Albany Coddles the Oil Addicts
Posted by Glenn on May 22, 2006 - 8:59am in The Oil Drum: Local
[editor's note, by peakguy] Yankee and I both wrote parallel articles about this and posted them within 15 minutes of each other (hey great minds think alike!) I have combined them as best I could in this one post.
[editor's note, by Yankee] Since this post is on TOD:NYC, it obviously focuses on the proposal to cut state gas taxes in the NY legislature. But note also that similar proposals have cropped up in North Carolina, South Carolina, Minnesota, Massachusetts, Delaware, and I'm sure we'll see some others soon.
The President has said that we are "addicted to oil". An addiction needs to be treated seriously, not actively enabled. But this is exactly what NY State's legislature wants to do. They are set to approve a 4-9 cent reduction in the gas tax in yet another attempt for politicians to look like they are doing something about increase gas prices.
Although I tend to think that a federal gas tax increase* would actually be a good thing, I can understand the political distaste for such a decision. However, I don't understand why they won't let the current status of the state tax just stand. Once the gas tax is lowered, it will be politically difficult to raise it later on, regardless of whether the wholesale prices of oil either raise or lower. That is, one day the politicians might wake up and understand why a stiff gas tax may be the best thing for us, despite high wholesale prices. Or prices might (temporarily) lower, in which case they'll want to raise the tax again, but could face a public outcry.
From the NY Times today we also hear that nobody's promising that this will even trickle down to customers (drug users/abusers?) at the pump:
But should the measure win final approval, even the oil industry acknowledges that there is no guarantee that the savings will get passed on to consumers.One reason is that gas taxes, for the most part, are levied when oil companies import fuel into the state and not directly at the pump. Though tax cuts at the wholesale level are passed down to retailers, small cuts would not necessarily show up in prices set by gas stations since variations of a few cents among stations are common.
"I'm not sure consumers would see it," said Rayola Dougher, the manager of energy market issues for the American Petroleum Institute, the oil industry trade group. "They might see something, but I'd be astonished if they saw 8 cents across the board."
Why is it that consumers wouldn't see much difference? Because the oil companies (drug dealers?) would take part of it at every step in the distribution chain.
Theoretically, a driver filling up a Toyota Camry could save 74 cents in state taxes and as much as $1.76 over all in counties with the highest taxes, if they choose to opt in. But in reality, while a steep cut in gas taxes would almost surely be felt, modest cuts could be lost in the distribution chain from the oil companies to the gas stations, several oil industry officials said. And that could leave at least some of the tax relief in the hands of the big oil companies that have been reporting record profits.
So it's just another subsidy for the oil industry. And this leaves us no closer to dealing with the real issue, which is our addiction to oil coming from unstable places and contributing to global warming.
Rather than trying (ineffectually) to lower the price of smack on the street and instead giving more money to those dealing it, why not take that money and invest in conservation (drug treatment?) programs that might actually lower the level of inelastic demand out there.
Why not rebuild the state's rail network to more efficiently move around people and freight goods?
Why not invest in rideshare programs that are proven to reduce individual fuel costs?
Why not rezone many suburban "residential-only" areas to allow critical commerical enterprises like grocery and drug stores to be closer to people?
Why not offer more bus/light rail service to underserved yet dense areas?
The list could go on and on, but the point is that the way to deal with an addiction is not to lower the price of the addictive drug. You need to show the addict the pain they are causing to themselves ($ budget, obesity, etc) and others around them (global warming, pollution, etc). Then you need to offer a positive alternative way of living and give them hope that there is an end in sight to the pain they are inflicting on themselves and others around them.
This proposal offers neither a frank description of the problem to the addict nor hope of building toward a positive alternative. It only coddles the addict and rewards the dealer.
*The word "increase" in this sentence was initially omitted. Thanks to Halfin for pointing this out.
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Boone Pickens gave a speech in Dallas this week advocating a sharply higher gasoline tax, to bring our price of gasoline up to what Europe pays, offset by cuts to the Payroll Tax.
The major media, as usual, completely ignored the speech. The after the speech, the Dallas Morning News ran an interview with the former chief economist of ExxonMobil, in which she said she was amazed that oil prices haven't fallen yet. She suggested that since development costs in the Middle East are only $5 per barrel, it is only a matter of time until oil prices fall sharply.
My "Iron Trinagle" comments:
http://www.energybulletin.net/15126.html
However, if gas prices are lowered by reducing taxes wouldn't the market reaction be to increase consumption, and if supplies are really constrained, the price will just bounce right back up to equilibrium, right? Only difference is that someone in the supply chain would be getting the extra money instead of the public coffers.
The best bad alternative might be price controls so that shortages develop. That would really get people's attention. I'm only half kidding.
Might I suggest that the attitude you describe is so pervasive that it might be called an "iron curtain" of denial?
jim
http://www.livescience.com/environment/ap_060510_hydrogen_prize.html
What a waste of human capital!
Yes, a complete waste indeed.
It isn't just the prize money; it's the active encouragement of US engineering skills and investment capital being applied to a complete dead end.
And exactly what alternatives to water are you thinking of?
The best thing people in NYC could do actually is to stop drinking water out of a bottle that has to be trucked into the city instead of using their taps, which has some of the best water in the world.
So you fill your bathtub to flush the toilet. You fill your your biggest cooking pots for drinking water... some head to the store and buy it, but they are usually not native residents. They are transplants who don't know the real drill.
Like many of you I grew up in a time where bottled water was a luxury and not something I ever drank. The first time I travelled to China, I was shocked that mt company had free bottled water stocked in the break room, like we have free coffee here. It seemed so odd to me that I kept one as a momento. I took me a while to realize it wasn't a luxury, it was a healthy neccessity.
Some solutions are in the offing, though it doesn't help the forementioned packaging waste, the leachates from plastic softeners, or the issues (In Maine at least) of sending millions of gallons from our water tables out of state as private (and largely untaxed) property.
http://www.bradenton.com/mld/bradenton/business/14456505.htm
bob
I hope that you are better informed about "oil/fuels" than about water. Fluoride is the worst thing that anyone could be placing in their water.
The minerals in the water are not used by the body anyway. The only pure water available today is distilled water; filtered water is nothing but a joke stay away from ice cubes that come from ice machines with water filters.
"Some solutions are in the offing, though it doesn't help the forementioned packaging waste, the leachates from plastic softeners, or the issues (In Maine at least) of sending millions of gallons from our water tables out of state as private (and largely untaxed) property."
Bottled water is necessary in many cases and besides it provides a lot of people with jobs. At a number of schools here in the state of WA there are stores of bottled water; our big deal is earthquakes ... and plastic bottles are much, much, much better than glass; I would not refer to it as "packaing waste."
There is still some controversy about adding fluoride to water supplies, but it has been an enormous success given the state of our dietary and other healthcare and economic realities in the US.
"The American Dental Association, the federal Centers for Disease Control and state government have endorsed the practice of fluoridating public water at 1 part per million for nearly 50 years to combat tooth decay in a safe, cost-effective manner.
Massachusetts officials supplied The Standard-Times with one study that shows the effectiveness of fluoridation on children's teeth. There are hundreds of studies from across the country that compare children who drink water without fluoride to those who drink fluoridated water.
The 1981 study by the Harvard University School of Dental Medicine and state Department of Dental Care Administration looked at 231 children ages 7 to 14 who grew up with fluoridated water in 1981 in Holyoke and a similar group of children who were screened in the same Holyoke schools in 1968 before the community added fluoride to its water.
The researchers found that among young boys and girls there was a 72 percent reduction in tooth decay, as measured through cavities, missing teeth and other signs of decay.
Comparisons of nonfluoridated and fluoridated communities in the United States, Australia, Britain, Canada, Ireland and New Zealand have consistently demonstrated the effectiveness of water fluoridation in reducing decay, according to the CDC. The reduction in dental decay ranged from 15 percent to 40 percent in these studies.
With this kind of results, it is understandable that the directors of New Bedford's anti-poverty agency, PACE, made a request several years ago to the New Bedford Board of Health to add fluoride to city water to help children and adults, and particularly to reach poor children who do not have good dental care at home through regular brushing or at a dentist's office through regular visits. "
http://www.southcoasttoday.com/daily/05-06/05-04-06/01opinion.htm
As far as our bodies 'not using' the minerals in water, ..please. Regular drinking water doesn't carry the volumes of Calcium or Magnesium that we NEED every day, compared to what 'should' be in our food, but if it's there in solution in the small intestine, it will get picked over, and Ca and Mg aren't the only minerals we need.
In the case of emergency water rations, who could argue with whatever Wa. has pulled together? Sure.. But the argument is about the ridiculous volumes of throwaway bottles that clog our solid waste streams and throw away precious feed-stocks in one-use containers. (Even recycled, that plastic has maybe two degraded uses to go, before its tossed. Glass, or a reusable water-bottle could go on for years. I hope the schools have at least stocked up in large, reusable water-cooler tanks, and not just cases of 'handi-paks'.. we've convinced ourselves that these conveniences are absolutely life/death necessities.
Providing people with jobs is not, and never has been, a valid arguement to continue engaging in some wasteful or detrimental practice.
Toothpaste actually is not as good as we might want it to be—many places that don't have fluoridated water give kids fluoride pills.
That makes zero sense, friend. Water use in New York City per capita is way below what it is elsewhere. As Peakguy said, we have no pools to fill and no lawns to water. We should be encouraging people to live in dense urban environments like New York City to get people to conserve water.
And "too much power pumping it"? Where are your facts? New York City's water flows down from the Catskills by gravity:
And it doesn't even use energy for water filtration. More from NYC.gov: "Today, New York City has the largest unfiltered surface water supply in the world."There are a lot of people here and together, we use a lot of water. But we use a lot less of it than if we were spread out over miles and miles of suburbia or exurbia. TJ, don't fall into the trap of thinking that just becuse New York City is big and filled with cars and asphalt, it is bad for the environment. In fact, quite the opposite. New York City residents use less energy and water than other Americans do.
If people are really worried, they'd be much better off buying a Brita filter than bottled water. Even with the filter changes, it still comes out to be a lot cheaper and environmentally friendly than bottled water.
And I'm sure it was sold as "Mountain Spring Water"...
When you add everything up, NYC is just plain efficient because it is dense and the rest of the state is just too spread out. They need to change their living arrangements - recenter their towns and villages, moving their homes closer to work, shopping areas, etc.
NYC subsidizes the rest of the state big time. Like by over $10 billion / year. Just look at the Mayor's budget presentation for 2007. Or Ask the Center for Government Research.
When you add everything up, NYC is just plain efficient because it is dense and the rest of the state is just too spread out. They need to change their living arrangements - recenter their towns and villages, moving their homes closer to work, shopping areas, etc.
Don't forget that there are 8 million people in NYC. That's an awful lot of state residents, and less than 25% of them own cars. Unless we want more cars on the road in a city that already caters to this 25%, then we should be happy that the state government puts so much into subsidized transit.
Probably half of the $540 million for the subways and $93 million for the LIRR comes from City residents because they pay the bulk of State taxes. They also pay the fares to ride every time they board a train. Upstate highways, on the other hand, are absolutely free for motorists, but they are paid for in large part by City residents who will never use them. Upstate pays for a portion of the investments in rail infrastructure, but city folk fork over a big automobile subsidy in the form of upstate roadways that encourage more driving, more gasoline demand and therefore higher gas prices.
I think everyone has to figure this out, why put the burden only on already-energy-frugal NYC residents? I'd say that the answer is re-urbanize the built environment, upstate and downstate. Cities and compact towns are the way people will live in an energy-scarce world, as we did before the cheap oil age.There is a reason Jim Kunstler lives upstate. It offers a great pre-existing environment for relocalization. Buffalo. Albany. Syracuse. Utica. Rochester. Oneida. Schenectady. Binghamton. Upstate New York is going to be better off than a lot of other places when demand destruction begins. Not because a fiscal subsidy from New York City will be there to provide people with alternatives. It will be better off because of its own inherent strengths.
Also, about 5 years ago the UK government introduced what was called the "fuel price escalator" - a policy to increase auto fuel taxes year-on-year by a fixed amount equivalent to around 40 cents a gallon. For the last three years and following fuel price protests in (I think) 2003, the rises were not implemented - the price of fuel was rising fast enough anyway, due to higher crude oil costs. However, the original aim was to encourage fuel efficiency in order to reduce CO2 output - with a side effect of reducing oil consumption.
Corporations fund politics, not people. Without this simply understanding, our efforts are wasted. It's about the greater good, and I'm optomistic at some point people will be forced to band together. That will be after the initial battles.
It's not broke, but you say we need to upgrade it?
Headlines-
Oklahoma oil production fell again last year
to a 93-year low.
PeakWater
I've always been alarmed by the consequences of high British petrol taxes. These taxes seem, to me at least, to result in a lot more people driving very much smaller cars than are seen in the US. Don't these tiny cars result in more people being killed in road accidents?
astronomer1
If Michael Schumacher can crash his 600 Kg Ferrari at over 160 kph and only break a leg it leads me to believe clever engineering is more important than mass, and I assume that's why the Euro NCAP program was started. I rarely see a commercial for a car nowadays where they fail to mention how many stars the car got.
Tiny cars are much better to hit a pedestrian with, rather than the front thick steel bumper of a land rover and the high radiator grill. I used to straighten out the bumper of my land rover with a club hammer or winch after off roading. A pedestrian isn't even going to mess up the paint on a land rover bumper.
Just wanted to point out that there already is a federal gas tax. It's strange how often I read comments which seem to assume that a gas tax would be something new.
http://www.belleville.com/mld/belleville/news/state/14449289.htm
And exactly how hot and long does that oven have to run? How much energy is expended? What's the EROEI?
'Who runs barter-town?' Master - Blaster or Auntie?
If pig sh*t is not going back onto the land, then you need another externally available input for fertiliser.
If you have to cook it, you need another externally available input to heat it.
Perhaps the politicos and economists should repeal the 2nd Law of Thermodynamics. Then we can all relax.
there we go again,addicts all. instead of using the manure for crop fertilizer,we'll use up some fossil fuel to make more fossil fuel....halleluyah!
http://www.econbrowser.com/archives/2006/04/more_political.html
He argued that reducing the gas tax would not actually bring prices down much at the pump. The argument is technical and has to do with elasticity of supply and demand, and I'm not sure how convincing it was. But if we go along with it, one of the correlaries is that raising gas taxes would also not have much impact at the pump either. An increase in the gas tax of 50 cents might only turn into 5 cents higher at the pump.
To see why this might be true, assume that prices are high right now because we are fundamentally supply-limited. This is consistent with a lot of Peak Oil reasoning. Then we see these prices in economic terms as being high enough to suppress (Peak Oilers prefer the term "destroy") demand enough so that it is in line with this limited supply
The key point is that raising taxes won't change this price at which demand is suppressed to the point where it matches supply. And, further, adding this tax won't make that much difference in supply. Oil suppliers are making plenty of profit on oil. Oil is not more expensive because it is costing them more to produce; rather, its high price is what economists call "scarcity rent". Oil is expensive simply because production is limited (in this model) and the price has to rise in order to suppress demand as described above. This is why oil producers are making record profits, because they are lucky enough to own an intrinsically inexpensive commodity which is scarce and in great demand.
Therefore, increasing gas taxes will make oil less profitable but won't substantially decrease supply, because supply is limited by physical factors and not by its costliness to oil suppliers. If supply remains about the same, price at the pump will stay where it is because we know this is the price which suppresses demand to match that level of supply.
The bottom line is, in current economic conditions, governments could raise gas taxes and almost all of it would come out of the windfall profits from oil producers. There would be little impact at the pump because oil producers would still be making plenty of profits and would continue to supply oil to the maximum degree possible, as they are today (world excess production capacity is at record lows).
This is kind of a good news / bad news message for those who hope to raise gas taxes. The good news is that they could do so with little pain at the pump, and put the revenues to work for alternative energy research, etc. The bad news is that if they wanted to suppress ("destroy") demand even more by raising prices at the pump, this method will probably not be effective unless or until taxes are raised to an extremely high level.
Now, you may disagree with that kind of taxation for other reasons, but let's at least compare apples to apples.
A $3/gal tax on $3/gal gasoline would result in a net 100% increase, reducing useage (assuming a simple linear extrapolation) by a meager 10%. As Europeans already know, folks keep right on motoring even at $6.50 equivalent gasoline.
The idea is sound (tax undesireable behavior), but if reduced useage is your only goal, you will be somewhat disappointed.
However, long term elasticity has not been tested, and the European model suggests it will be elastic. Meaning that if the price of gas stays high, people will replace their current cars with models that get better mileage. People may drive as many miles, but they'll be doing it in a more efficient fleet. The transition takes time because the average life of a car is something like 10 years.
Patience...
In the short term. The goal of whatever policy should be to encourage and accelerate the structural changes needed to bring us back to a more sustainable footing. Re-establishing towns and cities that people want to live in will take time. It started happening before three dollar gas, partly due to the re-recognition that urban-life has it's benefits and partly because in many cases the suburban lifestyle was becoming a hellhole of McHouses and congestion. So higher taxes on gas (returned through income tax reduction maybe) might accelerate that trend. But, it needs to be combined with other policy changes.
How to encourage relocalization of agriculture and manufacturing might be even harder.
a big shift to 'dirty' diesel ..
'dirty' as in more particulates
vs those from burning gasoline
Triff ..
We can at least now offer a carrot, abolish the Payroll Tax, along with the stick, higher energy taxes. In effect, I propose that we tax energy consumption to fund Social Security/Medicare instead of taxing payrolls.
Higher taxes per gallon would reduce demand, but the supply curve would be flat and inverting. Normally supply curves rise b/c producers would produce more at higher prices. But in the case of a depleting supply, the supply curve changes.
The government could capture some of those future increases in prices now and use it as a fund for other energy sources. We would be forced to not only conserve but prepare for life without oil. If the gov't strapped a $1.50 to every gallon sold, it would hurt. But that money, properly spent (yeh right), could be set up to fund new research. What you would gain is lower energy intensity, higher conservation, & a plan for the future funded both those still living in the old system.
First IOCs account for just a part (and a decreasing one) for the oil/gasoline supply in USA. Most of it comes from foreign companies which obviously can not be taxed here.
Second IOCs are and will be facing rising costs and dropping production - taxing up what is left as a profit will kill their so much needed investment projects. It will also kill whatever desire they may have to look for alternatives themselves.
Third you are relying on the government to determine what obviously the market would decide most effectively - which alternatives are the best. Even worse - in your scenario the government should be guiding their research and implementation.
Fourth you are not addressing the timing problem - the core of the PO argument is that we will not have enough time to transiotion to a post-oil society in an ordered manner. You are not suggesting to buy us some time by moving forth the demand destruction, rather you suggest to continue as usual, assuming that time will be enough and eventually someone (government?) will fix things.
There's been a big shift to diesel even in UK in the last 5 years, about the last European country to do so. Diesel and petrol are about the same price per litre, but some diesel cars are amazingly economical. My boss has a large saloon (by European standards) with impressive performance that does 45+ mpg. Even the SUV's sold here are mostly diesel and get better mpg than petrol saloon cars did 10 years ago. So yes, while the elasticity may be weak in the sort term, in the long term people will choose more economical cars and particularly diesels. It's a matter of trading one pollutant - more CO2 from less efficient petrol engines - for particulates from more economical diesels.
The problem is, will politicians tolerate the unpopularity of such a step to reduce oil demand when:
a) It takes years to take effect and people are suffering higher fuel bills while they still have old, inefficient cars;
b) The actions of one country - even the US - only have a small effect on global demand and hence prices.
Actually, the US accounts for about a quarter of oil demand globally, so it would have a noticeable effect, at least for a bit. The real problem is all the developing countries, and especially China and India, which are aspiring to reach american levels of prosperity, and where cars are to a much larger extent status symbols that everyone wants, to be just like americans. And an additional 2 billion cars would cancel 10 times over anything that the US could do.
The problem is that if you're addicted, price doesn't really matter. The freedom of movement in the privacy of a car prevents any succesfull ridesharing program for example. . Even if prices double again. There is one end to this addiction, called Cold Turkey.
I'm always very amused by the reaction to " high" huel prices on your side of the atlantic.
Just filled up the Nissan for more then $8 a gallon, and I don't really care. (It's still cheap in fact!)
Best from Holland
Plus, has anyone noticed that the Federal Highway Trust Fund could go bankrupt as early as 2009 -- even without any changes to the federal gas tax?
And, sorry folks, but I get upset when people wig out on the price of gasoline, let alone on the gas tax, as if they were the sole costs of driving. In fact they are only a small part.
The cost of driving is 44.5 cents per mile according to the IRS (see http://www.irs.gov/businesses/small/article/0,,id=105708,00.html or http://www.turbotax.com/articles/taking_business_tax_deductions.html ). Those costs do not include a parking costs, which is can be accounted for and deducted separately.
AAA has some interesting numbers to consider. They state that, for a car owned and driven 15,000 miles per year, the average cost to the owner is $7,800, or 56 cents per mile. When you apply that 56 cents per mile to your commute, you may be shocked at the figure and be tempted to give up that second or third car which sits idle 95 percent of the time.