Comments on: We Explain Gasoline Demand (including why it’s sticky)

By: EcoMyths « MrGreen.Biz

EcoMyths « MrGreen.Biz — Fri, 15 Aug 2008 02:56:50 +0000

[…] not 100% or 200% higher. Second, much of the increase was masked by price volatility. As we showed here, gas prices fell almost as often on a month-to-month basis as they rose during that period, masking […]

By: James Handley

James Handley — Fri, 30 May 2008 18:22:41 +0000

Well said, David!
Politicians avoid carbon taxes fearing reactions like George’s.  Instead, they’re talking about cap-and-trade which would be a tax on fossil fuels.
The Lieberman-Warner cap-and-trade bill (up for a vote in the Senate soon) would transfer tax revenue to such winners as "clean coal" (Takes ~ 25% of net energy to capture and sequester carbon from coal.  Wind’s more economical) biofuels like corn-based ethanol (doesn’t replace the fossil fuel it takes to make it) and nuclear (already very subsidized).
The Canadians are having a lively discussion about caps vs taxes. Some of their politicians are also advocating a cap, pretending it’s not a tax and accusing carbon tax proponents of stealing from the poor.   In truth, we have choices about what to do with the tax revenue under either a cap or tax, some very good (like a dividend) and some very bad (like subsidies to the already-subsidized).   Cap and Dividend would be a way to return the revenue from a cap, but it’s not the best, because a cap still creates volatility and traders skimming.
A revenue-neutral carbon tax would put the revenue back into the economy and let people like George decide how to make the needed adjustments and technological innovations instead of government contractors who have every reason to fudge their numbers to win more grants.

By: David Collins

David Collins — Thu, 29 May 2008 16:03:31 +0000

George, the majority of realistic carbon tax proposals involve returning tax funds collected, on a per-person basis, reducing other taxes, or something along similar lines. This would enable you to continue to get to and from work in the meanwhile, as you and others in your situation figure out your long-term approach to handling your long commute. Personally, I trust you and your friends and neighbors to do a far better job of it than any government bureaucrats or academic dreamers ever could.

By: george

george — Thu, 29 May 2008 15:12:43 +0000

Here’s one thing I know for sure about my gasoline usage. I have no choice but to use gas. Where I live, there is no public transportation that I can use to get to my place of employment. There are no trains, no buses, no cabs (unless I call for one and they aren’t cheap) I commute over 50 miles round trip a day just to get to work. Slapping a carbon tax on me and everyone else will do nothing but make it harder on all of us financially. Instead of taxing the pajesus out of all of us, new technologies should be developed that are clean and cheap that we can all use. If we keep getting taxed for every little thing, I can guarantee there will be a revolution. History has proven this time and time again.

By: Streetsblog » National Poll: Americans Expect Gas Prices to Rise More

Streetsblog » National Poll: Americans Expect Gas Prices to Rise More — Tue, 27 May 2008 17:29:43 +0000

[…] their habits appearing this month, the three-question survey lends weight to the argument that demand for gas drops noticeably once consumers firmly believe prices will remain […]

By: James Handley

James Handley — Sun, 25 May 2008 04:08:43 +0000

It’s a Seller’s Market Now. Price Volatility just increases the pain.
Recent reports suggest that we’re crossing from a buyer’s market (in which profits were maintained by limiting supply, via monpolies like Standard Oil or cartels like OPEC) to a seller’s market, in which demand always exceeds the available supply of petroleum.  Reasons include China and India’s embrace of car culture (promoted by US policy), limited refining capacity, as well as declining productivity of many oil fields.
In the transition range, prices are likely to be extremely volatile — sometimes strongly affected by supply, sometimes more by demand, but always moving and often sharply.
Once we’re firmly into the "seller’s market," fuel price will be mostly determined by consumers’ willingness to forgo fuel by skipping car or plane trips or by carpooling or finding other ways to get around.   In the longer run, people will adjust by choosing to live closer, travel differently and less and buying more efficient homes and vehicles, all of which are ways to dampen carbon emissions and thus climate impacts.
But it’s hard to imagine that these measures will be enough to reduce demand significantly below declining production rates– meaning that we’re a seller’s market for good or at least until there’s a big technological breakthrough or a major shift in consumption patterns.
Volatility makes deciding how much to invest in making efficiency improvements more of a gamble than a smooth, upward price arc would.  That’s a very big flaw of the current (lack of) energy policy (as Charlie’s graph shows) and of cap-and-trade systems. They’re volatile, and unlike a predictably-increasing carbon tax, induce more "stickiness," substantially increasing the pain and duration of a transition to a low-carbon and low-petroleum economy.
Dentists reassure patients by letting them know what to expect by making it quick.  At this point, our energy and climate policy consists mostly of avoiding "the dentist" and prolonging the pain. Maybe time to stop agonizing, face reality, work out something predictable, and try to avoid unnecessary shocks to our economy, our political system and international relations.   A predictable gradually-increasing carbon tax that helps keep demand in balance with supply and pushes us towards a low-carbon economy, might seem scary, like a shot of novacaine, but it sure beats the alternative.

By: Richard A.

Richard A. — Tue, 13 May 2008 14:31:31 +0000

Paul Krugman writes in his 5/9/08 blog,"In the long run, the best estimate of the price elasticity of demand for auto fuel seems to be -0.7. That is, a 10 percent rise in prices will reduce gas consumption by 7 percent. Of this, 4 points come from shifting to cars with better mileage, 3 points from driving less." http://krugman.blogs.nytimes.com/2008/05/09/prices-and-gasoline-demand/