Fuel-use reduction strategies.
There are three basic ways to reduce fuel use in the transportation sector in the United States. The first is corporate average fuel economy (cafe) standards, with which the US. government tells the automakers what cars to sell. The second is gas taxes, with which the U.S. government raises taxes on motorists. The third is what I would call the OPEC option, in which foreign governments raise fuel prices because they can, or because they need more money for domestic needs, or because they start running short of oil supply.
The fine article by Emil Frankel and Thomas Menzies ("Reducing Oil Use in Transportation," Issues, Winter 2012) reinforces the obvious point that the U.S. public strongly prefers the first strategy to the second one: "Don't tax me, don't tax thee, tax the man behind the tree" The authors also explicate more subtly that the CAFE strategy may not prove all its cracked up to be. But then, regulations seldom are. The automakers have made Swiss cheese out of the first two words in CAFE: "corporate" and "average."
I share the authors' weariness and skepticism about the stale debate over raising fuel taxes. It's exactly what we should be doing for a host of reasons, not least being national security and our massive infrastructure and budget deficits. But the state of our politics today dooms any self-evident strategy to oblivion.
I do think the article foils short in not providing enough attention to the third option: OPEC. After all, petroleum is a finite natural resource, the Middle East is as politically unstable as its been in generations, China and India continue to drive worldwide demand for oil, and the list goes on. The question on our minds should be this: Are we ready for a sharp and sustained rise in fuel prices?
I would answer that question in the negative and suggest at least two policy prescriptions we ought to pursue in response. First, I think Frankel and Menzies are too quick to dismiss the importance of public transit as an alternative to auto travel, especially if gasoline costs $7 per gallon instead of $3.50. Second, before we give the gas tax a proper burial, lets consider converting the existing excise tax to a sales tax on gasoline, initially on a revenue-neutral basis. If average gas prices rise over the long term, as they are expected to do, such a sales tax on gasoline could not only hold its own against inflation but raise substantial new sums for infrastructure or other public purposes.
Metropolitan Transportation Commission
Emil Frankel and Thomas Menzies make a strong case as to why the United States should complement more rigorous fuel economy standards with an increase in fuel taxes, in order to reward people for driving less and ultimately reduce how much oil we use for transportation. They also acknowledge a major obstacle: the lack of political will. "Indeed" they write, "it is difficult to envision a scenario in which policymakers could ever generate pub-lie support for higher fuel taxes without offering a compelling plan for use of the revenue."
That specific plan is the critical missing piece. Americans are tired of being asked to give more of their hard-earned dollars for ... what? With no clear vision for our nations transportation network and no performance metrics in place to measure return on in-vestments, its no wonder taxpayers are leery of increasing the gas taxpayers are leery of increasing the gas tax.
State and regional transportation decisionmakers are proving that if they articulate the goals, plans, and criteria for measuring return on investment, voters are willing to share the cost of maintaining and expanding roads and transit. Examples abound:
* The Illinois Tollway Board approved a 35-cent toll hike late last year to fund a $12 billion, 15-year capital plan for infrastructure improvements throughout the Chicago region. Predictably, motorists weren't jumping for joy, but the media reported quite a few drivers who said things like, "Since it means better roads, it will be a plus for me.
* Despite being faced, as many cities have been, with reduced state funding, Oklahoma City has been able to maintain and expand infrastructure using revenues from a temporary, 1-cent increase in the sales tax. How did they build political will to levy this tax? City leaders including Mayor Mick Cornett credit their success with explaining to voters what they planned to do with the funding, doing it (without incurring additional debt), and then ending that sales tax as promised. City voters are so bought into these new investments that they've agreed on multiple occasions to resurrect the 1 -penny tax to fund new projects.
* Minnesota converted nine miles of carpool lanes along 1-394 into toll lanes, guaranteeing that drivers can travel at about 45 mph nearly 95% of the time. More than 60% of residents in the Twin Cities area support the program, and more than 90% of toll lane users maintain a very high level of satisfaction. Because of the success of I-394s conversion, the federal government provided Minnesota with a SI33 million grant to expand the program.
To fight gridlock and keep our cities and regions competitive, the United States needs a new approach to transportation planning and investment, one that maximizes the use of existing infrastructure, evaluates and captures the value of new investments, and taps creative financing tools. The public is ready to be leveled with and is willing to invest in solutions that deliver results. It's time we provided a strong vision and plan they can get behind.
Metropolitan Planning Council
Emil Frankel and Thomas Menzies offer an incongruous jump from a realistic and well-reasoned analysis of the importance of oil to both U.S. transportation needs and historic U.S. economic growth to a completely contradictory and contrainciicated conclusion that we must reduce the use of oil in transportation!
There can be little doubt that energy use, and particularly the use of oil for transportation, has been instrumental in achieving substantial economic growth in the United States and now also in the larger developing nations: China and India, together representing 37% of the worlds population, are recognizing that they can lift their people out of poverty by using more oil.
Cross-plotting gross domestic product (GDP) per capita of different nations versus either energy or oil use per capita yields a remarkably strong correlation. In the case of oil, the correlation becomes even more pronounced if one incorporates population density: The sparsely populated nations such as the United States, Canada, Australia, and Norway use disproportionately more oil per capita than the more densely populated European states or Japan for roughly the same GDP per capita. One might expect that result because more-densely populated regions need less energy for transportation. Similarly, plotting GDP growth rate versus oil consumption growth rate yields an even stronger correlation.
From a different perspective, if we look at GDP per unit of either energy or oil use, developed nations, including the United States, are creating more wealth per unit of energy consumption than the less developed ones. Or to put it another way, the less developed nations are more wasteful of energy, in terms of creating wealth, than are the developed nations. From an overall global economic perspective, should we not be encouraging the developed nations, and particularly the United States, to use more oil rather than less?
But too many people worldwide have accepted, without much independent thought or analysis, the view of the United Nations Intergovernmental Panel on Climate Change that carbon dioxide emissions from fossil fuel use will cause catastrophic global warming by the end of this century The lesser developed nations, whose populations outnumber those of the developed ones by about 6 to 1, support this view, and particularly the notion that developed nations should reduce energy use and transfer wealth to the lesser developed nations, as "punishment" for alleged past contributions to global warming!
An important new and very perceptive book (The Great Stagnation, by Tyler Cowen) notes that a significant drop in the U.S. economic growth rate, as measured by median U.S. family income, occurred around 1973; dropping by 75% from 2.7% per year (1949 to 1973) to 0.6% per year (1973 to 2006).
Coincidently, 1973 was the year the Yom Kippur Wear and the Arab Oil Embargo triggered a large oil price increase. Oil prices had actually decreased 1.5% per year from 1949 to 1970 in real terms, but after a big jump (of 75% between 1970 and 1975) have now increased by 4.2% per year since 1975. This triggered a change in the U.S. rate of growth of oil consumption from 3.1% per year to a negative 0.4% per year, or a total decrease of 3.5% percentage points, clearly contributing significantly to the "Great Stagnation"!
So some serious economic realism about U.S. oil consumption is desperately needed, but the Frankel and Menzies article fails to provide it, adhering instead to the latter-day shibboleth that the United States must reduce oil use.
ARLIE M. SKOV
The author was the 1991 president of the International Society of Petroleum Engineers and a member of the U.S. National Petroleum Council from 1994 to 2000.