A new age of higher energy prices may very well be dawning, but the United States isn’t going to rush into the new world order without a fight. Although the options available to the world’s last superpower are dwindling when it comes to keeping energy costs low, whatever does remain of America’s choices won’t soon be surrendered.

West Virginia Gov. Joe Manchin is on the leading edge of a new political movement intent on limiting the pain thrown off by the current bull market in gasoline. It’s not much, mind you. But it’s the spirit that counts. The Pittsburg Post-Gazette reported yesterday that the governor has promised to sign an executive order that rescinds a previously planned 1.5-cents-a-gallon gasoline tax, which would otherwise add to the current 27-cent-a-gallon tax.
West Virginia’s governor is hardly alone in eyeing opportunities to pare back gasoline taxes of another sort–i.e., the one enacted by Mr. Market. As the New York Times noted yesterday, lawmakers in more than a dozen states plus the District of Columbia are considering plans to reduce if not cancel state gasoline taxes. “This issue has very much taken off,” Arturo Perez, of the National Conference of State Legislators, tells the Times.
High gasoline prices are usually motivation enough for politicians to seek ways to help Joe Sixpack keep the cost of driving as low as possible. But just in case that doesn’t suffice in the 21st century, some politicians are further stoking the fires by putting oil companies in the crosshairs. Every cause tied to energy needs a villain, or so history suggests, and the time-tested target of Big Oil remains a favorite bulls-eye. Gov. Christine Gregoire of Washington, for instance, said that “oil barons are making $200 million a day in profits,” The Columbian reports. The amount of profits are excessive in the eyes of the Evergreen State’s chief executive, who says that “there is absolutely no reason for gas to go up in Washington as the result of a hurricane.” No word yet on whether she’s pushing for the development of a new oil refinery in her state as a potential source of lowering gas prices.
In any case, there are easier, faster ways to lessen the cost of driving, or so the political system reminds. Accordingly, Washington State voters will be asked in November to vote up or down on Initiative 912, which would repeal a 9.5-cent-a-gallon gasoline tax in the state. In dollars and cents, this is clearly one way to reduce the cost of fuel. Yet it does nothing to boost supply or promote conservation. But economics, strategic thinking, and politics don’t always mix, at least not in obvious ways.
Moving right along, minds can and do differ as to whether denial is set to become part of the American landscape on the matter of energy policy. And while we’re at it, one can debate if denial has been present in the past in the country’s various efforts to find solace in the increasingly turbulent nexus of economics, politics and energy.
In any case, there’s a fine line between serving the public interest by keeping energy costs as low as possible and allowing a price incentive to endure so as to promote the development of alternative energies. Finding common ground on that fine line promises to be one of the more challenging political debates facing America in the months and years ahead, and one whose stakes are high.
It’s obvious to everyone that the U.S. imposes relatively low gasoline taxes compared to Europe, where $4-a-gallon prices-plus have long been common vs. below $2-a-gallon (until recently) in America. Assuming the market will effectively impose European-level taxes on drivers in the U.S. going forward, the question then becomes: Is that a healthy step for transitioning to a post-oil age? Or, as some argue, are hefty gasoline taxes (regardless of whether driven by government or the marketplace) detrimental to economic growth?
It’s easy to point to Europe’s comparatively anemic rate of expansion in GDP and conclude that high gas taxes are anti growth. And indeed there’s truth in them ‘thar economic hills. Paying more for energy leaves less disposable income for big-screen TVs, IPods, and the like. That’s hardly encouraging for the consumer paradise of America. But is it fatal?
It’s just as easy to argue that America’s relatively low energy costs don’t go far enough to promote conservation and a post-oil economy.
Perhaps there’s a way to compromise and inspire consumers to favor alternative energy without killing the golden economic goose in the process. Or is such thinking hopelessly naïve? If such a compromise exists, it almost surely involves tinkering with the pricing of energy. Then again, how about letting Mr. Market set the tone by way of letting supply and demand determine the price of energy. Yes, such a worldview receives plenty of lip service, until a bull market blows into town and triggers a political reassessment.
Meanwhile, it’s all null and void if the bull market in energy is set to collapse. Why think strategically if the price of oil’s falling?
Alas, the market doesn’t look all that cooperative these days. Oil prices jumped sharply today on mixed news about Opec’s commitment to pumping more crude in the foreseeable future. The silver bullet in energy remains elusive. Meantime, perhaps it’s time to scare up a few more rounds of reversing gasoline taxes.


  1. franko

    pricing of of energy is only one of the great mispricings underlying modern society/economies – turn your eye on water, or road access or the right to pollute – see any mispricings there?? I knew you would. Btw, the increases in energy prices that are predicted for the nearterm future are also neatly coincident with an aging population living increasingly on fixed incomes (ie. returns from investments/annuities/pensions rather than labour, the latter being much more elastic and more likely to reflect inflation)
    interesting times indeed…..

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