not much left in the reserve, tapping into it may not help much.

I do not drive much myself. But I am willing to subsidize for gas used by others. This can help economy from collapsing and many people from going broke. If that happens, it will cost me much more.


I am one of those "speculators" whom some americans love to blame -- I invested my IRA in oil as soon as Bush was elected. I am no fat cat, in fact I use very little gasoline, I commute by train and live in a tiny house which I heat with wood. Its clear to me from extensive research that the world has reached, and passed, the peak production rate of oil that it will ever reach, and a lot of americans are deluding themselves and each other about the real situation.


It would be far more productive to go after the oil "markets" themselves rather than do anything else. The traders who bid oil up on half baked rumors of possible problems from places that have not very substantial roles in global fuel supply, and then never let the prices fall back, that's the problem. The markets are crooked, it ought to be obvious to anyone looking at the records and justifications for the gouging.


Americans have been getting a free ticket to ride for decades! A bunch of whiners who think they are the only ones in the world, they have been paying ridiculously low prices for filling up at the pump for years! And you now think you deserve to be ‘rewarded’? $3.60 or even $4/gallon is nothing compared to what many of the rest of us have been shelling out at the pump for petrol. In the UK we pay between $10 and $12 per gallon, and six years ago we paid $5 to $8 per gallon. But your government continues to baby you with a false economy and stroke you with a spurious sense of economic security. Not to mention the automobile industry in the US keeps consumers and the American market in a political strangle hold away from developing cleaner-running cars. But you insist on tax breaks here and tax breaks there, and enjoy life off the backs of child labour and poor people from places like China and India so you can get your deals at Wal-Mart.

How you can stand the false economy your government politicians continually dupe you with is simply amazing. It looks like it’s about to bite you in the butt, too. Whilst you continue to buy bigger (but NOT safer) automobiles, foreclose on houses you could not afford to begin with, stew in credit card debt, and ruin the market for the rest of us who share the planet with you, your dollar is getting weaker. Your own leaders and media did not even tell you about your sub-prime troubles until about 4 months after the rest of us were reeling about it! And if you buy into this idea of a ‘gas tax holiday’ from John McCain or Hillary Clinton, or media gurus then all you are doing is allowing a bunch of windbags who are desperate for your vote to keep spoon feeding you with more false economy fairy tales.

You need to grow up and take more care and responsibility for the resources you have been given. Stop depending on the false economy you are continually sold, where you’re nickled and dimed to death with hidden costs. When your next president takes over, there will be a lot of back-tracking with economic reality. The old adage is that war is great for the economy, but this war on terror your present leaders keeps scaring you into just keeps pumping your resources away from you, and you will begin to see what a free ride you’ve been coasting on. For a very long time.

Welcome to the rest of the world!


Like Krugman said:
1) We live on loan from China
2) We give some to Suadis
3) Then we plunder more by giving GAS FEDERAL TAX break
5) This makes BIG OIL rich and plunders more oil
4) Hillary calls it SIDING with people against BIG OIL

These politicians will just PLUNDER the country away


I wish the laissez-faire Republicans would remember who they are. The one good thing about high gas prices is that market forces (and not government intervention) are causing the automakers and energy companies to seriously consider alternatives to traditional gasoline (ie better hybrids, plug-ins that are designed to rarely use gas, hydrogen power, diesel). When traditional gasoline becomes impractical for consumers, consumers look for alternatives. But when government proposes a "gas holiday", they reduce the demand for a product that consumers would seek if a company successfully developed a more efficient alternative. America has the knowledge to develop this alternative. But the carrot needs to remain out there for the inventors.


To help those that are suffering from high gas prices - send them a check! They can choose to spend the extra money on gas or something else.

To reduce gas prices - reduce demand. The only quick way is to reduce speed limits to 55 mph. Cars and trucks get better milage at 55 than at 70, plus we would all drive less. If a few rural areas need an exmption - say North Dakoda - fine.


The Iraq War could have paid for every gallon of gasoline used in the United States during the last five years.


The fact is that mobility contributes directly and substantially to economic prosperity. And our mobility systems are built on oil as the primary fuel source. Therefore, we are the ones that associate consumption with prosperity and tend to encourage wasting resources, or overconsumption.

The author's implicit assumption that the amount of waste in US oil consumption (too large, heavy, inefficient vehicles driving with mostly empty seats) is the norm in other countries. I respectfully disagree.

The per capita energy consumption in the US is by far larger than in developing countries. Thus, the author is wrong in assuming that consumers in developing countries are encouraged to waste through subsidies. Most of the world cannot and does not waste, and is much more resourceful with the limited amounts they have at their disposal. We could learn from that greatly.

God Father:

I disagree with the author on the gas tax.

The assumption that lower gas price will drive up demand is not true. The demand of gas is flat and is only a function of time of the year. The current gas price is already causing enough hardship and is high enough to deter most long distance travel. But people still need to drive to work, and changing to smaller cars can cost a lot, particularly for low income families. The gas tax break is not a good long term policy and is never meant to be, but make perfect sense for a short term relief in this bad economic environment.

Dennis Rusinak:

My only vehicle is a Toyota Yaris. Highly fuel efficient, takes very little parking space; its parts (tires, battery, engine) are small.

I am subsidizing every vehicle bigger, more fuel-guzzling than mine.

The owners of those behemoths have a false impression of the true cost, to the owners and society, of that kind of transportation.


this is classic drivel. Kerosene is used in India as cooking fuel in poorer families. Their combined usage cannot equal the gasoline used in a single day in the United States.


we already do subsidize gas guzzling in the US. we offer a tax break upto 100K for self-employed people who buy vehicles over 5000lbs. so if you are a realtor or a roofer, or a doctor with an independent practice, a gas guzzling SUV is tax-deductible.


The birth of the modern environmental movement started in 1970. Congress passed lots of legislation for safe water and air. Then we had The Three Mile Island nuclear accident. Soon we had so many environmental laws passed it got to be impossible to build a new oil refinery or nuclear energy plant. We had really cheap gas prices back then and most cars only got around 15 mpg.

In the early 90s, Saddham invaded Kuwait. If he had kept going, he could have taken the whole Saudi peninsula. The question is: why did we fight Iraq?
The answer is oil. Everyone should know this by now.

We are forced to import lots of oil from the Middle East. Congress won't let anyone build a new nuke plant or a new refinery to turn oil into gasoline. It is Congress that regulates oil and gas and how much it is taxed.

Now the Democrats want to starve the world by turning corn (food) into ethanol (fuel). Why? They will tell you they are doing it for the environment. This is the biggest lie you have ever been told by a politician. Only McCain is against ethanol factories. This scam is responsible for higher milk and egg prices at the store.

Whatever you do - don't encourage any Democrat to raise taxes. They will only be too happy to oblige. Then the oil companies will just jack up the price another dollar a gallon. Guess who gets screwed?


Why don't we just buy OIL from Iraq for $75 a barrel until they pay us back for all the Billion we have spent over there. That way they get some money and we get some cheaper oil.

rick jones:

WRT prices of and taxes on gasoline, I agree that suspending the current federal gasoline tax is silly. It has been present sufficiently long that removing it is a distortion of the market.

If we are going to distort the market, lets do it by actually _increasing_ the federal gasoline tax by a penny or two. At current prices, or at least by the time such legislation could pass (assuming it happened before the middle east froze over from those natural sun cycles...) it would be less than a fraction of one percent difference in the price at the pump.

Seems there are at least three potential reasons to want to see gasoline usage decline, and you don't have to agree with more than one of them:

1) global warming
2) peak oil
3) indirectly supporting anti-US entities

one would hope that the overlapping sets of those who agree with at least one of those three were large enough to see some change take place.

Donald J. Dodd:

How does this insanity end up in the Washington Post website? It is no wonder Al Gore has gotten away with talking up CO2 driven global warming during a time when the earth is entering a cooling phase. Changes in the sun’s energy output cause the earth temperature to rise and fall in cycles not CO2.

This junk is fraud – reporting requires that you challenge assumptions and discover truth not parrot propaganda.


I disagree with the premise that subsidizing oil is bad climate policy. There is no proven link between man made C02 and the Earth's warming trend that ended in 1998. The Earth's temperatures have been in decline since 1998. I guess Al Gore will have to wait a while before taking on Global Cooling since he just won the Nobel Prize for Global Warming. Also, repealing a tax is not subsidizing.


It's all very well pointing fingers abroad, Steve, but you should start by looking closer to home. Most customers in the US buy gas cheaper than it's available almost anywhere else in the world -- developing or developed. They also happen to drive the most cars per capita, and the biggest cars per driver. So, before you get on the high-horse about subsidies to populations which have large proportions of people at or below poverty levels, you might want to try addressing this issue first!

The biggest dilemma is one the current administration has refused to adddress -- that you can't keep hiding the real cost of fuel because your local automotive lobbyist says so! And that's something you have to deal with in Washington and in the US. Pointing the finger into the great beyond of "other countries" is NOT going to cut it any more.


There is some cherry picking of data going on here. India subsidizes kerosene which, is used by the poor but charges a higher than market rate for diesel and gasoline. By my rough calculation, gasoline prices have been around $4.47-4.75 per gallon since 2005.


Taxes on fuel should be high enough to cover all the externalities such as war and environmental degradation. I would also be happy with a tax on junk food that would pay for dialysis to relieve the burden on Medicaid.

ogden, utah:

actually, the subsidy even in countries like the united states is massive and hidden.

Even before the current war in Iraq, the United States was spending more defending oil pipelines in the middle east than we were spending buying the oil. That effectively doubles the price right there.

Current spending on the war in Iraq -- and, please, don't try to tell me it's about establishing democracy -- must also be added to the pump price. So Americans now are paying, one way or another, about $300 or $400 a barrel and $10 or $20 a gallon.

Given that, Clinton/McCain's idea to forgive, for a while, an 18 cent per gallon tax goes beyond silly and right down to totally irrelevant. It is, however, very much in keeping with the idea that slapping a pretty face on any problem, looking as if you are doing something without really doing something, will make people think life is OK.

It usually works, too. Very sad.


A tax "holiday" is hardly a subsidy, but I agree with the premise that we shouldn't be encouraging consumption. There were proposals during one of the past oil shocks to increase gas taxes substantially so as to discourage consumption. As you can imagine, no politician of either stripe had the courage to run with that.

Consumption is key to this issue. Sure, we can blame the oil companies, we can blame the automakers, we can blame the politicians, and we can blame commodity traders. Heck, there is a lot of blame to go around.

Still, if you don't like paying the price of gas, you can do things to change your lifestyle. Guess we just haven't gotten to the point where most people see that as a solution.


Oil markets are not free. OPEC limits production to a far lower level than it could produce, in order to inflate prices.

The Oil importers should play the same game, and instead of lowering taxes on gas (as hare-brained econ illiterates McCain and Clinton are proposing), should instead slap another $100 tax on every barrel of imported oil from OPEC nations. And if this drives gas prices to $10 a gallon, SO BE IT, until OPEC collapses.

Craig Bettenhausen:

I agree completely. As much as it would hurt, we would be better off as a nation if the our gas subsidies were removed. Necessity is the mother of invention, but as we get closer to a crisis point that requires innovation, we are blinded to it by the subsidies. Because we don't feel the pain at the pump, there is insufficient pressure to come up with an alternative. Whether we are ready for it or not, the crisis will come and soon. If nothing changes, the impending death of the conventional internal combustion engine will be the end of the Pax Americana.

PostGlobal is an interactive conversation on global issues moderated by Newsweek International Editor Fareed Zakaria and David Ignatius of The Washington Post. It is produced jointly by Newsweek and, as is On Faith, a conversation on religion. Please send us your comments, questions and suggestions.