International Gas Prices - Tax or Subsidize?


I thought this graphic was really interesting (click on it for an larger, readable version).  

One of the main pillars of my belief that new urbanism is a solution that will need to be considered by every municipality, town and neighborhood is the almost inevitable rise of fuel and energy prices that we expect to see over the coming decades.  It's not a political or ideological argument.  It's basic economics.  More demand for a fixed supply of a product causes prices to increase.  Couple that with a product that is mainly traded in a currency that is steadily losing value against other currencies and you have a double whammy.  The underlying issues behind both of these causalities are apolitical.  Politicians did not make up peak oil and both parties have led the country down the path to financial instability.  

Now, there's been a lot of talk about how expensive our gas is and how our politicians should do something about it.  The frequent 'thanking' of Mr. Obama for our high gas prices bugs me and I'm not really a supporter or detractor.  It just seems a bit of a stretch to blame our president for a situation that is largely out of any individual's or policy's control.  Even if we could somehow encourage the companies we have any type of influence over to drill, pump & refine more, it wouldn't even put a dent into our overall demand.  The big non-nationalized oil companies control a miniscule amount of the world's oil reserves.  The majority are controlled by nationalized petro companies.  

Don't be fooled when you hear that companies are being kept from drilling domestically.  There are currently more than 68 million acres of land leases that are going unused in the US.  If Shell, Chevron, Exxon or anyone else thought it was financially beneficial at this point in time to drill on those already permitted sites, they sure as shootin' would be.  Are there two main areas that companies might consider drilling on (ANWAR & the Eastern Gulf)? Yes, but they really aren't the saviors some thing they are.  Looking at the gulf, it produces about 25% of our domestic oil or about 9% of our total usage.  If we could somehow magically increase production in the gulf by 50% we might be able to increase that from 9% to 13% of our total.. Now a 50% increase isn't realistic.  What is realistic?  Probably less than 10%.  What I'm getting at here is there is no silver bullet domestic oil solution.  There are too many problems with both production and supply to detail in this post.  Suffice it to say that the economics of domestic drilling making any meaningful dent in the price of gas just don't add up.

I can recall a number of people beating up Bush a few years ago when the super spike happened (Obama for one).  Saying that he and his oil men were soaking up profits at the expense of the American people.  Complete nonsense.  Did people make piles of cash?  Yes. Absolutely.  Was a major head of state complicit? Probably not.

Now that I've gotten that off my chest, let's take a look at this really interesting study and infographic.  The underlying study (here) suggests that the US is essentially the baseline price for an unsubsidized fuel nation.  Maybe we are the Goldie Locks of gas prices?  

It seems to me that if the government intervened to lower the price of gasoline significantly, they would need to subsidize that price reduction in some way (pay for production, reduce taxes, release reserves).  I don't think we can do that and I'm not sure it would make sense to.  Now, in all reality the current gas tax is miniscule.  Especially when we compare ourselves to other countries around the world.  We probably can't go lowering that much given the crappy state of affairs we have going on with our infrastructure which is what we are told receives the funds from the federal gas tax.  Looking at the overall price of $0.76/liter, there aren't very many countries below us that aren't oil rich nations.  I'm arguing that we probably pay a pretty fair price for gas when you look at what the rest of the world is paying.  

You know what would lower the amount you pay at the pump though?  Living in a community where you can walk to a high percentage of your daily needs.  Where can you do that in North Fulton??  Not very many places.  Here are a few; Historic Roswell, Milton-Crabapple and Downtown Alpharetta.  Some of the subdivisions around North Point mall are in an okay location too. 

Looking at this, do you think we should raise taxes, subsidize prices or keep the status quo?  I'm in favor of the status quo myself but I'm not sure we're going to enjoy being to the very left of this graph in the long term.  

Image:  Hat tip: