We hear a lot about how horrible the gas price situation is in the USA…Which pretty much fails to invoke any amount of sympathy here in Europe where a gallon of gas is approaching $5 and SUVs aren’t seen as a god-given right to drive.
I had heard a long time ago that gas was somehow subsidized in the USA…which I don’t know if that means it just isn’t taxed as greatly as gas here, or if the US government actually pitches in to keep prices lower than everywhere else in the world.
My friend here was involved in a discussion about gas prices in the USA where he proposed that taxes should increase in the USA over a period of 10 years to make the prices the same as in the European community. All money collected would go to public transport and funding public research on cleaner energy or fuel consumption…Somehow I don’t think people would go for that, but that is probably a GD question.
It could be argued that the US government subsidizes the oil industry by using its military to maintain friendly sellers in the mideast. This is getting into GD territory but I think it’s pretty safe to say that a privately-funded mercenary force would cost the oil companies quite a bit to keep the price of crude from being what Saddam would be charging if he controlled Kuwait and Saudi Arabia plus Iraq – the scenario he was headed for in August, 1990.
Nonetheless, the price of gas is artificially high in the US due to taxes, not artificially low due to subsidies. The failure to take this deviance from market forces to the levels seen in Europe is the true premise of your question.
Not that I’m his official representative or anything, but he means what he wrote. As you see in the next sentence where he says something about it being even ‘more artificially high’ in Europe.
Correct. Still, if one (fairly in my view) factors in the cost of federal highway subsidies that provide the pavement necessary to create a market for gas in the first place, then I suppose you could say the price is artificially low. You could also factor in tax breaks for exploratory drilling, etc., but I am unaware of any gas subsidies like those that exist for argriculture for example.
But not argued successfully. Show me one instance where the U.S. gets a lower than world price for their oil. Oil is a fungible resource.
It doesn’t work that way. If Saddam had managed to take Kuwait, the other OPEC nations could simply exclude him and continue to offer oil at whatever the OPEC price was at the time.
In fact, it can be argued that the U.S. strategy of containing Saddam through sanctions actually caused Americans to pay more for oil, since the sanctions restricted the global supply of oil. Had the U.S. simply allowed Saddam to take Kuwait, it’s entirely possible that oil would be cheaper today.
This is correct. The difference is entirely due to different tax regimes in the various countries. Gas is more expensive in Alberta than it is in the U.S., despite the fact that we’re a large oil producer. The reason? Because we still have to pay world prices for oil, and our gasoline taxes are higher.
The US government just passed a huge subsidy in the form of a multi Billion dollar tax for the oil companies at the same time they are making record profits.
**mangoldm ** - What is the basis for saying that our gas prices are artificially high? We have some of the cheapest gas in the western world.
IMHO, we need to tax gas another $1 per gallon. This would drop consumption so much that the price of oil would drop. To this end, OPEC would effectively be paying the tax.
Well, taxes on gasoline are used to pay for road maintenence and construction. If we’re going to have publicly owned roads then gasoline taxes are a pretty good proxy for road use. In that sense, any road contruction that ISN’T paid for by gasoline taxes is a subsidy for gasoline burning vehicles, even if it isn’t a direct subsidy on gasoline itself.
You can’t just look at gasoline taxes, you have to look at the whole infrastructure. That includes gasoline, but also vehicles, vehicle maintence, vehicle taxes, insurance, road construction, and road maintence.
How about the post above that cites an average 38 cents per gallon in tax? The fact that other countries immolate themselves further can be debated on its merits, however, but that would be a question for GD.
But “oil companies” aren’t just some rich person who’s getting richer. The stockholders get these profits. I have oil in my 401(k) portfolio, so let them make all the profits that they want to. Why do we all feel that we have to begrudge people their earnings? They’re not getting a net rebate here.
Pretty good idea on the surface. But deeper down, we’d just be subsidizing the other high consumer nations who’d be getting cheaper oil, and they’d increase their consumption to make up for us. So if it’s them vs. us, may as well let us keep our cheap gasoline.
It’s not a matter of begrudging high earnings necessarily. It’s a matter of, given those high earnings why are additional subsidies so desperately required. Why should my tax dollars go into your 401(k)?
Remember, gas prices were at historic lows during the latter part of the 1990’s–the same time period the sanctions were in effect during Saddam’s regime.
There are many costs of driving that aren’t paid by the person buying the gas.
For instance, local and state road construction and maintenance (like, plowing the road in front of your house, buying traffic lights, and maintaining bridges) . These are paid for by property taxes (local) and income taxes (state). So a property owner or worker who doesn’t drive much is paying for roads that other people are using.
Other costs include state and local police to patrol the roads and keep them safe, treating accident victims (paid for by either other members of their insurance plan, or taxes if they’re not insured), the cost of pollution from the exhaust (paid for by everyone who’s asthmatic, or elderly, or otherwise had issues breathing), and the cost of global warming. Plus, depending on how much you value the Arctic Wildlife Refuge and a Valdez-less Alaska, there are costs of oil extraction and transport. And you could argue that a lot of our most-expensive foreign policy is in reality based on securing oil supplies.
Of course, a lot of these costs are very hard to put dollar figures on (how much is an asthma attack worth?), so it’s hard to say exactly how much gasoline is subsidized. But given the amount of money towns and cities spend on roads, it’s pretty easy to say it is.
You are using an extraordinarily broad use of the term “subsidy.” So broad, in fact, that the English language doesn’t recognize the word “subsidy” as encompassing an accounting of all downstream economic activity related to a specific item.
There’s no market force that dictates that the trade in gasoline should generate revenue to pay for roads, cops, health care, or whathaveyou. Instead, the market generates an equilibrium price for commodities, including gasoline. If the government does something to lower the price of a commodity below the market’s price, then you have a subsidy. The existence or not of a subsidy has nothing to do with the downstream or ancilliary services that are either desired, useful, or beneficial to the use of a commodity.
What’s more, cops are not solely used for traffic enforcement. They also catch bank robbers. By this logic, one could only conclude that savings accounts are also subsidized by the government. But that is nonsense.
To put this argument another way, if I sell matchbooks on EBay, a going rate for a standard matchbook might be five cents. If someone starts using the matchbooks to burn down houses or to light cigarettes, simply because the price of a matchbook does NOT increase to cover the rises in property insurance, the cost of firetrucks, the cost of cancer medication, etc. etc., is not evidence of a government subsidy of matchbooks.
As has been stated many times before, no, the government does not subsidize gasoline in the United States. There are in fact excise taxes (the exact opposite of a subsidy), but the size of those taxes is much less than in Western European nations.
Dictionay.com has this as their primary definition: “Monetary assistance granted by a government to a person or group in support of an enterprise regarded as being in the public interest.”
Is direct monetary assistance provided? No. Is indirect assistance that involves the expenditure of money - such as plowing snow - provided? Yes.
Well, that may work where you live, assuming you have the infrastructure and resources of public transportation. However in the rural hick states where it’s not uncommon for someone to drive 20+ miles to get to work, it can be a problem.
It’s so damn easy to call for raising taxes on people whom you don’t even acknowledge exist. :rolleyes:
