Every day is already a gas tax holiday

The cost of gas has tripled in the last few years, Goldman Sachs is predicting oil at $200 a barrel, and the economist Paul Krugman makes the case for why this isn’t a speculative bubble. Given that reality, what’s a country to do?

Subsidize?

Both Hillary Clinton and John McCain’s recommendations for a gas tax holiday this summer begin us down this road. As it stands now, we are already experiencing a gas tax holiday, every day of the year. Our gas taxes have 42% less buying power today than when established in 1993, which is why our road infrastructure is in such sorry state of disrepair. Imagine trying to keep your own life in good working order with 42% less buying power.

And indeed, filling up the gas tank is taking a significant bite out of the average family’s household budget, and is forcing difficult choices among those with the lowest incomes.

Is subsidizing the answer? It might be, for some very small slice of Americans. Which doesn’t mean it should be for all Americans.

Indonesia gives us an example of what this path holds. That country has been subsidizing gas for its population for years, initially certainly with good intentions of helping ease the cost of a perceived necessity. This year, Indonesia anticipates that these subsidies – 40% of the real cost of fuel -- will eat up 13% of its federal budget, more than it spends on education and health care. When the government reduced these subsidies in 2005, riots ensued. Yet projections around gas prices are forcing the Indonesian government to sensibly reduce is subsidization a seond time. It is expected to announce another reduction in the subsidy shortly, resulting in an immediate 25-30% increase in gas prices.

I think we would all agree that an overnight 25% increase in fuel prices is going to be a real shock to their economy. But it is the right thing to do. Better yet is to never start down this path. It isn't helpful, not in the short run, nor in the long-run. More on that in the next post.

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Which cars get the best mileage?

We all use the Prius (45 mpg highway) as the short-cut reference for a fuel efficient car. The folks at Honda must be ripping their hair out at the relative silence yet equal performance of the Civic (also 45 mpg). And the Mini Cooper, with its award winning ad campaigns, should surely be taking advantage of its incredible mileage (36-40 mpg). And for me, the fact that the Pontiac Vibe, a car I know little about, is in the top ten was a revelation.

Note to policy makers and car buyers, as I've said before, don't give special treatment to "hybrids." More than half the cars on this list have regular engines. Fuel efficiency is the key, and even more relevant is passenger miles per gallon. More than seventy-five percent of car trips carry only one driver. The most expedient way to improve fuel efficiency is to move more people per gallon consumed. [I have to reference GoLoco here, our best-in-class ridesharing site.] It takes 25 years to turn over the US fleet of passenger vehicles to get the full benefits of the new CAFE standards. But we could get those benefits this week if more people would share rides.

Here is the top 10 list link from AutobeTel.

Here is an interesting article about how buying high mileage used cars is actually the most CO2-minimizing path (if you are going to buy a car).

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