When asked what it would be like to live in an America where gas costs $6.40 a gallon, William Beach, Director of Data Analysis for the Heritage Foundation, replied, “Well, it’s like this. It’s like you just woke up in France.” This worst case scenario seems all too imminent, with gas prices forecasted to reach an average $6.40 a gallon by 2016. Contrary to popular opinion, the price increases will stem from more than gas-guzzling corporations or world supply shortages. Instead, it will be the willful creation of the largest price gouger of all, the U.S. government.
Current energy legislation such as H.R. 6 and S. 1419, among others, could add additional excise taxes on both imported and domestically refined oil, which would dramatically raise the cost of petroleum products in the United States irrespective of outside market forces. The legislation also calls for higher corporate average fuel economy (CAFÉ) standards and new energy efficiency standards for home appliances.
These upcoming changes have already sparked media interest, producing articles tacitly in favor of the changes. Mike Spector, a writer for the Wall Street Journal, recently wrote an article carried by the Washington Post Express, titled “Gear Shift in Guzzling.” It discusses the merits of the European auto industry and its applicability to American life. However, it does not mention alternative perspectives on upcoming legislation and sidesteps the question of whether such harsh taxes are appropriate, or why they are occurring.
Throughout his process of communicating what amounts to a favorable policy evaluation, Spector integrates several false assumptions about energy policy into his article. Firstly, he assumes that egregious tax hikes are necessary to persuade the public to purchase fuel-efficient vehicles. Otherwise, he must face the question of why hybrid car sales still only garner a 3% market share, and do not seem to be sparking much consumer interest. This interventionist approach is predicated on the assumption that government regulation properly serves to correct the “market failure” of gas over-consumption by artificially inflating public demand for hybrids, diesel engines, and fuel-efficient vehicles. In reality, government intervention in the economy does not necessarily fix economic problems, so much as shift negative outcomes into other economic sectors.
Not long ago, sources such as CNN were pointing to $3-per-gallon gas as the magic mark at which American fuel consumption would decline. This moment has come and gone, and now the media are raising the estimates to $4.50 or more to accommodate for the perplexing phenomenon of increased fuel consumption. The Energy Information Administration estimates that domestic petroleum use will grow 1.5% this year.
It becomes readily apparent that American demand for fuel is highly inelastic, and the costs of additional excise taxes will be easily transferred onto consumers. These high costs will not cause a significant reduction in fuel use; rather, they will slow our economy by reducing demand for such things as clothing, DVDs, theater, art, and other commodities. In addition to the economic downturn—which could cost jobs—living costs will rise significantly. According to the EIA, 89% of the nation’s non-fuel energy consumption requires petroleum products. This means that the cost of plastic, synthetic fabrics, and even food will increase at the very moment when people need to tighten their belts and shift more money into their gas budgets.
Spector omits any mention of possible economic decline in his article, listing instead two minor costs of emulating Europe: smaller engines and decreased performance. He never defines “decreased [vehicle] performance.” By oversimplifying the costs of fuel-efficient cars, Spector virtually dismisses opposition to the politically correct virtue of hybrid vehicles and other fuel-efficient transportation. By defining the debate in simplistic terms—hybrid cars good, gas-guzzling bad—Spector misses the point that larger vehicles sacrifice some fuel efficiency in favor of a safer, sturdier frame.
Placing increasing numbers of diesels and hybrids on the market should not be characterized as a simplistic “upshot for U.S. consumers,” especially given the health risks posed by diesel exhaust. These risks include increased asthma attacks, allergies, and even lung cancer. The EPA classifies diesel exhaust as a “likely carcinogen,” and has recently established new, low-sulfur requirements for diesel fuel in order to try to limit some of this secondary pollution. Until the pollution released by diesel engines has been minimized, diesel-reliant vehicles are unlikely to form the new backbone of American transportation.
Dr. Bradley, President of the Institute for Energy Research, notes that “the energy road to hell is also paved with good intentions.” Perhaps an artificial spike in petroleum prices, while well-intentioned, could create a virtual hell for the American populace. After all, lower living standards, decreased market competitiveness, and increased pollution seem like a rather high price to pay for hybrid and diesel cars.