An Idea: Repeal or Amend the US Gas Guzzler Tax
Posted by Gail the Actuary on May 25, 2009 - 9:29am
This post is a guest post by Morgan Downey. Morgan is a commodities trader and author of the recent book Oil 101.
The US gas guzzler tax was created in the Energy Tax Act of 1978 and designed to discourage the purchase of inefficient vehicles. It had precisely the opposite effect.
The tax is paid by a vehicle buyer at the point of purchase and not by the manufacturer. The tax is posted on the same window sticker as the EPA MPG rating at a new vehicle dealership. The gas guzzler tax only applies to cars. As SUVs and light trucks are not affected, the tax has created a major incentive since 1978 to purchase a heavy vehicle. Light truck and SUV sales have gone from around 20% of total non-commercial vehicles sold in the US in 1978 to around 50% today (other factors have also played a part, but these have not been government related).
Gas guzzler taxes apply to cars that get less than 22.5MPG, with taxes beginning at $1,000 and increasing to $7,700 for cars which get 12.5MPG or less.
Amend the gas guzzler tax to eliminate the exemption for non-commercial light trucks and SUVs or repeal the law entirely and replace with a Vehicle Efficiency Market. This would immediately improve the incentive to become more efficient.
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Thanks! I can see that the existence of this tax would make an SUV or a pick-up truck look like a better buy compared to large car, or I suppose a minivan. So if someone needs larger capacity, they would tend to look at SUVs rather than cars, even though they re inherently less fuel efficient than cars--not the desired outcome.
Does anyone have statistics showing actual price comparisons--how this works?
The gas guzzler tax doesn't really play a part in purchase decisions because almost no American brand car is subject to the tax. Heavy and powerful cars can get pretty good highway mileage with aerodynamics and a long overdrive gear, but their city mileage will be much lower, e.g. the 500hp Corvette Z06 gets 15mpg city/24 mpg hwy and pays no gas guzzler. The Pontiac G8, a heavier sedan with a 361hp V8, gets the same mileage. BTW minivans are also light trucks and exempt from gas guzzler.
I think CAFE did much more to discourage car sales vs. light trucks because minivans and SUVs counted towards the 21 mpg truck average instead of the 27 mpg car average. They were really boxed in to a certain product mix in order to meet the CAFE average, and small cars became their giveaway loss leaders, see Chevy Cavalier and Aveo.
I agree that the gas guzzler tax hasn't impacted many vehicles. However, the point of the law was that it was supposed to push efficiency and certainly not encourage SUV/light truck sales.
Regarding US CAFE standards, since 1975 (when CAFE standards began) European vehicles have accounted for fewer than 8% of US auto sales, but 100% of CAFE fines. No US or Asian auto maker has ever been fined under CAFE.
I don't think that CAFE standards in the past have done anything to improve US efficiency. CAFE standards have merely been a rubber stamping of easily attained US automaker efficiency.
Last week the US administration announced a supposedly tough new CAFE goal. However, a good description of this new US CAFE standard is that it (my bold emphasis):
An efficiency standard which is at least 20 years behind currently available technology is no standard at all.
I think the one part of the tax code regarding vehicles is the tax disadvantaged position that cars and small trucks, vans under 6,000 pounds gross vehicle weight (GVW) have. A truck, van, or SUV over 6.000 pounds can be depreciated over 5 years and take a Section 179 deduction (up to $25K), just like computers and other 5 year property. Depreciation on cars is limited to a maximum of $10,960 the first year, $4,800 the second year, $2,850 the third year and $1,775 each year thereafter. If you have a car that costs $35-40K, it takes forever to depreciate it. If you level the playing field between cars and large trucks, people would buy more fuel efficient cars.
If I am not mistaken,the Big Three lobbyists were partly responsible for the loophole exempting light trucks,but there was and is a genuine need for light trucks.My folks raised five kids without a car,because they could not afford two vehicles and the farm simply could not function without a truck.We sardined into the cab,rode in the back,or stayed home.
The bosses in Detriot got together with the guys from Madison Avenue and convinced the typical suburbanite citizen that he really would morph into an alpha male if only he would pay two to three times the regular price for a truck tricked out like a car.
The profit margins were enormous.Suv and over decorated truck sales kept the production lines humming.The lower end of the auto market was more or less orphaned;money was available for styling changes and advertising,but not engineering.If not for that pesky CAFE thing,they might have just quit building lower end cars altogether.
Japanese cars kept getting better.The young folks who bought Cavaliers and Contours either new or second hand learned the hard way about gas mileage and maintainence/repair costs,but they did learn for the most part,and when they got a little older and more prosperous,they were not inclined to buy domestic makes again.OTOH,the typical buyer of a small,cheap ,cramped Toyota or Nissan ,new or used,was quite happy to buy the same make again,just a bigger and nicer version the next time around.
Detroit RIP
I'm not an auto expert,but I used to read all the good car mags,and this is a pretty good short summary of thier interpretation of the facts.
I like this interpretation! The car market really has been ignored by big three.
A big piece of the puzzle is lean manufacturing. Lean manufacturing was embraced by the Japanese companies since the war, however, the big three still haven't completely caught on. The Japanese are able to produce better stuff cheaper.
Looks like it will be "The Big One" as early as next week!
This is like saying the tax on cigarettes doesn't discourage smoking because people are still smoking.
All this proves is that taxes are too low(or effectively repealed by the exemption for light trucks). Why do we need to create a silly market anyways?
What would you rather have--phoney 'choice' or a good deal?
A better idea would be to replace old cars. In the US is age of the average car is 9 years old.
Under their stimulus plan, German government is buying old cars and junking them. The owners get cash toward the purchase of a new car.
It's very popular.
http://news.bbc.co.uk/2/hi/business/7989583.stm
The idea would work for replacing old cars with energy efficient cars except Detroit doesn't make energy efficient cars so this idea isn't mentioned.
I think the point is that we need the taxes on SUVs and trucks not used for business purposes as well. It doesn't work to have them just on cars, especially if SUVs are less fuel efficient.
Gail, what I am suggesting is that framing these issue in market terms is completely wrong.
For example, we use taxes to punish behavior and expect people to get the message( they never do).
I don't believe that high taxes on addictive tobacco or oil will impact be as effective in reducing demand as directly reducing( by education and lifestyle changes) the need for it with energy efficient cars. The reason politicians like taxes is because it raises money 'for the people's own good' while lining their pockets( see..it's win-win)!.
As the Ayres article pointed out higher demand will lead to....higher prices! So it's in nobody's( of TPTB) interest to simply reduce demand!
Market theory doesn't believe in lifestyle changes(unnecessary..just let the system of supply and demand work its miracles!).
How do you mean? People do respond quite well to economic incentives.
How strange. Despite the effect the recent spike in oil prices had on efficiency of new cars? Despite the European example? Well, good luck to you with the soft paternalism of "education".
Have the politicians lower other taxes with the same amount. It's up to you, the people.
Because all politicians are bought by the Big Oil?
With punitive prices, demand diminishes and lifestyle changes are accomplished.
I would change 'lifestyle' by directly limiting consumer choice. Nobody has a 'right' to the mistake of buying an inefficient car. It impacts society at large.
The Europeans pay a lot in taxes for passenger cars that get average of 44 mpg which is a gain of 20% over the last 30 years. This is not tremendous progress. Instead it shows that under the heaviest taxes the economic impetus to improve efficiency is weak at best.
http://money.cnn.com/2007/05/21/news/international/europe_gas/index.htm
Shirley, you must be joking.
THEY don't need to buy ALL of them.
Maybe some of them are too stupid to demand bribes/campaign contributions(yeah, right).
You have a libertarian perspective: miraculous but simplistic laws of supply and demand ruling human behavior.
I can see why you can believe in unlimited atomic power.
That thought doesn't scale.
Average mpg is just one adaptation. Denser cities, better public transport and moving closer to work are others.
No, I actually believe you live in a democracy.
I do have a libertarian perspective, yes. The rest is just your attempt to discredit it. As I said, that economic incentives does shape behaviour to a large extent is obvious.
Believe? I simply know it is a technical possibility and currently the only way with which we could replace fossils. But perhaps something else will appear before we start to ramp down fossil use.
Actually, raising the cigarette tax (that was a comparison you made somewhat earlier in the thread) does impact smoking behavior (http://www.pnmj.org/03052005_cigarette_tex.asp).
The effect of a tax on gas guzzlers, and not SUVs is complicated, and different because cigarettes you have to buy frequently, and that is not true of cars, plus as a majority of people buy cars on credit, a small tax is hard to detect in the monthly payment.
Taxing gasoline, on the other hand, may share some of the characteristics of taxing cigarettes. I am no libertarian, and no authoritarian, but at this point in the ACC game, I say, do it all! Tax the cars, the drivers, the roads, the gasoline, the environmental destruction and the carbon emissions. (I must have left some out). Then mandate fuel efficiency and ration the fuel.
No doubt some people were priced out of the cigarette market by high taxes but I think it was mainly thru the really heavy social pressure and the defeat of the tobacco company deniers.
The UK smoking ban will cause an estimated 400000 people to quit smoking.
http://news.bbc.co.uk/2/hi/health/7480856.stm
It actually is rather idiotic to think that people would be really motivated to quit by an increase in the tax on a highly addictive, poisonous product like tobacco.
Based on smokers I've known, the social pressure of smoking outside, medical information and now smoking being banned in bars is decisive.
But the idea of taxes as a way to regulate behavior is mainly a disguise for raising money for the government.
Hi Majorian, I think your peer pressure idea has merit. One idea relying on such pressure would be to require a large 4"x4" sticker with the EPA MPG of a vehicle on vehicle registration plates. That alone would cause some (not all of course) to stop and think of the impact of efficiency choices. I am not saying this should/shouldn't be done. Just throwing it out there as a suggestion to test its merits.
That would probably annoy 4x4 drivers more than making them think about their consumption. A better way may be to require expensive commercial registrations for all light trucks and maybe offset it with a tax credit for documented business use (cargo or multi-passenger use only). Even that would be pretty unwieldy in practice, but it would make people think about their choice of driving an off-road truck as a private passenger vehicle. Boaters and off-road enthusiasts would be screwed, but that's the price of a "lifestyle choice".
After I typed the previous comment I forgot to clarify I meant 4 inch by 4 inch sticker. I belatedly realised that many outside the US call SUVs 4x4s.
That's funny. They were called 4x4s in the US too, but the marketers needed a new name that sounded less truckish and more appealing to soccer moms. I remember when they first started using sport utility vehicle in the early to mid 90's and it sounded very awkward.
Yeah, the guys who think scientific studies have something to say about this are real idiots. Some excerpts:
Well over 100 published studies estimating the impact of price on cigarette smoking have been conducted by economists and other researchers.5, 9, 10 These studies apply econometric and other statistical methods to a variety of aggregated and individual level data from numerous countries, states, and other areas. These studies clearly demonstrate that changes in cigarette prices, resulting from changes in cigarette taxes, manufacturers' prices, and/or other factors, lead to changes in cigarette smoking.
most of the estimates from the USA and other high income countries tend to fall in the relatively narrow range from -0.25 to -0.50. This implies that if cigarette prices rise by 10%, overall cigarette smoking will fall by between 2.5 and 5%.
Moreover, a number of recent studies conclude that youth smoking is relatively more sensitive to price than adult smoking, with some estimates implying that teen smoking is up to three times more sensitive to price than adult smoking.
Estimates from econometric models that account for the addictiveness of smoking imply that the long run impact of price on smoking is about double the short run impact.
And the reason I advocate such taxes in some cases is due to me wanting the government to have more money? No, you are simply wrong.
And BTW, what's wrong with the government having at least enough money to balance its budget? As long as you insist on electing governments who will pitch trillions of dollars at every problem going and start wars costing further trillions paid from "off-budget accounts", then you either need to raise taxes or declare bancrupcy very shortly. One or the other, no alternate choices!
"And the reason I advocate such taxes in some cases is due to me wanting the government to have more money? No, you are simply wrong."
Disagree! follow the money, its all about the money, the govt (state and fed) have computer models showing a tax increase will result in less consumption, thus resulting in less money received via tax. That money will be collected somewhere else, wether its a soda tax or a fast food tax, pet tax, mileage tax, hours spent watching TV tax, or even a TV tax, (like in the UK), water hose tax the list goes on about how stupid the taxes can get, but somehow and someway, the govt will find a way to tax us to pay for things the govt deems we need and don't need.
If everyone quit smoking, all money received would be ceased. Govt relies on money to exist. Partially true on changing behaviour, but its really all about the money. If the govt was concerned about your and mine health they would ban tobacco, ban alcohol, red meat consumption etc. Bottom line the govt could care less about our health, the govt just wants our money. Because they think they know better on how to spend it.
There is talk in Texas about installing flow meters on private owned water wells to charge a TAX on your usage from your own private water well.
I just saw the video from IOUSATHEMOVIE.COM and basically if the govt stopped all fraud and waste spending, quit spending on the war in Iraq and Afghanistan the federal debt would be reduced by less than 3%!
I don't have the answers, but a tobacco tax will not solve world problems, only make the world population continue to increase, which further exacerbate the worlds problems. As the people of the world will continue to propigate and use resources which are finite. which are the unintended concequences! more people in the world using more resources. just freaking lovely isn't it?
I quoted research that said 10% increased tobacco price means 2.5-5% less consumption, so a tax hike would clearly increase revenue. We are not past the maximum of the Laffer curve.
False - they can't ban that stuff, since they would be voted out of office. But they might be able to increase the paternalism gradually with taxes. Actually, after tobacco smoking has been slowly decreased by taxing the stuff, a number of European governments have lately been able to ban smoking in restaurants, pubs and other public places.
So, the politicians who advocate tobacco taxes does it to get money to spend, not out of health concerns. And you know they are lying how, exactly?
It gets a little scary when you doomsters say cancer should be embraced as a solution to resource problems you see in your crystal balls.
Less poverty, longer lives and more urbanisation means lower nativity rates. Growth, health, education and technology is the way forward.
thank you for your reply, but i am not convinced the govt is here to help. reason being is: have you looked around at the people of this country? fat and/or obese is becoming the norm. I blame diet and exercise, but really i blame corn. high fructose corn syrup. "hfcs"
its in most any packaged food and soft drink we consume.
"kingcorn.net" shows a video on the stuff. sometimes on PBS. a little dry at first but once you get into it, it explains how corn has contributed to our weight problems.
nobody wants to die, but it will happen regardless. like the song says " everybody want wants to go to heaven, but nobody wants o go right now"
world population has more than doubled since 1960. where it was once 3 billion people, it's now at 6.7 billion people.
do the math, finite resources and increasing population. it's a no brainer.
Even if it did and people were able to continue buying them, energy efficient cars by themselves only exacerbate our problems. It has been shown time and again that people squander the efficiencies by driving further and using their cars more.
We have to provide alternatives to driving either by giving incentives for people not to drive or creating living conditions where cars are not necessary. Mass transit in the form of electric trains and hybrid buses should have been put in place a long time ago. Unfortunately where I live they are cutting back on our local Metro rail service just when we are going to need it the most.
Anyone commuting in a single occupancy vehicle should be stigmatized and penalized unless they have a special permit to do so. Mileage should be taxed after 5000 miles a year. It has to become socially unacceptable to use a private ICE vehicle for most purposes. Yeah, I know I'm dreaming.
Will lower oil prices result from increased efficiency? Possibly. However, not everyone will use more efficiency savings to buy more oil. Some will save more or buy something other than more oil.
US government policy (the current gas guzzler tax) is promoting waste. This is not a good thing. On a selfish basis, efficiency is a competitive advantage. A more efficient nation is more resilient to price shocks and shortages. Lower prices from increased US efficiency may be eliminated by other nations increasing consumption - which makes those nations relatively more susceptible to supply shocks.
Are you sure? A more efficient nation doesn't have much to curb.
I think we are lucky to have the US wasting 10 mbpd. That will provide a cushion for all of the world if peak oil really hits us. Your involuntary curbing of that waste will give us all some time to adjust. Just think what would happen if you were efficient and PO hit us (a few years later), when every drop is needed.
A more efficient nation doesn't have much to curb but it also doesn't have a large need to support. In a world of $150+ per barrel oil I would rather live in a nation that explores for and produces large amounts of oil but only consumes 10million barrels per day rather 19million (approximate current US consumption). The 9 million we used to consume can be sold elsewhere.
Well, yeah, being rich and healthy is better than being poor and ill, but if you could choose, whould you rather be real thin than somewhat fat when a serious food shortage hits you?
I think in terms of oil consumption the US is thin (rather than fat). Any slight cut in food (oil) supplies will have a major negative impact. To carry the food analogy further, what we should strive to do is bring ourselves to be able to happily prosper on what we grow in our back yard and build an "efficiency" store for hard times which may occur suddenly.
Yes, in a way, through prices, since demand is so inelastic. But the inelastic demand at these levels is not in itself a proof that the marginal oil is very important to you. It has just been extraordinarily cheap, so that even a doubling in price didn't mean much to the ordinary consumer. Demand destruction doesn't seem to really set in below $100, but above this, we should expect the demand to be increasingly elastic.
That's b/c the improved energy efficiency is driven by rules and tech, not by gas prices. If driven by higher gas prices, people would curb their use overall.
Marjoran,you must be raking in the coin,since you seem to think we can all just trade in our old cars with a little help from Uncle Sam.Let's consider a few additional facts.
1Uncle Sam if flat xxxxing broke.
2The folks I know who drive older gas hogs are doing so because they can't afford to trade.I'm in that boat myself.I do drive my 18 year old 15 mpg truck as little as possible, and run all other necessary miles in a 10 year old Escort that gets 36 mpg on the interstate.
3I get screwed in order for you the new car buyer to enjoy a subsidized trade.You pay less taxes,I pay the same as always.
4If the old cars traded under the program are crushed,I get screwed again because the used car market tightens up and I will have to pay more when either of my clunkers dies.
5There is no assurance that given the energy and materials used in building a new car that there will be a net saving of either energy or resources.Since I drive my old truck only once a week or so for an average of less than 4000 miles a year, it would take many years for any savings to be realized,if ever, by replacing it with a new one.
6There can be a good case made that any money thrown at the auto industry is not only going to be wasted but that it will also actually impede any eventual recovery by propping up an industry doomed to a great deal MORE SHRINKAGE OVER THE NEXT FEW YEARS-if indeed we live to see a recovery.
In my humble opinion,such programs are little more than thinly disguised attempts to subsidize the Detroit and Detroits associated the hangers on at the expense of the rest of us. Now when you get right down to it,I don't feel sorry for the auto workers or the auto stockholders.The stockholders would not be doing anything to help me out if the situation were reversed and they were all raking it in.I didn't notice the auto workers coming to the aid of the folks down here in furniture and textile country as we lost our industry to overseas competition.If they had exercised a little common sense in negotiating thier wages and benefits maybe Detroit would be solvent.Probably not,but it would have helped.
I fail to see why they should get such incredible bailouts,nobody else ever has,except of course the banks.Any body who feels sorry for a broke auto worker who has been paid(not necessarily EARNED)upwards of two million in wages and benefits over the last couple of decades is long on compassion,maybe,but short on every day judgement.They should have saved some of it.
Now as far as WHY they DO get the bailout goes,that is perfectly obvious.You got the connection,you get the payoff.
FarmeMac,
the Germans are extending their car-replacement/economic-stimulus program.
They want to boost their economy.
Now maybe they're a bunch of dunces or maybe not.
2The folks I know who drive older gas hogs are doing so because they can't afford to trade.I'm in that boat myself.I do drive my 18 year old 15 mpg truck as little as possible, and run all other necessary miles in a 10 year old Escort that gets 36 mpg on the interstate.
Well, that's just fine. Give yourself a gold star.
The program is for people who waste gasoline--not you. Virtue is its own reward.
3I get screwed in order for you the new car buyer to enjoy a subsidized trade.You pay less taxes,I pay the same as always.
Me, I got already got the $3000 tax credit years ago on my hybrid and I don't have a gas guzzler to sell. I haven't heard of anyone buying a hybrid every year just to get a tax credit but maybe that notion makes sense to you.
The idea of a economic stimulus program is to get average people spending money--if you don't understand how that works you haven't been paying attention. Right now most of that stimulus money goes to bankers who caused this Depression and are unlikely to cure it.
4If the old cars traded under the program are crushed,I get screwed again because the used car market tightens up and I will have to pay more when either of my clunkers dies.
How will the used car market tighten up if everyone is driving a new car?
Naah... the price of clunkers will crash and everyone will take them to the dump where they belong.
5There is no assurance that given the energy and materials used in building a new car that there will be a net saving of either energy or resources.Since I drive my old truck only once a week or so for an average of less than 4000 miles a year, it would take many years for any savings to be realized,if ever, by replacing it with a new one.
Plenty of studies have been done of the input energy used making cars and its only a fraction of the energy used driving it around. Here's one that says it takes 6.6 mmbtu per vehicle to manufacture a car--the energy of 55 gallons of gasoline.
http://www.cleanmpg.com/forums/showthread.php?t=18240
6There can be a good case made that any money thrown at the auto industry is not only going to be wasted but that it will also actually impede any eventual recovery by propping up an industry doomed to a great deal MORE SHRINKAGE OVER THE NEXT FEW YEARS-if indeed we live to see a recovery.
Really? A good case? Okay then make the case!
In my humble opinion,such programs are little more than thinly disguised attempts to subsidize the Detroit and Detroits associated the hangers on at the expense of the rest of us. Now when you get right down to it,I don't feel sorry for the auto workers or the auto stockholders.The stockholders would not be doing anything to help me out if the situation were reversed and they were all raking it in.I didn't notice the auto workers coming to the aid of the folks down here in furniture and textile country as we lost our industry to overseas competition.If they had exercised a little common sense in negotiating thier wages and benefits maybe Detroit would be solvent.Probably not,but it would have helped.
Iacocca revived a bankrupt Chrysler! US manufacturing sector is bigger than the GDP of whole countries like India and CHina a few years ago; in 2008 GM was the 4th largest money maker behind Exxon, Conoco and Chevron and Ford was number 6. Letting a huge chunk of national industry
burn away is not something any other country would allow!
I fail to see why they should get such incredible bailouts,nobody else ever has,except of course the banks.Any body who feels sorry for a broke auto worker who has been paid(not necessarily EARNED)upwards of two million in wages and benefits over the last couple of decades is long on compassion,maybe,but short on every day judgement.They should have saved some of it.
The unions were looking out for their members, that's the American way. You're just envious.
Now as far as WHY they DO get the bailout goes,that is perfectly obvious.You got the connection,you get the payoff.
The auto bailout ain't nothing compare to the thieving bankers. But the fact is they're probably both too big to fail and you shouldn't want the economy to simply collapse away to nothing because the small fry always get burnt the worst.
PS Stop listening to Limbo.
Well it may be that the Germans are idiots.They are fixing to shut down thier existing nuclear capacity and it looks like they will be depending on the FSU and OPEC for thier survival.Do you think the Russians REALLY like the Germans?-not that we are whole lot smarter.
I notice that you skip over the fact that Uncle Sam is broke and that we may be printing enough funny money to bring about the real crash by means of said funny money alone.
If the fact that you get an income tax credit for buying a new car puts me in an effectively higher bracket than previously in relation to you (unless I also buy a new car)does not make sense to you,I suppose you don't understand taxes very well.A very great part of our troubles are due to the fact that we have a tax system that encourages wasteful and uneconomic spending.I fail to see that virtue has anything to do with this issue,except that by VIRTUE of a tax credit of say 15 percent of the price of a thirty thousand dollar car you get a gift valued at 3000 bucks-assuming that you bite of course.And that of course means a little bit bigger slice of the pie for you,at everyone else's expense.
You might be able to make the case that in a world of continueing exponential growth such a subsidy is a win win, but that world appears to be on it's way out.Incidentally I am semi retired and pay very little nowadays,but that does not mean that I don't have a stake in how taxes are spent.
Three thousand spent on subsidizing a new car purchase is three thousand that can't be spent on for example research in non chemical means of pest control in food crops,or home health care for my aged mother.In the larger scheme of things my mother is not important,but ridding our environment of some nasty chemicals while silmantaneously feeding 6.7 billion people might be considered a worthy priority in some quarters.
I understand very well the possible benefits of subsidizing new tech such as the hybrid car,but that is not the same thing as propping up a bankrupt and hopelessly decrepit business.In the real world things have a useful life span,and they die.Something else fills the niche so vacated.
Do you or does anyone else not believe that if GM and Chrysler cease to exist that somebody more capable will buy up the wreckage and be building new cars and trucks before the current unsold glut is cleared off the lots?If blacksmiths and horse breeders had possessed the political clout of the car companies and the big unions,we would still be riding horses and driving buggies.
Every body driving a new car?Folks who buy new cars do usually trade something in,and after a while it might be old enough for the less fortunate to buy it,so you may have scored a minor point here,but the vehicle fleet will not turn over in less than a decade under any circumstances,and it usually takes a lot longer.
Iacocca merely prolonged Chryslers misery.
GM's the fourth largest MONEY MAKER IN 2008?WILL YOU INTRODUCE ME TO YOUR CONNECTION?I haven't had anything good enough to to make me believe one the size of that since the sixties.Maybe you meant money churner.Churning money is not making money,and it is a hoary old truism that if you want more of something,you should subsidize it.Does anyone really want more GM?
My old Ford has a bumper sticker on it the reads THIS IS FORD COUNTRY.ON A QUIET NIGHT YOU CAN HEAR THE CHEVYS RUST.
I'm not broke,and I made a conscious choice many years ago to live somewhat frugally in order to live in my camper in the woods for a few months at a stretch reading good books and fishing rather than working my butt off FIFTY WEEKS so I could afford to stay in the woods in a camper for a couple of weeks annually.
Jealous? XXXXed off is more like it that the people who had the cake and ate it now want more of my bread.We don't have a lot of cash, but we do have the skills and material resources to survive if tshtf,which has been predicted to have a 49percent chance of happening by Jared Diamond.You might enjoy his books.He is held in the highest possible esteem by most of the regulars here.
I would not trade my life for the life of an auto worker,evenup.In my estimation I have a lot better chance of living thru what is coming and enjoying the rest of my life than an auto worker.I do have a great deal of respect for them as individuals holding down dreary mind numbing jobs.
The average person who might be buying a car every three or four years is finally waking up to the fact that he has been had,and that the money would have been spent far more wisely on other things.We have been living way past our means for a long time.If you want to stimulate the economy with more deficit spending,why not just lower every taxpayers withholding rate?That would distribute the money much more equitably across the economy.
Fifty five gallons of oil to manufacture a car?According to the iron and steel industry it takes over TWO barrels of oil to manufacture ONE ton of steel.Not a CAR mind you,but the STEEL used to MAKE the car.And even a small car has about a ton and a half.
Make the case that we may be in for a very rough time and possibly a rough time SQUARED over the next few years? I don't need to,as about half of the posts on this site deal with that very subject.
Your last comment seems to reveal your real feelings when you mention thieving bankers and then say the auto bailout is nothing,but actually it is more of the same.Do you by any chance have a bigger than average stake in Detroit?
I don't want the economy to collapse any more than you do,but I believe,no offense intended,that my world view is somewhat larger than yours.Although I am not a practicing scientist,I took my degree in agriculture,a field based on hard science,mostly chemistry and biology in my case.When I go in a field and see that a crop is lost due to drought or storm,I write it off and start over.Sometimes I try the same crop again in a different place next year,and sometimes
I switch to a new crop.
It is past time to start over and face up to the fact that in the face of the very real resource constraints we face today that some industries are either done for or doomed to drastic downsizing.The auto industry is one of them.Read the book currently being reviewed/dissected in the post above this one by Jeff Rubin.If you are not impressed by his resume and credentialsI give up,I don't have the foggiest hope of changing your mind.
As a matter of fact I read the New york Times online daily,as well as the Washington Post.When I listen to the radio in the house it is BBC London on the net.My news bookmarks include a dozen major domestic news papers,about twenty environmental sites,and half a dozen foreign language news magazines such as Der Spiegel,in english of course.In the car it's NPR courtesy of Wake Forest University-except when Rushbo is on,cause he does do a ripsnorting old timehellfire and brimstone preacher sort of job of presenting the opposite point of view.He is often wrong,but I believe it it important to know how his followers are thinking,and he is imo far more entertaining than pop music or athletic contests.He makes sure that people know about such astoundingly stupid affairs as the afone publicity flyover.He even turns up an interesting scandal once in a while, and nobody is better at exposing hypocrisy-assuming of course that the hypocrite is a democrat.Without Limbaugh and talk radio a very substantial number of people would be deprived of a readily accessible forum,and we might forget that our leaders are not descended from the stars.
Now even though it IS STILL RAINING I must go out and check on the livestock.
Ah FarmerMac,
Well it may be that the Germans are idiots.They are fixing to shut down thier existing nuclear capacity and it looks like they will be depending on the FSu and OPEC for thier survival.Do you think the Russians REALLY like the Germans?-not that we are whole lot smarter.--fm
The Germans are well known for their financial conservatism so I figured they had scrutinized their plan which I think is a good way to get guzzlers off the road and to stimulate the economy.
The only defect is that it appears to be a deal directly between the consumer and the government with out a middleman markup and that's SOCIALISM.
I notice that you skip over the fact that Uncle Sam is broke and that we may be printing enough funny money to bring about the real crash by means of said funny money alone.--fm
I don't get why it is so terrible for the government to print money. We need to print money
to lubricate the economy. We've had a mild case of inflation only once since the government started up the presses(caused by oil addiction) and it lasted only 2 years. Meanwhile we've had major deflation around the world.
You seem to worry about a lot about unlikely, looney stuff(is Obama is going to let Hugo Chavez sleep in the Lincoln bedroom).
If the fact that you get an income tax credit for buying a new car puts me in an effectively higher bracket than previously in relation to you (unless I also buy a new car)does not make sense to you,I suppose you don't understand taxes very well.--fm
More of your very weird worries. How does me taking a tax credit put you into a higher tax bracket? Do you actually do your own taxes? Do you pay any taxes?
Crazy!!
A very great part of our troubles are due to the fact that we have a tax system that encourages wasteful and uneconomic spending.I fail to see that virtue has anything to do with this issue,except that by VIRTUE of a tax credit of say 15 percent of the price of a thirty thousand dollar car you get a gift valued at 3000 bucks-assuming that you bite of course.And that of course means a little bit bigger slice of the pie for you,at everyone else's expense,.--fm
US personal tax rates are lower than most OEDC countries and corporate tax rates are somwhat higher but Japan has about the same rate that we do and their corporations are doing pretty well.
http://en.wikipedia.org/wiki/Tax_rates_around_the_world
Ever notice all those Yankees up in Michigan get $.73 on a dollar they send to Washington while y'all in North Carolina get $1.08.
And you have the GALL to complain about helping Detroit in an economic disaster. Typical ingrate.
http://www.nemw.org/taxburd.htm
Three thousand spent on subsidizing a new car purchase is three thousand that can't be spent on for example research in non chemical means of pest control in food crops,or home health care for my aged mother.
Can you be honest for once? You just want your bleeding tax cuts and forget the rest.
I understand very well the possible benefits of subsidizing new tech such as the hybrid car,but that is not the same thing as propping up a bankrupt and hopelessly decrepit business.In the real world things have a useful life span,and they die.Something else assumes the niche so vacated.
Hopelessly decrepit businesses like dairy farmers (or better tobacco farmers) who are going bust at record rates.
Do you or does anyone else believe that if GM and Chrysler cease to exist that somebody more capable will buy up the wreckage and be building new cars and trucks before the current unsold glut is cleared off the lots?
Because it's hard to build a huge complex industry, they don't just spring up out of the ground. The wreckage is from a system of financing to help people buy cars--in my example, I'm helping people buy cars directly from the government. The damage is to the car workers and yes car dealers who worked hard to build better lives. I notice you didn't mention them while harping on Uncle Sam.
I'm not broke,and I made a conscious choice many years ago to live somewhat frugally in order to live in my camper in the woods for a few months at a stretch reading good books and fishing rather than working my butt off FIFTY WEEKS so I could afford to stay in the woods in a camper for a couple of weeks annually.Jealous? XXXXed off is more like it that the people who had the cake and ate it now want more of my bread.We don't have a lot of cash, but we do have the skills and material resources to survive if tshtf,which has been predicted to have a 49percent chance of happening by Jared Diamond.You might enjoy his books.He is held in the highest possible esteem by most of the regulars here.I would not trade my life for the life of an auto worker,evenup.I do have a great deal of respect for them as individuals holding down dreary mind nunbing jobs.
(When tshf I fully expect y'all to go lootin' and to celebrate your moment of triumph with a little good ol' boy mayhem.)
We have been living way past our means for a long time.If you want to stimulate the economy with more deficit spending,why not just lower every taxpayers withholding rate?That would distribute the money much more equitably across the economy.
You're talking about payroll taxes(7.6% workers, 14.1% for self-employed) most of which
which go to your (and your mother's) social security and medicare.
What kind of baby are you?
Fifty five gallons of oil to manufacture a car?According to the iron and steel industry it takes over TWO barrels of oil to manufacture ONE ton of steel.Not a CAR mind you,but the STEEL used to MAKE the car.And even a small car has about a ton and a half.
Fine, add in 84 gallons of oil to 55 gallons and you get only 129 gallons of energy in a new car--when the average car burns 600 gallons of energy every year. A hybrid would reduce that by half in one year.
Your last comment seems to reveal your real feelings when you mention thieving bankers and then say the auto bailout is nothing,but actually it is more of the same.Do you by any chance have a bigger than average stake in Detroit?
No, I buy hybrid Japanese cars but I wish I could buy hybrid US cars instead. The hybrid was a good idea that was developed here in the US.
http://www.hybridcars.com/history/the-great-hybrid-car-cover-up-of-74.html
As a matter of fact I read the New york Times online daily,as well as the Washington Post.When I listen to the radio in the house it is BBC London on the net.My news bookmarks include a dozen major domestic news papers,about twenty environmental sites,and half a dozen foreign language news magazines such as Der Spiegel,in english of course.In the car it's NPR courtesy of Wake Forest University-except when Rushbo is on,cause he does do a ripsnorting old timehellfire and brimstone preacher sort of job of presenting the opposite point of view.HE IS OFTEN WRONG,but I believe it it important to know how his followers are thinking,and he is imo far more entertaining than pop music or athletic contests.He makes sure that people know about such astoundingly stupid affairs as the afone publicity flyover.He even turns up an interesting scandal once in a while, and nobody is better at exposing hypocrisy-assuming of course that the hypocrite is a democrat.Without Limbaugh and talk radio a very substantial number of people would be deprived of a readily accessible forum,and we might forget that our leaders are not descended from the stars.
Okay, you've convinced me how witty and urbane you really are but seriously, Rushbo?
Rushbo appeals to the really stupid prejudices of rural gentlefolk like any good con man.( You have to admire that.)
Limbo is a prescription drug addict, a racial bigot and a sex tourist(also the titular head of the GOP). How does this entitle him to a multimillion dollar gig sitting on his ass everyday?
Now how in the WORLD...could Rushbo be a hypocrite?
No, the real hypocrites are the folks who think Limbo is a 'real American'.
http://www.thesmokinggun.com/archive/0706062rush1.html
http://www.cnn.com/2003/SHOWBIZ/10/10/rush.limbaugh/
http://en.wikipedia.org/wiki/Rush_Limbaugh
Racist Rush Limbaugh Quotes
1. I mean, let’s face it, we didn’t have slavery in this country for over 100 years because it was a bad thing. Quite the opposite: slavery built the South. I’m not saying we should bring it back; I’m just saying it had its merits. For one thing, the streets were safer after dark.
2. You know who deserves a posthumous Medal of Honor? James Earl Ray [the confessed assassin of Martin Luther King]. We miss you, James. Godspeed.
3. Have you ever noticed how all composite pictures of wanted criminals resemble Jesse Jackson?
4. Right. So you go into Darfur and you go into South Africa, you get rid of the white government there. You put sanctions on them. You stand behind Nelson Mandela — who was bankrolled by communists for a time, had the support of certain communist leaders. You go to Ethiopia. You do the same thing.
5. Look, let me put it to you this way: the NFL all too often looks like a game between the Bloods and the Crips without any weapons. There, I said it.
6. The NAACP should have riot rehearsal. They should get a liquor store and practice robberies.
7. They’re 12 percent of the population. Who the hell cares?
8. Take that bone out of your nose and call me back(to an African American female caller).
OMG, this is your 'representative'.
I wonder about your critical reading skills,as you have turned me into a Limbaugh supporter when actually I said that I found him to be rather entertaining,that he is FREQUENTLY WRONG,and that I believe it is important to know what every body else is thinking. Every devil has owed to him a certain due,and I pay Limbaugh
his,but I don't think most enlightened readers would assume that I am a Limbaugh supporter,given what I wrote,or the many comments I have made on this site.
I never think of myself as witty and urbane,but I do pride myself on knowing what's going on.
We did our part-personally- to support Detroit by buying domestic for the last fifty years.Detroit let US down.
Just why do you think you are driving a Japanese car?
I don't suppose you realize that if GM is dissolved as a corporation that the infrastructure, the line workers, the bean counters,and the engineers will not vanish into thin air.If there is a market for the cars that these folks can build,they will be back at work with shiny new signs and logos on thier shirts pdq.
I don't suppose it has occured to you that the steel that goes into a car is not the only component or that the TOTAL environmental and energy costs of the automobile culture are simply incalculable.I quote page four Rubins Why Your World Is About to Get a Whole lot Smaller:
"Just building your car takes as much energy as it burns in several years.Add to that the fact that the plastics and paints and interior elements are made from petro chemicals derived from oil,and the picture becomes clearer."end quote.
If I had nothing better to do,I could slice and dice the rest of your comments as easily.
When some catches me in such a ridiculous error (which happens only rarely as I never accept a single source of information as definitive)as believing a car embodies only a single barrell
of oil,I apologize and thank them rather than calling them names.I reserve the insults until called for as retaliation.
You seem to think that I am opposed to socialism but in favor of socialism,which is it? If you care to read my other posts,you will find that I am in favor of spending the money currently spent on corn ethanol and other ag subsidies on subsidizing electric cars.I don't suppose you would be capable of distinguishing between an electric car subsidy and a bailout of incompetents.
I don't know exactly what you consider mild inflation,or where you got the idea I am worried about who sleeps in the white house,but for your information,I don't believe that O bama is capable of screwing up as bad as bushes one and two.He does at least seem to get it,as evidenced by appointing some good scientists to high positions.YOU brought Limbaugh up in a transparent attempt to paint ME as the village idiot.
For what it is worth,I think the country is somewhat better off with the Democrats in charge at the present time.That does not mean that I must support all thier policies.
It does seem obvious though,as I look at each of your comments that you USUALLY find it necessary to resort to ridicule or a straw man reply as you have nothing coherent to say.
It has been said that one should never argue with a fool in public,because the onlookers will not be able to distinguish who is who.I am finished,except to suggest that,since you have found your way to this site,maybe you should actually find yourself a tutor and study the contents,starting with the concept of peak oil.I leave it to the other regulars here to decide which of us is,er,intellectually challenged.
I will hazard a guess that you could not pass a fourth grade quiz on peak oil or the various ecological crises that may soon put finis not only to the auto industry but to industrial society as a whole.NOW I'm finished.
Good question!
The problems with the car industry visavis Japan is fairly obvious. The Japanese entered the US car market making economy cars because the profit wasn't in it for Detroit. Detroit made whatever they could markup the most to the consumers. It wasn't the unions that made the decisions it was the bosses.
The Japanese were also much more concerned with quality ( a national obsession again nutured by US statisticians like Deming, who were ignored by Big Auto) while Detroit cut the quality out to save money whenever possible.
The effort went into horsepower, gadgets and appearance all cheap add ons or into phoney quality awards, rebates, etc.
Do you think the quality of US autos will improve if the car companies become bankrupt?
Poppy-cock. You have marketmania syndrome. Nothing bad can happen because the Market will fix all the problems. The fact you keep repeating it in light of the recent market collapse shows the grip the delusion has over you.
I gave references based on the energy used by auto plants and you gave one I didn't check for energy to make a ton of steel
These guys says it takes 29 million BTUs--5 barrels of oil to make a ton of steel from raw iron ore( we recycle most of our steel in the US reducing that 29 million by 74%--that's 1.25 barrels of oil---farmermac).
http://www.alliedwastescco.com/mobius/084%20chapter4%20lesson2.pdf
If Jeff Rubin really believes that it takes several years of fuel to pay down the manufacturing expense, he's too stupid to take seriously.
You are a Southern gentleman, suh!
Ah say...Pistols at 10 paces or sabres?
Yeah, but as you said, he reflects what a lot of people believe. But if you are embarrased by me bracketing you with Rushbo we'll maybe there's hope for you.(Yeah!)
Do you support ANY of Democrat(ic) policies? Which ones? Curious minds may want to know.
Perhaps I have been a bit sarcastic, especially concerning dear fat Rushbo(someone you don't support in the least, correct?).
Magnificently deliver thrust, suh!
Better to remain silent and be thought a fool than to speak out and remove all doubt.--Ape Lincoln
Perhaps, ethanol IS better put into shot glasses than into cars OTOH, you have convinced me that while we will eventually run out of cropland but the amount of human generated bio-gas in Dixie is for all practical purposes....AN UNLIMITED RENEWABLE RESOURCE.
What is needed that would have an "immediate" effect on gasoline and diesel consumption in the US would be a return to the 55 mph speed limit nationwide. Who would not agree that our consumption crisis is at least as bad as it was in 1974?
This would also solve the revenue problem of many localities which could be augmented by "fining" speeders...thereby killing two birds with one stone. Are not speeders equally as transgressive as cigarette smokers or consumers of alcoholic beverages when it comes to issues of public health, and therefore of equal obligation to pay the price of "government excesses"?
I like (not) the way "government excess" has become an automatic asumption not to be contested, for many. Really, people, almost all of government is your friend, and if it didn't exist you would be demanding it. Reminds me of the comedian / philosopher telling of being stopped at a light and having a 95lb teen guy jump out and squeegee his windows. On the front of the kid's tee-shirt is emblazoned "ANARCHY" in large letters. "Do you suppose this kid has thought this through very far?" mused the comedian. "He'll do well under a system of anarchy? Everyone will elect him king? More likely it'll wind up under anarchy that a 100 kg (220 lb) biker will be drinking soup from his skull."
It was "tongue-in-cheek", Len--calm down...
...on the other hand, there would be those who would agree that, in spite of the essentially "free" education they were afforded in their (baby-boom) time, that it's now OK for students whose parents are not of exceptional means to graduate from college with debts as high as $100k.
I have worked for the government, know many people who do, and have spent a great deal of time in the private sector. Don't get me started on 'government excess'.
The government is the very worst of badly managed companies. Employees who do nothing make outrageous wages and can't be fired because most departments in the government are incapable of layoffs.
The government really can be leaned down to about 75% to 50% of it's current size and provide the same exact services. Downsizing the government is unpopular because the government 'provides jobs'. Every economist knows that jobs don't provide wealth, cheap products and services provide wealth. So the government is stuck at a place of being a suck on the economy and being unable to lean down.
The major problem with the government is it cannot layoff non-producing employees, making it unable to reduce costs. So it just gets bigger and bigger and bigger and bigger...
So you're contending that by paying your plumber $5.00 / hour rather than $20.00 / hour everyone gets wealthy? Importing cheap goods from 3rd world sweatshops who pay only a bare subsistence wage makes everyone wealty? How does that work exactly?
It all trickles down-first they need to run it through their kidneys.
That "trickle down" (actually means they're peeing on us) garbage Reaganomics has been thouroughly discredited in rational economic thought. Just track your US Gini index across the Reagan / Bush / Shrub years.
By starting positive spirals of investments, employment, education, infrastructure and so on in poor countries and giving richer countries better purchasing power and enabling them to abandon the least productive tasks in favor of better ones. This has already worked time and time again, and continues to do so.
Lengould,
Any one interested in a REALLY GOOD discussion of real wages,real prices and standard of living,etc can find one in Twain's A Conneticut Yankee in King Arthurs Court.It's technically sound,incredibly funny,and comes gift wrapped in a classic novel that will be in print as ling as printers are still printin'.Available at almost any library.
I have worked for the big business, know many people who do, and have spent a great deal of time in the private sector. Don't get me started on 'government excess'.
Big business is the very worst of badly managed companies. Employees who do nothing make outrageous wages and can't be fired because most departments in the company are incapable of layoffs.
Incentives are misplaced and counterproductive, managing the whole becomes unmanageable, and the top management has no inkling of what is going on down at the bottom. Decisions are made "in bulk" without closer examination of the varying circumstances. Management trends and fads come and go (if I hear the words "excellence" or "quality", or the phrases "management by objective" or "management by walking around" again, I'm gonna puke...)
Those who complain about government excess just haven't stood in line at the DMV lately.
I disagree. My car has a small engine and a very small cda, therefore it is not as wasteful for me to drive faster as it is for a truck driver, and thus it's unfair to slow me down, for my little car ain't the problem. Anyway, I pay for the gas, so I'll burn it as I please, or I'll kill weeds with it in the drive after washing parts in it cause it's cheaper than anything.
Second, I smoke and drink and speed too. It's my right, and has nothing to do with public health or the government.
You're right, in the same sense that guns don't kill people, people do.
Um no, in most places not only are you are not allowed to use gasoline on your property for killing weeds but there are severe penalties for doing so.
Fuel Spills as they are called must be reported to your local Pollution Control Agency (no spill is too small). The Agency will then provide you with a list of environmental consultants and cleanup contractors that deal with such spills.
They will fine you if you do not comply with their requirements. You might also get cited by your local fire marshall. In case you don't beleive me just call up your local town government and see what they tell you.
You were doing fine until you said that you speed. That isn't your right and it makes you a scofflaw and a danger to society and subjects you to fines, arrest and suspension of your driving privileges.
Not that anything I've mentioned could in any way change your view of the world from where you are observing it.
Does any of this matter? Right now, there aren't many vehicles sold at all. And most of the TOD community seem to think gas prices will go through the roof within a years time, and when that happens, Americans will once again figure out gas guzzlers don't make sense. No action need to be taken!
But if you think fuel efficiency matters anyway, you should follow the European path of 100%-ish gasoline taxes. Or you could do even better by implementing a carbon tax. Set it to $0.2/kg CO2, for example, and don't allow any exceptions. That would increase the price of oil by about $63/barrel. It would also increase the price of electricity by about (update) $0.2/kWh if from coal, and $0.12/kWh if from natural gas.
As a result, you would start transforming away from fossil fuels quite rapidly and with minimal administrative overhead. You don't really need to do anything more than this - the invisible hand will then take care of stuff. It would also yield the federal government about $1.2 trillion per year, which could cover some of the budget deficit. Win-win, right?
The current run rate is for around 9 million new vehicles to be sold per year in the US. Due to the recession this is down quite a bit from previous years - but auto sales have certainly not stopped.
The goal is to remove efficiency pushes from the stop-start oil price cycle. Every time oil prices fall, everyone rushes out to buy an SUV/light truck. This is happening even right now. SUV/truck sales as a percentage of total auto sales had been falling as prices moved above $100 in 2008 and now are climbing as a percentage of total sales once more.
I think that many on TOD see higher prices, but with prices moving in a jagged upward pattern. Why not create a constant pressure to become more efficient rather than an occasional pressure?
European-style retail taxes on oil have always been political suicide in the US. There have recently been more failed attempts by several states to enact such taxes.
Ok, that's quite a lot.
Yes, I forgot the jaggedness. (I think they are wrong about future growth being more erratic than in the past, but that's beside the point.)
That I believe. There was a TOD thread recently about things you have learned. I was about to post this, but never got around to it: I have had a belief that the more market-oriented American system was due to Americans being better educated about economy. I have come to realize that this isn't so. My current hypothesis is that it is mostly due to the federal system.
The only way forward is through conservation and then consistent reduction at a rate greater than depletion.
If you by chance or design have some huge family, my first response is "tough bananas". My second is, DEAL WITH IT, and make "other accomodations" such as vehicles in the used market.
Rapaille noted ("The Persuaders", Goodman, Dreitzen, Rushkoff, PBS 2004) that the fundamental purpose of the SUV us NOT practicality or safety, but DOMINATION over others. In this way, the used market could serve your need to dominate the planet with your sproggen and vehicles very easily, for a far lower cost than a new megaSUV.
Such as a SARACEN. This one is available for a lousy $29k. Marked down for a Quick Sale!
Now, if a few inches of armour plate is a bit excessive for your needs, you can always pick up a used UNIMOG. Those things make Hummers look like Tonka Toys. And you can pick them up for relatively little money - a '69 can be had for about $10k or even less.
Why spend the money on some glittering piece of crap Like a Chevy Tahoe/Suburban/tank/whatever. It will never get you off road away from the roaming hordes of starving zombies, and if you back into a sapling, your dented bumper on a GMC Tahoe would cost thousands. A Unimog wold simply knock the damn tree down. And it can straight up climb a 29 inch wall! You go into it at a 30% angle, then cut the front wheel directly into it and shut off the motor. Put the truck in first gear and start it up, punching the gas - BANG! between the starter torque and the low gear instantly on, the truck just pops right over the barrier. Do THAT in your puny little Suburban! Or your Grand Cherokee! Or your Porsche Cayenne!
Why settle for the lesser evil? VOTE CTHULU!!!
The thing that grinds me most about SUV drivers is the passive aggressive bullcrap their presence requires. "I'm in a big truck so I can crush you, but it's a PRETTY truck so at least while I'm snuffing your hippie-treehugger-bicyclist life out and ruining the planet, I'm doing it in STYLE! Now where's my double mocha nonfat latte? I have to go pick up Muffy from soccer practice!"
Dang. I'd rather have someone blow past me in an M1 Abrams - at least there's no ambiguity.
Exactly.
Does the phrase "pretty boy truck" come to mind?
Yeah, and here's a picture of Muffy at soccer practice... She does have her own SUV and chauffeur.
You're right. It is to intimidate and dominate. For the people who need cargo room or 7 passenger seating, minivans (also considered light trucks) are more practical, but SUV owners make all kinds of lame excuses for not buying a minivan. It all comes down to fashion and style.
As this is my first post to TOD I don't want to be impolite as I find a lot of good stuff here but do we really want the government deciding what cars we can buy and imposing punitive taxes on those who, for whatever reason, decide they need a larger, faster or more powerful vehicle?
The miles per gallon a car gets is not the whole story when it comes to fuel consumption.
Mileage driven is just as important and the Prius owner putting 30,000 miles per year on his vehicle is using more gas than the Bentley owner driving less than 5000 in his gas guzzler.
The truth of the matter it is not those who buy big luxury or high performance sports cars that are the problem when it comes to oil consumption. They tend to live in the more fashionable neighborhoods with names like Georgetown, Pacific Heights or River Oaks and do not have long commutes if they commute at all.
The problem of excess fuel consumption is more a problem of distance than vehicle. For
that reason rather than tax the vehicle we should make the criterion mpg X mileage driven the criterion for punitive taxation though I don't think most people who have long commutes are doing it because they enjoy the drive.
Do we really want the oil companies, through their lobbying, campaign contributions, etc. determining our energy and foreign policies? Essentially that's what's happening.
For example, we spend somewhere between $100 billion and $200 billion per year for military and defense costs alone inthe Gulf. I think it's a fairly safe assumption that our expenditures would be zero if all they had was sand.
At the lower figure, it amounts to roughly $120 per barrel for the oil we get from the middle east, or $3.00 per gallon of product. Even if you spread it across all gallons used in the US, it still amounts to amounts to about 30 cents per gallon. And as Mexico's exports decline, we will have to go into more an more hostile areas to get oil.
Shouldn't we at least try to end this market distortion by war subsidy done at the will/behest of the oil companies? An "energy tax" would not be punitive, it would merely try to correct for these market distortions.
As I'm sure you are aware the United States does not get a whole lot of its oil from the Persian Gulf littoral and our military presence would have to continue in this key region even if we got none.
The fact of the matter is the oil production in that region is very vulnerable and the US is the only power that has the means to defend it.
As to the influence of the oil companies, it does not seem to be as far reaching as you suggest. They are more typically demonized in Washington and when they aren't being subjected to punitive taxes are having their CEO's subpoeaned to appear
before Congressional dog and pony shows.
I'd suggest the NRDC, Sierra Club and other econut NGO's spend as much if not more lobbying Congress than do the oil companies and seem to be gaining the upper hand in the legislative battles.
However, if you want to maximize our available oil resources why not go all the way and institute WW2 style gas rationing instead of playing around with CAFE standards and mileage penalties? Simply limit the amount of gas each automobile owner can buy via ration coupons or, being the 21st century, we
could get EBT type cards to stick in gas station pumps. Government bureaucrats in conjunction with environmental groups could decide how much the citizenry is to be allowed to drive and issue allotments based
on that. Once you've used up your allotment you can either pound pavement or stay at home. I'm sure it will be wildly popular.
The global oil supply chain is linked with the threat of shortages only as weak as its weakest link. That weak link has proven itself in the past (1973 and 1979-1983) to be the Middle East. The weak link has, therefore, to be defended even though the US is not directly consuming Middle Eastern molecules. If Middle Eastern oil becomes scarce then oil everywhere becomes more scarce.
I am a big fan of oil companies. Oil companies enable modern civilization in ways many fail to appreciate. I agree that the demonization of oil companies is a luxury generally espoused by those with plenty of the good things oil provides.
I am not in favor of government involvement. Amending the gas guzzler tax would correct the perverse incentive the government is currently providing to buy an SUV rather than a car. The ultimate goal would be to have the consumer themselves push efficiency (vehicle efficiency market) and have as little government involvement at all in determining efficiency.
I challenge the notion that we would have to stay even if the US didn't get any oil from the region. In fact, it would be to our advantage if we did not need oil, we left, and the place went to hell in a handbasket. That way, our competitors, namely Japan and Europe would no longer have the benefit of us subsidizing their cheap energy with our soldiers and our dollars, and we would be relieved of that anchor dragging down our economy.
I think Mother Nature is going to start putting in one hell of a regulation on that within a couple of years...but I think we need to prepare for that day to minimize the shock on our economy.
I don't know about environmental groups being a major influence on U.S. politics, but the oil industry certainly isn't. The opensecrets.org list of "heavy hitters" has Chevron as the top oil company at number 68. Exxon Mobil is number 71, and BP is number 100.
The top ten include six trade unions, the trial lawyers association, AT&T, the National Association of Realtors, and Goldman Sachs. Ahead of Chevron come thirteen banks and other financial organizations, and a total of about 23 labor organizations, as well as virtually all of the U.S. aerospace and defence industry corporations.
Oil companies are a proxy for oil consumers. Oil consumers of the world are demanding oil to be provided as cheaply as possible. Oil companies are lobbying because that is what oil consumers want.
Any taxes on oil itself or oil companies comes directly out of oil consumers pockets through either the taxes themselves or higher pump prices.
And here I always thought they were there for their shareholders. Awwwww, isn't that nice that the oil companies are looking out for us?(/sarconal off)
Well, here is one consumer that would rather have hydrogen available, but there isn't a fueling infrastructure nor ready made hydrogen cars. It only takes 55 KWH to produce a kilogram of hydrogen (gallon of gasoline energy equivalent) by electrolysis and our local utility is happy to sell off-peak KWH at 5 cents apiece.
Ain't hard to do the math there when comparing against $4.00 per gallon gasoline, is it? So are the oil companies going to lobby for the government to build the initial hydrogen fueling infrastucture, or to spend more military dollars in the middle east? Ain't hard to figure out that one either...
Any economist will tell you that is an incorrect statement. It really depends on the demand - if demand is absolutely inelastic - ie, consumers will buy regardless of price, then yes the consumers would effectively pay all of the tax. If demand is perfectly elastic, ie, demand drops to zero if the price goes up at all, then the oil companies would have to absorb the tax out of their pocket to maintain the market.
Obviously, oil products fall somewheree in between absolute inelasticity and perfect elasticity. Last year, demand resistance seemed to build at around $3.00, and then abruptly got more intense when prices went above $4.00 - people just started driving less and buying smaller cars.
So the proportions of the tax shouldered by the oil companies vs. the consumers will depend on the slope of the demand curve at the current price point.
I still stand by that statement. By "as possible", I include the required return on capital for the risks involved to shareholders of losing their entire investment.
I always tell people that if they think oil companies are making profits which they believe are too high for the risks involved then the simple solution is to start an oil company or buy shares of an oil company.
In terms of hydrogen, there are a lot of sources of power (coal, for example) which are less expensive than oil on a BTU basis. It is not a triviality or oil company conspiracy preventing these from developing into transportation fuels. If there is a buck in it, you will find many takers.
I also stand by this statement. Oil retailers/refiners in Europe are generally not more or less profitable than oil retailers/refiners in the US. This is is despite the fact that retail taxes in Europe are often ten times more (US$6/gal tax) than in the US (roughly 60 UScents/gal tax). Consumers bear the tax.
If it takes your figures 5cents times 55 kwh to get a gallon of gas equilavent of hydrogen,you are at 2,75 per gallon before you consider any other costs,or taxes..It takes a lot of energy to compress the hydrogen,and it is not easy to store, as it requires specially made high pressure tanks that are not cheap.you can't store it in steel,it migrates right thru.
Now if somebody ever builds an AFFORDABLE fuel cell,hydrogen might work. I don"t think it can compete with gasoline unless gasoline goes up a lot ,and electricity prices remain near or at present levels using it as a motor fuel because the infrastructure costs plus the actual hydrogen costs plus taxes will exceed the price of gas.This could change of course.
55 kWh electricity for one kilogram of hydrogen implies a 28% conversion efficiency from the heat energy of a thermal power plant. However, using high temperature electrolysis (HTE) at 850 C, the conversion is 64% efficient. Such nuclear designs are being worked out and could be fast-tracked, if desired.
Now, that means $1.20 per gallon. I agree that hydrogen infrastructure would be much more expensive, but I don't think fuel cells are necessary to make the hydrogen economy fly.
Hi Whale Oil. (My blog is called scarce whales!)
What you are in favor of is allowing oil prices alone to dictate efficiency. This is the current situation in the US.
This assumes that all of the costs involved in getting that oil to market are reflected in the price of oil and that everyone pays their fair share. However, many costs (such as military bases and patrols in the Persian Gulf) are borne by all taxpayers but only benefit a few (car drivers). If you drive a car you are effectively receiving a kickback from all those taxpayers using mass transit, bicycling or walking. Those individuals should demand that anyone receiving that kickback either pay for the indirect costs of delivering oil to market - or at the very least that oil consumers consume oil as efficiently as possible.
The government is already heavily involved in making that decision for you by allowing oil to be delivered safely at a price which doesn't include the true expense borne by all taxpayers. If government is going to be involved (representing all taxpayers and the cost they bear), then at least it should promote what is good for ALL taxpayers - and that is efficiency.
I dislike big government and government involvement in private commerce - but oil supply is one area where, for good or bad, the government is involved and as a taxpayer I don't like to see my money being wasted.
Some food for thought?
At price X, supply and demand meet at Y.
At price X + tax X, supply and demand meet at Z < Y.
Another way to try to get consumption to Z is to do some form of cap-and-trade. End-user prices will be 2X here too.
Who gets the extra X? In the first case, the American state. In the latter case, the Saudi royals. Which do you prefer?
Actually, if the world agreed on taxing gasoline, that would eat into oil producer's profits - the untaxed price would be lower due to lower demand as taxes increse.
Europeans use half as much gasoline, but pay twice the amount per liter. So we pay as much as Americans. However, we pay half of the amount to ourselves. You pay your whole amount to oil producers, typically foreign.
I don't think retail oil taxes or cap on oil consumption and trade would work in the US. Both have a proven track record of not succeeding in the US. Many have tried and failed to raise retail oil taxes and 'cap and trade' places a hard limit on physical supply which would create lines at the pump similar to the US in the 1970s. This is an image nobody wants to see.
These solutions are too removed from the consumer. This is why I prefer a vehicle efficiency market solution.
I advocate markets in Units redeemable in electricity, and in (say) gasoline and other carbon-based fuels, priced by reference to a Unit of Energy as an Energy Standard.
The idea would be to make a carbon levy on gasoline - say $3.00 a gallon - ie enough to lead to demand destruction.
Then an issue would be made to US citizens of Units redeemable in gasoline.
People could use them by redeeming them against consumption, sell them for dollars to people who want them, or exchange/barter them for something else directly without using dollars at all.
A market in Units would develop pretty damn quick, and indeed could probably rapidly become international as the technique spread and was harmonised. eg by an International Energy Trade Association/ Clearing Union.
By monetising the energy value of carbon in this way, we might actually get a solution that would work, instead of the emissions trading and carbon credit nonsense promoted by the same people who brought us the Credit Crunch.
This not unrelated presentation
An Energy Pool?
went down pretty well last week at the All Energy Show in Aberdeen (Scotland!).
Hi Chris, You are proposing a combination of a retail tax on oil PLUS an oil consumption 'cap and trade' type scheme - all as a proxy for carbon? I don't think this would work for the reasons mentioned in my comment just above.
Also, a big risk with your proposal is that people sell their "units" too cheaply because as with any new asset, its true value may not be immediately apparent (to many). This situation appears to have occurred when Russian oil assets were distributed in shares to the general population following the collapse of the Soviet Union. These new citizen shareholders subsequently sold their shares too cheaply to what became the Oiligarchs.
These would not be shares as we know them, Morgan.
Imagine a Redeemable Preference Share, but redeemable in energy; or a Unit in an Exchange Traded Commodity Fund, redeemable in energy; or an undated 100% margined futures contract......
Clearly the issue of Units and the size of the "pool" would have to be transparent,and the function of Pool Manager would be an important one. The market price of gasoline would still be subject to normal supply and demand. It's just that the financial market in Units would be disconnected from the physical market in a way that would take speculation out of the market entirely.
I think that the fact that these Units are redeemable in payment for gasoline would give people a pretty shrewd idea of what they are actually "worth". If the Unit price fell below the gasoline price even the dumbest would realise that buying Units and using them to fill their tank was a good idea.
Bob Hahl has created
Kilo Watt Cards
as a very interesting prototype, just to show it can be done.
Once you get your head around it, you'll see how simple and radical this is. And my track record in energy market innovation isn't bad, I think: Exchange of Futures for Swaps; volatility trades and settlement trades were all introduced by me at IPE long before it got gobbled up by ICE.
I have no doubt at all that this would work. It's pretty much self evident.
Well, perhaps citizens get wiser as they get older?
Why? The point of "trade" in cap-and-trade is to allow markets to raise prices to the point where supply and demand meet.
The vehicle efficiency market is unnecessarily complex and address just one aspect of gasoline usage. It won't make people move closer to work, for instance
'Cap' in 'cap and trade' means that a hard limit is put on oil supply.
The 'trade' part I think is good. However 'trade' along with a 'cap' in this instance is like putting tasty icing on a leather boot sole (the cap part). No matter how you cook it, the entire plan would be too difficult for oil consumers to swallow.
I agree that the vehicle efficiency market affects just one aspect of oil use (efficiency). The basic premise is that it is much simpler and more fair than the current gas guzzler tax. The vehicle efficiency market also allows consumers themselves to push efficiency directly rather than the government .
A vehicle efficiency market solution might have been useful if had been implemented 20 years ago--now it's far too little...and far too late in the game.
Any efficiency solution buys time to find energy solutions. Twenty years ago the Internet didn't exist. It now facilitates great transportation alternatives (videoconferencing, email etc.)
MD,
As you can tell, I'm not loving your freemarket solution but you appear to understand how incredibly serious depletion is going to be in the next 5 to 20 years.
I wish we had a huge bunch of fuel cell cars and electric trains and trams and flying nuclear power plants to help us thru but we don't.
When the panic time comes, 'rational' solutions like yours will get tossed out the window.
I'm quite familiar with the exotic and luxury car market. That's easily solved with an exemption for low-volume manufacturers, say under 5,000 per year. True exotics are sold in tiny numbers and spend a lot of time parked. Ferrari US sales are about 1,500 per year and Lamborghini about 1,000 per year. BMWs, Mercedes and Porsches, on the other hand, are sold in much higher numbers and they're driven daily as commuters.
Seeing this post, I felt compelled to share an old post of mine on the same topic:
http://truecostblog.com/2006/09/15/gas-prices-and-what-ever-happened-to-...
I don't imagine that the gas guzzler tax will be reformed any time soon, but it's good to get the word out there!
Hi Praveen,
I agree with you. Cool blog by the way. I really like the True Cost theme and the way you break complex issues down.
Yet another example of how government cannot legislate a change that can only happen organically. If Americans do not want to drive fuel efficient cars, then americans should have to suffer the consequences of their actions on the open market. Including loss off competitiveness, inability to export inefficient cars, loss of wealth due to spending more on oil, having to build and maintain an empire in order to secure resources, etc etc.