Keep Fuel Prices High

The U.S. needs to implement a fuel-tax policy that keeps the price of gas and diesel at a point where Americans are motivated to continue purchasing fuel-efficient vehicles.

Commentary

Five years ago in this column, I called for higher U.S. gas taxes. Now I’m doing it again but in a very different way.

Back then, I wanted to see gasoline become expensive enough that Americans would be prodded into buying more fuel-efficient vehicles. Today, I want to ensure that gas prices stay high to make sure Americans keep buying them.

I know that sounds crazy with so many suffering from higher fuel prices, but here’s why: My biggest fear for the auto industry is that it will spend tens of billions of dollars re-tooling factories to build a new generation of fuel-efficient cars and all of a sudden the price of oil will drop.

I’m looking out to the 2012-ish timeframe, when the industry is filling its showrooms with cars that get exceptional fuel economy. These will be expensive cars, certainly a lot more expensive than what people are used to paying for a car right now, because the technology needed to make cars get great fuel economy won’t come cheap.

Customers will buy them only because they will be able to justify the up-front expense due to the fuel-economy savings that will follow.

But if oil prices ease and the price of gasoline drops back to where it was a couple of years ago, what do you think many American consumers will do? Why, they will be right back buying the biggest, most powerful trucks and SUVs they can afford.

And the country once again will abandon the enormous efforts it’s making to develop alternative fuels, as I’ve seen twice before in my lifetime.

Forget corporate average fuel economy standards. They have done almost nothing to reduce America’s addiction to oil. The government can mandate better fuel economy all day long, but it can’t mandate what consumers buy. And if the price of gas drops enough, they’ll be back buying big cars and trucks.

That’s why the U.S. needs to implement a fuel-tax policy that keeps the price of gas and diesel at a point where Americans are motivated to continue purchasing fuel-efficient vehicles.

I’d suggest making sure the price of gas doesn’t fall below $3.50 a gallon. The tax wouldn’t kick in until the retail price of gasoline hit that level. And if the price rose above that level, the tax would phase out. None of this would apply to alternative fuels.

People tell me I’m crazy. They tell me the price of oil is never going to go down again. “Fine,” I say, “if the price of oil is never going down, then you should have no objections to putting a floor on the price of fuel.”

So what would cause the price of oil to return to historical levels? I have this nagging fear we’re in the middle of a commodities bubble that’s going to burst. But that’s a story for another day.

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline Detroit” for WTVS-Channel 56, Detroit and Speed Channel.

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