Reducing demand by increasing taxes is an obvious part of the solution to any thinking person, however suggest it to Joe Shmoe while he is filling up his SUV at the gas station and you may get a black eye. Unfortunately your post does not condense well into a 30 second commercial, so it is political suicide for our polititians to suggest. How do we get chapter one of Econ 101 accross to the masses?

It's going to get ugly in the US. For over a century professional politicians have made careers out of pandering to the populace and telling them what they want to hear. Many good ideas have been stillborn because they represented political suicide to any politician who might espouse them.

The "politics as usual" infrastructure is not prepared for what happens when the old ways pass away due to reality's incursion into the status quo. It's going to get big-time ugly because there are no palatable solutions. What's needed is leadership and elected officials willing to tell the truth and present the alternatives honestly, with the country's best interests at heart and not their own careers. The chances of those kinds of leaders emerging are somewhere between zero and none. Sometimes I think I'm not cynical enough. The next 10 years should take care of that.

"It's not that the genie is out of the bottle -- it's that 100 genies are out of the bottle," said Daniel Yergin, chairman of Cambridge Energy Research Associates. Normally known for optimistic forecasts of lowering oil prices, Mr. Yergin's firm now says the price could rise to $150 a barrel this year.

In the face of impeccable logic; and not a little tenacity from TOD and host of lesser organs, CERA have thrown in the towel and admitted all the stuff they have published to date is garbage.

It's looking better and better for Simmons every day in his bet with Mr. Tierney.

I remember a lot of speculation from friends, acquaintences, etc. on how high gas prices would have to get before things would change. Most people said $3 or $4 a gallon. But I now believe people will buy oil as long as they can afford it, even if it is significantly painful. It's simply going to have to be unaffordable to destroy demand, and that means the price of oil is going up a lot more. You could easily have labeled the post countdown to $500 oil, or $1000 oil.

It's freaking me out - soothing myself with assurances that the rise in oil prices will be gradual is getting harder to sustain.

The US and Europe, at the end of the Second World War, took radically different courses on energy prices. US, low taxes, Europe, high taxes. As a consequence, total energy consumption per capita in the US is twice what it is in the EU, and the EU, IMO, is better equipped to outbid the US for oil exports. It is interesting to see how crowded the roads are in Italy, with prices for fuel in the $10 per gallon range.

The logical trade in the US is an energy consumption tax, to be used for Social Security and Medicare, and some mass transit, offset by eliminating the highly regressive Payroll Tax. Both Boone Pickens and Al Gore have come out in support of some form of this idea (Pickens supported it before Gore).

Jerome
It's a tough gig. Trying to sell higher taxes. We have a fuel tax here in Australia (about US$0.36 per litre) however there is continuous pressure on government to have it reduced. With the pain families are currently experiencing from a number of fronts, I fear that some "bright" politician may attempt to make a name for themselves by publicly advocating the removal of the tax. Such lunacy is the bread and butter of politics.

Demand will be destroyed at some point, one way or another. Many of us chose to do our own personal demand destruction years ago. For me, it started in 2002, when I bought my first hybrid. Anyway, as long as demand is going to be destroyed, we can choose to send our dollars to the government or choose to send our dollars to foreign countries, including those in OPEC and others. Instead, we get these insane schemes to lower taxes and, thus, send even more money overseas.

Well, there is an alternative, actually: shortages and rationing. Maybe that will create the urgency that the current situation seems unable to create yet.

I am hoping for shortages. Rationing can price increase can be manged by decision makers to avoid hitting their needs. Shortages hit everyone.

The problem with the price increases of the last 3 years is that policy makers have avoided consequences.

I am recommending that everyone plant a garden. Shortages might escalate beyond control.

what a great post (i'm from europe also) :D. but...

it's too little too late. americans are *cornered*, they have nowhere to go. and just like any human being that has no place to go, the'll just hold on with their teeth on oil, instead of just letting it go
europe has high taxes....but it has 2 decades of high taxes, and very little oil production. america does not have that luxury. america won't build a public transport infrastructure because gues what... operating and fuel cost too much. you just can't budget a good public transport system from one year to another. and everyone knows it doesn't bring much profit, so it's a no-go for cash loving americans

my bet is american cities will just let it's inhabitants figure it out for themselves how to get from A to B.

Some commenters kindly called me a "rich elitist f*ck from Europe" (guilty on all counts, of course) for wanting to bankrupt poor Americans who cannot do without gasoline, preferably cheap, and are already struggling mightily.....

The thing is, it is correct to say that high prices due to supply shortfalls will ultimately have the same impact as high gas taxes. But there are two very important reasons for favoring the gas tax approach. One, it is manageable and more predictable. This let's people know without doubt that prices are going higher, so they can stop holding on to those gas guzzlers as they plead for relief. Second, by letting the market drive prices higher, that extra money ends up in the hands of OPEC and the oil companies. As a shareholder of ConocoPhillips, that's good for me, but I don't like to see a huge outflow of money from the country. Without managing this, the U.S. economy will struggle mightily to extract itself from this mess.

You are making the assumption, Jerome, that the increased fuel prices will hit personal road transport first.

I'd suggest there are other areas where increased prices will drive them to the wall before road transport.

The resistance to tax increases of any kind in America is a cultural thing as well as economic. Most view taxes as money lost as in a lottery since few experience little real benefit from increased taxes. The money seems to disappear down a black hole of military spending, interest on debt and a bureaucracy that supports mostly the wealthy and powerful.

There is a kind a royalty of the wealthy in the United States. Nearly everyone dreams of joining the top group that owns most of the country even though the chance is as small as winning the lottery.

This is most obviously seen in the bazaar case of the big dollar lotteries . Millions are spent on tickets for a chance at a $200 million prize. Would in not make more sense to have 200 one million dollar prizes so that 200 people would be fixed for life if they win?

But the culture worships the single obscene big winner, even though millions lost in that win. To have 200 winners of a large, but smaller, amount is less acceptable and sells fewer tickets.

The government loves and promotes this attitude. A single big winner is more easily and heavily taxed. The prize is easier to administer. The lottery promotion is a simple sound bite about a single big winner that the public can easily grasp with it's short attention span.

And the single big winner adds only one to the wealthy while making millions poorer. Just what the system wants.

In the case of increased oil taxes, people do not so much resent the oil companies or the oil producers as they resent having to cough up cash right now. What is the difference who gets the money? Americans will not see any benefit of it just as in losing the lottery.

rationing works

Boris
london

Regarding gas tax, does the US have a state by state tax?

http://www.gasbuddy.com/gb_gastemperaturemap.aspx

According to this map prices vary by state. Why?

It delineation doesn't appear to be entirely geographic.

Marco.

REFINERY MARGINS!

Hello everybody,
I just downloaded a time series about the development of refinery margins.(http://omrpublic.iea.org/refinerysp.asp)

Can anybody tell me, why "Hydroskimming" margins are almost always negativ and "Cracking" margins being positiv ?

Do those refinerys use different crude streams ?
What refinerys types are more common worldwide( Hydroskimming or Cracking?)

best from Germany
Thomas

I think it much more likely that the US will go to rationing before it increases fuel taxes to any appreciable extent. Rationing can be sold as a national/homeland security thing - fuel needs to reserved for the military, emergency responders, and other priority users first.

Even so, I expect that the US will be VERY, very late in implementing rationing. I would be surprised to see it any before 2012-2013 or so.

I am planning on ordinary people like myself receiving NO rations by 2018-2020 or so. There just won't be enough left for anyone except those priority users and a few other favored, non-ordinary people.

But Jerome, didn't you know that "the American way of life is non-negotiable"? Dick Cheney is right of course, but not the way he thought when he said it.... Your comment about supposedly the Obama community simply not ready to appreciate the end of the days of cheap energy suggests that his stance on energy independence initiatives might in fact be as substantial as a western town filmset.

Instead of talking about raising the tax to pay for alternative energy, you should be talking about raising the tax while at the same time knocking the lower tax brackets down.

In my dictatorship, income taxes would be for the rich, like you and me. The poor would pay a gas tax.

I think we have a good chance of seeing rationing before any obvious gas tax in the US that will work effectively. Heavy taxes just goes against the grain on their national way of thinking.

I'd like to make a point about the USA and Europe. Anyone who thinks Europe is not in a vastly superior position in regards to transportation is kidding themselves, and it has to do with city design, land use planning, and a commitment to electric rail transport.

Using the 2005 BP Statistical Review of World Energy and 2005 World Bank development indicators, I created a chart of GDP produced per Tonne of oil consumed, using the Purchasing Power Parity (PPP) approach to GDP.

Think of this as, how much economic activity is yielded by consuming a ton of oil?

Saudi Arabia: $3,578
Canada: $9,816
Russia: $10,938
Mexico: $11,558
USA: $12,430
Japan: $15,671
Sweden: $17,365
Italy: $18,273
Norway: $18,395
France: $18,623
Germany: $18,826
Denmark: $18,907
Ireland: $19,164
Switzerland: $20,491
UK: $22,596
China: $23,052
India: $28,562

In short, as is usually the case, the USA's miserable economic efficiency per barrel of oil is similar to that of the producing nations (exception Norway). It should give US leadership pause that most developed European nations which have standards of living that match the US create 50% more GDP per unit of oil consumed.

http://digg.com/politics/Countdown_to_200_oil_3_no_gas_tax_needed_really

Thanks. :)

So many good comments to such a timely article. The comment by "X" was particularly poignant commenting on the cultural proclivity of we americans to vote and act contrary to our economic interests as well as the idea that we can get something for nothing, the mentality of Atlantic City and Vegas. This has been well covered in books like "What's the matter with Kansas?". There is a terrible concatenation of factors in the US all pointing to collapse of our suburban living/ transportation lifestyle and it is happening so much faster than even we TODers thought possible.Some of the factors right off the top of my head are (1)the level of debt (from joe sixpack's Visa card and home equity to corporate paper to state and federal levels), which will IMO will never be serviced), (2)the deregulation or should I say partial deregulation of practically everything, (3)the outsourcing of our manufacturing overseas resulting in the destruction of our middle class and the concentration of power and money in just a few hands,(4) increasing inflation with the US government deliberately lying about all the pertinent economic statistics, (5) the destruction of the currency, (6) the disappearance of a responsible press. There are certainly other factors but the real story which is Peak Oil has been ignored by all our leaders and god help this country if we don't get a leader soon to show us how we can find ways to ameliorate this collapse. At what level will there be demand destruction in oil consumption? Certainly not $200 or even $300 which would translate into $10 or $11 gas, which is close to European prices. The real story is our personal auto transport model is doomed except in the densely settled areas. Taxing fuel to build an electrified mass transport network is the obvious answer but it would only be done at least initially in the urban corridors and If what Gail the Actuary says is correct, our electrical grid may not support the build out anyway. Land and house values in the distant commuter suburbs are certain to fall and in fact it's happening right now in places like Washington DC with distant suburbs falling and close in prices climbing. Most of our auto and truck fleet will have to be scrapped long before it reaches its service life. There is no reason to expand or improve airport terminals and large sections of our road network. There needs to be a rational national dialog about this with all parties at the table and not run the way Hillary Clinton and Dick Cheney did things in years past.Escalating oil prices should eventually stem demand but how do you tell an entire nation that the party is over and you cannot continue to go on living the way you have? There WILL be a recession or depression in our future. IT is the 2X4 between the eyes that will finally get the attention of the average american. Whether the national recession becomes a global recession is any body's guess but if we in the US don't get good leadership going forwards, the situation will soon be very very grave.

Keep in mind that above a certain amount, roughly $10/bbl, every dollar increase is a 1c to 2c per gallon tax paid to the dictators of Arabia, Africa, and the scoundrels running Mexico, Iran, and Veneseula. The citizens of importing nations are receiving no benefits from these taxes. At current crude prices that's $1 to $2 per gallon tax going to the worst governments in the world.

Does anyone know what caused this artificially looking price plunge in mid 2006?

graph

Might I suggest the Untax, as described on zfacts.com?

http://zfacts.com/p/933.html

A gas tax increase might be politically viable if the legislation created a trust from the revenues, which would be designated for disbursement back to every American.

A gas untax would increase the cost of gasoline without actually affecting a consumer's finances. This would incentivize an immediate reduction in gasoline usage.

If the first untax refund were paid at the start of the program, as with the current economic stimulus checks, this might just buy the support of the American public.

So why not try a 10% (or more) untax on motor fuels?

It is of course true that gas is way too low at the pump and that taxes on it need to be raised, and raised steadily. But the only way to do this fairly and humanely is to provide means whereby people can live without their cars. The means of doing this are varied: job swaps so almost everyone can live near their jobs, drastically improved public transportation, pooling, subsidies, etc. This is of course only the beginning. In the longer run, our whole way of life needs transforming.

But if the gov't just simply raises the tax without combining it with assistance and leadership (squaring with the public on what's facing us) so that everyone can survive, of course it will blow up. The current gov't isn't about to do that -- it will use the developing rage and try funnel it into war fever.

Oil traded down slightly today, appearing to have found a balance point this past week above 120 a barrel, from which it is fluctuating up and down in small increments. That may be its peak for now, that is until something changes supply or demand.

I have to wonder though if there aren't some very smart people at OPEC tweeking supply to land at a price which is as high as it can go without causing demand destruction, or causing widespread economic recession. A price balance point that provides the maximum profit, yet squeezes the US economy just enough to reduce public sentiment to wage wars.

We don't have an energy problem. I keep meeting folk who believe the "Joe Cell" will save us. All my engineering and science training does not apply any more!

Again, I read all the above and feel a little depressed. I guess because I'm still pretty new to the notion of A World Without Oil and continue to find it all hard to accept. Worse, that no-one in my personal life shares an interest.

So I ask: Is there any way a collective group of TODsters can knock and kick and scream at the windows of MSM, so that the general public are at least made aware that we COULD be facing the abyss. No doubt, that's what you've been doing, and continue to do. But, can you try harder? Is there anything I can do to help? Some mailbox drops or something? Afterall, Mr Gore seemed to get things up and running in the end. With a slide-show, for Pete's sake.

One of you replied to one of my posts (gripes?) that TOD is a form of therapy. So after six months, why don't I feel any better? No doubt I would feel better if I didn't have to come here, rather that I could chat about PO around the dinner table, with the wife and kids, or with friends and colleagues... Even the next door neighbour.

C'mon. Let's get Britney Spears off the front page. We can do it!

http://www.bloomberg.com/apps/news?pid=20602099&sid=agIPErPeNurM&refer=e...

"This is the 18th straight week that analysts have forecast a drop in prices. The oil survey has correctly predicted the direction of futures 50 percent of the time since its introduction in April 2004."

Is Bloomberg a becoming a little cynical?

Folks-
The single biggest thing we should take from the rush toward $200 per barrel oil is the sociological changes that will happen. Suburbanization of the U.S. is going to reverse. Bedroom communities are going to become ghost towns.
The most important things that Politicians can do is to make this as painless as possible, and removing the gas tax is not going to help. I would say that increasing the gas tax without a plan on how to make this transition work is not going to help much either. I have been consistently disappointed in the "Invisible Hand of the Market" to respond to anything before it's too late. "The Invisible Hand of Industrialists Profit Interests" seems to win in almost any arm-wrestling match with the "Invisible Hand of the Market." We need local politicians, city planners, and zoning commissions that are able to push for more livable industrial cities, ones designed for people and not cars. We need regional, state, and national politicians that give them the support to do this. They will have to do this in direct opposition to those Industrialists who will see this as an attack on their record oil profits. Until there is a push to redesign cities, an increased gas tax is just going to cost people who individually have little or no power a larger amount of their paycheck.
However, if those individuals start to contact their local, state, regional, and national leaders, we may see this happen.
More thoughts at my blog.
-Edly

As Kurt55 rightly say although right, the content of this article is a political suicide, ergo no politician is going to sponsor it.

The countermeasures for the present energetic crisis can only be taken in democratic countries if the major parties forget about their rivaltry and work together for the good (..or better the survival!) of the Country. Otherwise whenever a restrictive measure is announced somebody will come out promising not to do it, and continue the feast, to capture votes.

A national joint government, will be able to order a few basic measures, which will give benefits in a relatively short time:

- Rationing petrol within a reasonable pro-capita limit
- Triple the price of petrol over the rationing limit (also to curb the illegal trading of rations)
- Use the income to invest in public transport quantity, quality, safety.
- Make clear with citizens and companies that the very logic of growth has to be reconsidered, in view of a qualitative growth rather than quantitative. Car makers will make less cars, but they can transform their industry to build something else. There will be less petrol station, but space and energy can be used for other purposes. The entertainement can be made more local. Etc. etc.
- Start a serious birth control policy, which includes the immigration in the equations. Make clear that the wellbeing of a newborn child is "in primis" responsibility of the parents, not of the society. The irresponsible parents of ten starving/ineducated/hopeless/miserable children have only themselves to blame. Birth control methods have been widely available in the last 40 years.

This will be painful, but far less painful that what we will have to face because of the cowardy of the democratic governemnts, kept at ransom by the multinational corporations. The big companies CEO's will escape the disaster, at the expenses of everybody's else. The third world will die, the industrialised world will decline back to pre-industry.

And to the ones who believe that some new discovery will magically solve the problem, I suggest to think to the statement "the stone ages did not end for lack of stones". The technological changes do not follow the great rearrangements of the society: they cause them.