Gas Is Too Cheap

Democrats are pushing President Joe Biden to suspend federal gas tax as a way of reducing inflation, reports Axios. Politicians are saying, "It’s a common-sense step to put more money in people’s pockets without jeopardizing infrastructure projects." Florida's gubernatorial candidate Charlie Crist says: "That’s a good, right way to get people some relief, especially during the holiday season. These are important things. These are tabletop issues. These are things we need to be addressing." This is after the president has already tapped the Strategic Petroleum Reserve and begged oil-producing countries to crank out more of the stuff.

The problem with this is that according to the EPA, the burning of gasoline in vehicles for transportation is the source of 29% of American greenhouse gas emissions. One of the reasons those emissions are so high is that gas is cheap relative to other rich countries.

At the end of November 2021, according to GlobalPetroPrices.com, gas averaged $3.745 per U.S. gallon. North of the border in Canada, it sold for $4.811. In France, it was $7.002 and in the Netherlands, $8.605. In all of those countries, especially the European ones, people tend to drive smaller cars that have greater fuel efficiency. As Joe Cortright of City Observatory notes:

 "These higher fuel prices prompt people and businesses to make different decisions: people drive more efficient vehicles, drive fewer miles, and kill and maim fewer of their brothers and sisters in crashes. Cheap gas is a principal reason for America’s excessive greenhouse gas emissions and the epidemic of traffic violence. Higher priced gasoline prompts businesses and consumers to make choices and investment decisions that lower our fossil fuel emissions. Higher gas prices make electric vehicles more competitive, and prompt people to buy more fuel-efficient vehicles. Higher gas prices also discourage long commutes and make transit more attractive."

There is a reason Americans bought smaller cars during the '70s oil crisis, and why Japanese imports grabbed so much of the market: they were more fuel-efficient. That's what the market signaled.

The last time oil prices spiked in early 2020, we noted that "when you look at the sales of passenger cars vs light trucks (SUVs and pickups), the light truck sales have been generally increasing except when gas prices spike or the economy crashes." Yet even after the pandemic shutdown and economic dip, light truck sales are still dominating the market. That's because gas prices crashed too.

Meanwhile, the Highway Trust Fund, which is supposed to pay for the roads, has not been increased from 18.4 cents per gallon since 1993. According to the Tax Policy Center, had it been indexed to inflation, it would now be by 33 cents. The difference between the tax collected and the costs of keeping the highways open is paid for out of general tax revenues, all subsidized by people who take transit, ride bikes, or walk. This year, the Highway Trust Fund bailout is $118 billion.

Historically, gas prices are not even that high. After the Great Recession, they were over four bucks for a couple of years. But since 2014, they have been much lower and people have short memories and big gas tanks now.

Higher gas prices disproportionately affect low-income families and the working class, who have to drive to work and do not have the option of decent transit in much of North America. Perhaps Biden's e-car subsidies should be going to them instead of those families earning up to $800,000 buying $75,000 trucks.

Cheap Gas Is Linked to Public Health

There are other benefits from higher gas prices. A just-published study answers the question: "Is cheap gasoline killing us? Fuel subsidies and under-taxation as a driver of obesity and public health problems worldwide." Study authors Jeff Colgan and Miram Hinthorn found cheap gas encouraged people to drive more and walk or bike less.

"In our models, we consistently find a strong, statistically significant, and negative association between gasoline price and body mass index (BMI). While BMI rose over time almost everywhere, the rate of increase was considerably lower in countries with high fuel prices. Our findings suggest public health advocates have reason to consider joining the coalition of environmentalists and economists already urging reforms to fuel subsidies and taxation."

The researchers note that raising taxes on gas or removing subsidies are politically unpopular, as are increasing prices that politicians have little control over like Biden is facing now. "Worldwide, increased fuel prices often lead to significant political backlash, which can take the form of mass protests or electoral shift," write the researchers. As can be seen on the sticker put on every gas pump in Ontario by the conservative government fighting federal carbon taxes, gas prices are very political everywhere.

The authors conclude with a statement that sounds right out of Treehugger:

"The results of this study suggest that modes of transportation and human health are inseparable. At a time when governments around the world are looking to increase mass transit and decarbonize their economies for reasons linked to climate change, they should be mindful of the health benefits of encouraging a shift away from private vehicles for short-distance travel. In most countries, such efforts would also lighten the load on the public purse, as resources currently dedicated to obesity-related medical conditions could be reallocated to other purposes."

The problems with cheap gas are legion, from encouraging bigger vehicles, suburban sprawl, obesity, and poor health, and most importantly, increased carbon dioxide emissions.

Yet at the time of this writing, Saudi Arabia, Russia, and other Opec members have agreed to increase supply by 400,000 barrels a day. According to the Financial Times, this is "after weeks of pressure from the White House, which had called on the group to add more supply to cool prices that have risen sharply in the past year and Fed fears of broad inflation in the US."

This is why it is going to be so hard to end this climate crisis because it doesn't take much for politicians to forget about the climate crisis and hit the gas pedal instead.