DETROIT - This is an idea whose time has come, and quickly gone. Presidential candidates John McCain (I believe he proposed it first, so he's mentioned first) and Hillary Clinton have proposed a moratorium on the federal gasoline tax for the summer vacation season. So pack up the family SUV-o-barge and head to the beach!
No, wait a minute. Cooler heads are prevailing over this, from that other presidential candidate, Barack Obama, and even Chrysler CEO Bob Nardelli. Still waiting to hear from Ron Paul's camp. (Scratch that - I don't want to hear from Ron Paul's camp.)
This comes in the wake of the Department of Transportation's proposed rules for stiffer Corporate Average Fuel Economy standards for 2011 to 2015. And more important than that, it comes after April sales figures show that Americans are trading in their truck-based SUVs for four-cylinder midsize and compact sedans. The free-market system, Keynesian as conservatives might find it, is working. Fact of is, the guys in the boardrooms at Chrysler, GM, Ford, and Toyota would likely prefer an increase in the federal gasoline and diesel tax to even higher CAFE standards, as a surefire way to make our nation's fleet look more like Western Europe's.
More scratch that. They would like to see an increase in the federal gasoline tax. Probably not diesel. In metro Detroit, diesel runs about $4.29 per gallon, a good 60 cents or so higher than regular unleaded. So here's a revelation: The federal tax on gasoline is 18 cents per gallon. It's 24 cents per gallon on diesel. Now probably some time in the past, a politician or two thought it wise to tax diesel at a heavier rate because (a) it's dirtier and (b) it's not going to affect demand and resulting tax revenues, because trucks have to deliver their loads whatever the price of fuel.
With some considerable exception, we have lower-sulfur diesel, now, and for cars at least, the after-treatment on new diesel models mitigates the emissions problem. As for demand, you can thank that extra 6 cents per gallon for contributing to higher food prices and for everything else that gets delivered by truck. If no politician is willing to consider lowering the diesel tax by 6 cents, someone ought to think of raising the gas tax to parity.
Make that this fall. Nothing of the like can happen politically while people are loading up the family Hummer for that weekend at the bed & breakfast.
And by fall, who knows where gas and diesel prices will be? This latest runup in fuel prices has nothing so much to do with high-demand/low-supply or the Iraqi civil war or China loading up its fleet with rear-drive Buicks as it does with oil futures traders.
I'm looking at you, my friends from Wall Street. With so many other investments no longer worth the keyboards they're typed on, Wall Street's savvy investors have been flocking to oil futures. How else to explain the runup in prices about the same time as the New York International Auto Show, when I could get a shoeshine from any number of Bear Stearns executives? And by the end of this week, prices were receding from those near-$120 peaks.
After all, U.S. demand for crude oil has been falling since 2005. More fuel-efficient cars -- all those Priuses we're driving -- and the implosion of the SUV market are to blame, if you're ExxonMobil. With demand falling and with $10.9-billion in Exxon's pockets from first-quarter profits, I predict we'll see a steady drop in fuel prices by the fall, with Big Oil content to push down prices to the $3 range. It will seem like relief to us (certainly more than the 18-24 cents per gallon we'd get from two of the three presidential candidates) and it will still be more than Big Oil was getting last year.
Speaking of Big Oil, the response earlier this week from President Bush was to call again for drilling in ANWR province and to browbeat Democrats in congress who want to "raise taxes" on oil companies. In the same press conference, Bush railed against congress's farm bill proposal for handing subsidies to millionaire farmers. Yes, that part may be true -- it's going to millionaire (or billionaire) farmers like Archer Daniels Midland, which by making ethanol literally takes food out of Big Oil's mouth. The irony here is that the "tax increase" on Big Oil that Bush derided is a tax break that congressional leaders want to cut.
Anyway, Alaska's ANWR wouldn't help relieve our dependency on foreign oil for something like a decade, but it's a good idea to get that sort of perk in while you're still in office. One can only hope that some of these automakers' schemes, like biofuels from waste, will actually amount to something and put the ExxonMobils of the world into a struggle for profits, kind of where Detroit automakers are now. ExxonMobil is actually facing a shareholder revolt, including from some descendants of founder John D. Rockefeller, for funding "research" denouncing the notion of global warming, and for refusing to develop alternative energy sources.
So that's the week that was. Two of three major presidential candidates pandering over fuel taxes. Another record quarter for the world's largest independent oil company. The president calling for more deals for the world's big oil companies. The good news is no one bought the McCain/Clinton pandering. Time to return to our regularly scheduled political/economic mess.