We hear the press clamoring about the price of gas. We see it when we fill up at the local gas station. Gas prices have recently skyrocketed. This is not the first time and this certainly will not be the last time. Consider this one of many downsides of globalization. Political instability, market speculators, and global demand will affect the US for many years to come. This is the world we live in and for better or for worse, this is the world we will be living in for quite some time.
The Keystone XL pipeline is unlikely to provide relief. It is true the pipeline will bring more oil to the U.S. and create additional jobs in the process. However, many other factors control the price we pay at the pump.
T. Boone Pickens can drive a natural gas powered vehicle but there are serious limitations to widespread adoption. These limitations include the availability of cars that run on natural gas, the limited number of fueling stations, and an aging natural gas infrastructure. Even if we were to push harder for the development of biofuels, the widespread adoption is still years away.
For all the political grandstanding this election year, one word that politicians do not dare mention is the word “tax.” While skyrocketing gas prices affect almost every facet of our lives, there is another piece of the puzzle that has long been ignored. This is the gas tax.
Each time we go to the gas station and fill up our gas tanks, we pay a tax per gallon. The federal government and state governments impose separate but similar taxes. The revenues from gas taxes are used to help build and repair our nation’s roads, highways, and bridges. To a lesser extent, they help pay for mass transit infrastructure.
Where am I going with this? Well, there is no doubt that increased gas prices will have an effect on how much we drive and what type of car we drive. If we drive less and drive more fuel efficient cars, the government collects less money. While it is true that the less we drive, our roads, highways, and bridges will have less wear and tear. However, the government still needs money to build and repair them. If the government collects less in revenues for this purpose, they will eventually have to raise the tax to account for the shortfall.
The combination of rising average gas prices and the long term prospect of an increased gas tax means that four dollars or more per gallon will be the norm rather than a periodic blip.
Walter Wang is Managing Editor of CleanTechies. Follow Walter on twitter: @energytaxprof.