USA Today: Price holds key to ending nation’s addiction to oil

Two years ago this month, crude oil prices spiked to more than $145 a barrel, driving the price of regular gasoline to more than $4 a gallon and painfully reminding the nation once again how vulnerable it is to the whims of the international oil market.

It’s reasonable to ask what policymakers have done in the past 24 months to try to reduce that vulnerability. For that matter, it’s reasonable to ask what they’ve done in the 37 years since the Arab oil embargo, which caused huge lines at gasoline stations, to stop enriching hostile petro-states in the Middle East and elsewhere.

The answer: not nearly enough.

There have been energy bills, incentives for oil drilling, tax breaks for solar and wind and biofuels, billions for energy research, and so on. But here’s the one metric that matters: In 1973, the United States imported about 30% of its oil. Now it imports about 68%.

The Senate will soon take up another energy measure, one that now looks likely to emerge as a watered-down compromise that will do little to change things. The legislation could contain some useful incremental provisions to address BP’s oil spill in the Gulf of Mexico and promote home energy efficiency. But it won’t swing for the fences. “Cap and trade” — a mechanism to limit greenhouse-gas emissions by making oil, coal and other fossil fuels more expensive over time — is dead for now.

That’s too bad. Because if there’s one thing that really works, it’s price.

Consider what happened when gasoline prices spiked in 2008. It was painful for just about everyone, and particularly hard on lower-income people and those who had to drive long distances. But it did more to change habits and reduce oil usage than anything Congress and a parade of presidents had done in decades.

In June 2008, Americans drove 12 billion fewer miles than in June 2007, part of the longest sustained drop in driving since high prices discouraged driving in the 1970s. Car buyers suddenly wanted smaller, more fuel-efficient cars and began to try to shed their SUVs. Sales of Toyota’s 50-mpg Prius hybrid shot up by 69% in 2007, exceeding those of the popular Ford Explorer SUV. The Toyota Corolla was the No. 1 selling car in the country in June 2008, while the Ford F-150 and Chevrolet Silverado pickups — traditionally best-sellers but comparative gas guzzlers — had dropped to fifth and sixth place. But once prices fell, so did sales of the Prius and Corolla. The F-150 and Silverado again rose to the top of the heap.

Four decades of experience suggests the only way to wean the nation off its ruinous oil addiction is prices that go up and stay up. And, although it’s a political non-starter for now, the simplest and best way to achieve that is to gradually raise the federal gasoline tax, now 18.4 cents a gallon, where it has been since 1993.

The arguments for a gas-tax increase are no less compelling for their familiarity. Higher taxes would produce substantial revenues — roughly $1 billion a year for every extra penny in tax — that could be used to fix roads and reduce the budget deficit. They would make fuel-efficient cars more attractive.

Ultimately, higher taxes could help drive alternative technologies that would slow the flow of money to finance some of the world’s worst regimes and multinational oil companies, such as BP.

Whether increasing the gas tax would reduce the need for drilling in environmentally sensitive areas such as the Gulf depends on worldwide demand for oil, which is being driven upward by the rising economies of China and India. But those countries have their own efforts to curb gasoline use, and reducing consumption in the USA, the world’s top oil consumer, is essential.

To be sure, the middle of a shaky economic recovery is a bad time to raise taxes. But total gasoline taxes are now lower than they’ve been in decades after adjusting for inflation — less than half what they were per mile driven in 1970, for example. And while shocking the economy with a tax increase of 50 cents or $1 a gallon all at once wouldn’t be prudent, phasing in such an increase — a penny or two a month for 48 months, for example — would limit the economic damage.

A gradual increase would also send an unmistakable message that the price of gasoline will eventually rise to reflect its real cost to the economy, the environment and national security. And it would give car owners plenty of time to plan for a change.

Brave (or foolish) politicians have been calling for this for years with no success, but it’s an idea whose time should come. The alternative is a status quo where nothing changes except the amount of environmental degradation and the nation’s weakness in the face of foreign oil suppliers.

USA Today