Thursday, February 24, 2011

Gas Prices Around The World

"Petrol prices in America are substantially below levels elsewhere in the rich world, and this is almost entirely due to the rock bottom level of petrol tax rates. The low cost of petrol encourages greater dependence; the average American uses much more oil per day than other rich world citizens. This dependence also impacts infrastructure investment choices, leading to substantially more spending on highways than transit alternatives. And this, in turn, reduces the ability of American households to substitute away from driving when oil prices rise.

There are any number of good reasons to raise the petrol tax rate. The current rate no longer brings in enough money to cover current highway spending. Petrol taxes are an efficient way to raise revenue, and the government needs revenue; President Obama's deficit commission recommended an increase in the federal petrol tax rate. Burning oil produces carbon emissions, and dearer fuel would reduce America's sky-high per capita carbon footprint. But a higher tax rate would also diminish the possibility that a sudden rise in oil prices would throw the economy into recession. That would be a nice risk to minimise! And yes, higher tax rates would hit consumers just like rising oil prices. But those prices are rising anyway; better to capture the revenue and use it, all while improving behaviour.

It's hard to take any fiscal hawk seriously so long as this measure isn't on the table. It's as close to a win-win solution as one is likely to find."

~ The Economist, Tax away vulnerability

Grouch: The Netherlands tops out the list at around $8 a gallon. This number is probably higher today considering the turmoil in the middle east and its impact on crude prices. The Economist seems very keen on advising the US how to fix its budgetary woes, and lord knows we need all the help we can get. The raising taxes solution always suffers from one major problem: the crowd in Washington can't control their spending and will offset any new dollars in tax revenue by on average $1.40 in new expenditures. Until this spending addiction is addressed and some charismatic political figure somewhere in either party actually shows some leadership and statesmanship, the US deficit problem will continue unchecked.


  1. Last night I watched some senator (from Arizona I think) address a town hall meeting. Very articulate, laid out the issues well, lambasted his colleagues for profligate ways etc. etc. And I thought every single Senator and Representative does exactly the same.
    People ask questions and they give sincere answers that are so-well rehearsed and sound sensible but don't really get at the crux of the questions. Sadly, people accept the answers and its basically business as usual.
    I wonder when the American people are going to drop the polite facade and ask for action beyond what is happening at the state level.

  2. I have to agree with you about not giving the Congress any more money to play with. The US is spending much more than it should right now, including all the money collected for Social Security. The unfunded liabilities were calculated by Laurence Kotlikoff at $202 trillion. We need serious cuts, but that requires leadership. Instead, I think we will get more of the same which is money printing (inflation).

  3. Gas is nearing $1.40 a litre here, or $5.41 US/gallon.

  4. Does anyone in Canada care about the ridiculous prices of Gas here? What about the Federal Election Campaign? Why are they not addressing this issue at all??????
    D. Truell, Pres., CBS