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Falling Energy Prices Could Lead to Higher Gas Taxes

Posted Jan 02, 2009 03:14pm EST by Aaron Task

Amid renewed violence in the Middle East and Russia's dispute with Ukraine over natural gas supplies, oil prices have risen sharply in the past week. Still, energy (and gas) prices are down dramatically from their recent highs, one of the few bright spots of the financial market meltdown of 2008.

But in an era where every silver lining seems to have a cloud, there's some downsides to the steep fall in energy prices.

First, energy prices are falling partially because of demand destruction, which is econospeak for: The economy sucks so fewer people are driving. That, in turn, "means fuel taxes aren't raising enough money to keep pace with the cost of road, bridge and transit programs," as the AP reports.

To help offset the revenue shortfall, a panel commissioned by Congress is expected to recommend a roughly 50% increase in gasoline taxes from the current 18.4 cents per gallon, according to AP.

While some believe even higher gasoline tax hikes are necessary to help wean America off hydrocarbons, any hike does diminish the benefit falling gas prices are having for a strapped U.S. consumer.

Second, and speaking of U.S. consumers, falling gas prices have been accompanied by a sharp decrease in the sale of hybrid vehicles and an increase in the sale of SUVs.

While nobody wants to deny Americans their freedom of choice, there is a risk we, as a society, are about to make the same mistakes as after the oil shocks of the 1970s and early 1990s: As oil prices fall Americans tend to forget about conservation, energy independence and energy security, and resort to our gas-guzzling ways.

If ever there was a time when a comprehensive energy policy was needed, it's now. Don't hold your breath.

113 Comments

__A_YAHOO_USER__
__A_YAHOO_USER__ - Friday January 02, 2009 03:25PM EST

they had their chance back in 1978 and blew it....

GUSTAVO R
GUSTAVO R - Friday January 02, 2009 03:40PM EST

Buy some Gas futures now....

Yahoo! Finance User
Yahoo! Finance User - Friday January 02, 2009 03:47PM EST

What we learn from history is that we never learn from history!

Moxies
Moxies - Friday January 02, 2009 03:48PM EST

The American consumer is nothing more than a Yo Yo being played by the international bankers. Put yourself in the mind set of an influential world leader, contemplating how in the world could they have any respect for consumers. When people wait in line fighting over cabbage patch dolls and actually PAY for a hat that advertises a company's products. There is always a price to pay for being stupid and apathetic.

__A_YAHOO_USER__
__A_YAHOO_USER__ - Friday January 02, 2009 03:49PM EST

Just like in the 70's and 80's, they will find some lame excuse as to why we cannot get off oil/gas for our vehicles. Solar, Wind, etc, will fall by the weigh side, again. But, not after blowing billions "developing" the alternatives.

Matt Quigley
Matt Quigley - Friday January 02, 2009 03:51PM EST

Are these guys nuts using taxation to incentives consumers to buy cars they my not want. This is just another way of saying price controls of a commodity, price control worked really well in the 1970's. Let the market determine supply and demand not government gluttony for our hard earn dollars.

Moxies
Moxies - Friday January 02, 2009 03:55PM EST

12:55 The American consumer is nothing more than a Yo Yo being played by the international bankers. Put yourself in the mind set of an influential world leader, contemplating how in the world could they have any respect for consumers. When people wait in line fighting over cabbage patch dolls and actually PAY for a hat that advertises a company's products. There is always a price to pay for being stupid and apathetic.

LeonU
LeonU - Friday January 02, 2009 04:01PM EST

The only real energy solution is nuclear. However, raising gas taxes is a sure way to lose congressional seats and the presidency.

Yahoo! Finance User
Yahoo! Finance User - Friday January 02, 2009 04:18PM EST

Hang on - it hasn't been all that long ago that $3 per gallon barely affected our fuel useage; in fact, was it not the highest consumption ever? So after maybe 6 months of cutting back the government ALREADY needs to raise gas taxes?? Just remember - once they raise it it'll never be reduced. Oh and BTW - who elected - and re-elects - these people anyway? Yep, just go look in the mirror. Ready for term limits, anyone??

__A_YAHOO_USER__
__A_YAHOO_USER__ - Friday January 02, 2009 04:18PM EST

GOD BLESS OUR PRICES

ChristopherC
ChristopherC - Friday January 02, 2009 04:18PM EST

Its seems as if Americans don't think that gas will go back up as the economy goes back up. Yes it will take time but it will happen. I guess people haven't learned not to buy these big SUV amid gas prices. I will be happy to stick with my midsized 4 cylinder engine. And then you have the government wanting to raise gas tax. They already know the American consumer is cash strapped at the time and they want us to pay more out of pocket. In MD, the state gov't decided to raise taxes to raise more revenue. Let's just say that that has backfired big time and the state is in a bigger hole. now

JohnTheNYer
JohnTheNYer - Friday January 02, 2009 04:18PM EST

Looks like more and more people are driving their Hummer again. =(

Nate
Nate - Friday January 02, 2009 04:19PM EST

Of course an increase in gas taxes will not be repealed even after gas prices go back up.

Todd
Todd - Friday January 02, 2009 04:23PM EST

here is an Idea...many may not like it, but after a while people would just have a budget... this would be world wide... make a gallon of gasoline $1.95 World Wide. Then let inflation make the value of how much it costs. The Saudi's who pump this stuff and made our Gas $4 were still and are still only paying around $.90 a gallon. TAXES Same as sales tax. PA, MD, VA, etc...6%. If the entire world had to pay the exact same price for the exact same product (You do the same for the Cabbage patch dolls) there would be stability in that economy. If local government in any area throughout the world wants to raise or lower the price and initiate some sort of non working "stimulus package" to offset it, simple cut off their supply and make it fair!

NicholasM
NicholasM - Friday January 02, 2009 04:24PM EST

If vehicles become more fuel efficient; or people drive less; and the money used from the gasoline tax is for road repairs, how can we maintain the roads with less money?

Gorilla
Gorilla - Friday January 02, 2009 04:28PM EST

That's why I have been driving my 96' Mustang GT Conv for the past 8 1/2 years. Think I want to give one more cent of my money to the Auto Makers. Then they wonder why they have to be going to the gov to bail them out (and fly in on a private plane by the way..) You can sum this up and the housing and credit issues in one word.. GREED! and then YOU and ME have to bail them all out. Going to lead to one of two things people, colapse or revolution. Remember where you heard it first.

na
na - Friday January 02, 2009 04:30PM EST

i never under stand why ppl scream and hoillow. about we need to do this or that to help the comsumer. it all comes down to making money. company's are going to use fear and other way to make money. oil is just fine at the price it is now. the roads that are being build here are fine. there is no need for more tax money. you know when a company can make more money they will. open your eyes ppl. don't be blind to the fact that money is the name of all. next time take a look at how the oil ppl across the world live. i wonder when enough money is enough for ppl like that. just remmember what the price of oil done over the last few years here. it is bad when ppl have to stop shopping for food and go to bed hungry when they have no choice but to use ther money to buy gas to get to work on. it comes down to who makes the money now day's. let me say one more thing. the more money and tax that falls on us all. the more it will take to just leive. so the more one has the more it takes to keep it. o and by the way. sence gas price is down that means you and i can pay more tax and more for everything else we need. thats how they see the way to get more money. i could be wrong in the way i think. but i know it is going to cost alot to find out if i am. i for one don't see the need to find out do you ?

Harold
Harold - Friday January 02, 2009 04:32PM EST

Sounds like the old Democrat line. Give everybody $600 then spend billions bailing out poorly managed companies. Then raise the gasoline tax as well as the other increased Obama has promised. Then the taxpayer is supposed to foot the bill and not complain!

Gracias
Gracias - Friday January 02, 2009 04:33PM EST

Anyone remember John Anderson, presidential candidate of 1980? His policies could have avoided these disastrous unending oil wars. But he was crucified for recommending the responsible: raising the gas tax. Now, let's punish bad behavior and reward the good, by 1) raising fuel taxes through the roof to $4 per gallon. While we are at it, 2) let's punish home owners with a new house owners tax... If you own a house here's an automatic 10 percent tax across the board for each one you own. After all, it was private real estate ownership that got us into this mess. You can use fuel to give incentives in the form of 1) cash rebates to renters of high density housing and 2) build free public transportation. Quit rewarding irresponsible SUV drivers and homeowners who waste our resources on energy wasting private homes.

Dan
Dan - Friday January 02, 2009 04:39PM EST

This has nothing to do with driving SUV's it's about TAX and Funding! We are not driving as much because of the economy and money issues, Hell, we are all afraid of losing our jobs, our homes, everything! We are saving every penny we can...hence, not driving as much. Now they talk about more TAX! The Politicians are doing nothing to help the tax payer, just continuing to take more. Yahoo Finance user has it right....read it. Keep electing these people that keep taking from the middle class and giving to those that helped cause our current crisis...Term Limits are needed! Our politicians are responsible for much of this!

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