Sunday, June 01, 2008

High Gas Prices: The Natural Carbon Tax?

Latest data from the U.S. Department of Transportation Highway Administration page:

Americans Driving At Historic Lows
Eleven Billion Fewer Vehicle Miles Traveled in March 2008 Over Previous March

The graph is from here. Please let me know where similar Canadian data can be found. The answer does not seem to be "Stats-Canada" or "Transport Canada". (And excuse my ineptitude with Paint. The graph looks better when you click on it.)


Steve V said...

I read somewhere that gas usage had dropped 4%. I guess the question, is it because of prices, or is it because the American economy is in the tank, which obviously affects demand. That graph shows usage falling at the end of last year, which pre-dates the huge increase in oil prices. It's probably a combination of price and the economy slowdown.

That said, sales of hybrids are through the roof, relative to the past, so if the goal is too change behavior with a carbon tax, it would appear that is happening regardless.

bigcitylib said...

Although I still support a revenue neutral tax SHIFT.

Someone mentioned the idea of a carbon tax kicking in when gas/heating fuel (whatever it applies to) fell BELOW a certain level, which seems an interesting way to do it. As with everyone else, I await for the details of Dion's plan to emerge.

Steve V said...


I was thinking that too, the tax kicks in at a certain threshold.

Robert McClelland said...

Miles driven is meaningless. If, for example, there are more SUVs driving those fewer miles then fuel consumption and ghg emissions will still increase.

Here are the Fuel consumption numbers for Canada. I can't find any other data than that.

Steve V said...

"If, for example, there are more SUVs driving those fewer miles then fuel consumption and ghg emissions will still increase."

But, that's not the case. In fact, sales of SUV's are quite sluggish now. Why do you think the Honda plant is increasing production for it's Civics, while others are closing their big car lines? And, as I mentioned before, hybrid sales are up exponentially, all of this clearly a reaction to gas prices, as well as some environmental sensibility.

bigcitylib said...

OT, but anyone heard about how well a used Prius would perform? I've often thought of making the move to hybrid next purchase, but couldn't really afford a new one. Has hybrid tech changed too much to make this feasible?

Ti-Guy said...

I wish terms like "tax" weren't thrown around so cavalierly. Higher fuel prices might influence behaviour in terms of the way taxation can/might but they don't operate to influence revenue as taxation does.

I'm still not even all that clear why oil prices are soaring, since there's a lot of condradictory information floating around about that.

Robert McClelland said...

In fact, sales of SUV's are quite sluggish now.


Neither did rising gasoline prices broadly affect the level or composition of vehicle sales. Overall, unit sales were the second highest ever, just 4% below the record set in 2002. For the fifth straight year, purchases of trucks (which include SUVs) rose faster than car sales. While demand increased for some segments such as subcompact cars, demand continued to grow for large and luxury SUVs and crossover vehicles (SUVs mounted on a car chassis). In fact, the strength of truck sales pushed the share of cars in all vehicle sales to a record low of 51.7% last year (eclipsing the previous low of 51.8% set during the oil price collapse of 1998).

Granted these aren't the most up to date numbers, but I doubt we'll see much of a change when the latest numbers are released.

Robert McClelland said...

I'm still not even all that clear why oil prices are soaring

Supply and demand. There are too many dollars chasing too few investments. So what we're seeing is yet another irrational investor bubble.

I think it may be nearing an end. The analysts are nearing a unanimous consensus that we'll never see double digit oil prices again. Which naturally of course means the bubble is ripe for the bursting.

bigcitylib said...


Miles driven is not meaningless if we assume that the mix of cars on the road is relatively stable from month to month. The only caveats I would worry about are due to the fact that we had such a crappy winter in NA, so this might have discouraged a certain number of trips.

S.K. said...

We had the second worst (most) snowfall on record, which was on the ground from the second week of NOv until the fourth week of April in southern Ontario.

The snowfall met records in many other parts of Canada and the Eastern US.

Sorry to burst all your bubbles, but you are seeing a weather effect, not a gas price effect.

If you can show me numbers from just California, I might believe it.

tedhsu said...

I'd like to answer "No!" to the question posed in the title of your post.

The explanation is here.

tedhsu said...
This comment has been removed by the author.
tedhsu said...

I should have said to click

Dr. Tux said...


I've seen a lot of information contradicting what you're saying about truck and SUV sales. Stuff I've seen has shown that hybrids are up and SUVs are down, significantly.

Dr. Tux said...

The main argument here, that high gas prices are a natural carbon tax, is true only in a limited sense.

Ted points out three reasons that I think are worth mentioning:

Here's why:

1. A high price for oil encourages more production, notably Canada's oil sands projects, which have been a major contributor to Canada's greenhouse gas emissions growth in the last few years. A tax might increase the price for gas for the buyer, but the seller doesn't get paid more and therefore a carbon tax does not encourage more production.

2. The high price of oil has been driving increased usage of coal as an energy source, notably in places like China. Coal emits more greenhouse gases per unit of energy than oil (as well as other noxious things). A carbon tax would increase the cost of energy from coal, more than it would increase the cost of energy from oil. Therefore it would reduce the incentive to switch to burning coal - something that a higher oil price does not accomplish so easily.

3. If higher oil/gasoline prices had been the result of a carbon tax, money would have been going to our government instead of to places like Russia and the middle east

Dr. Tux said...

There are a few more reasons why high gas prices aren't a natural carbon tax.

My biggest point is that we need to be asking about the role of government in times of high (and increasing) oil prices.

The modern economy is founded on cheap and readily available energy, and every economic sector takes a hit as that energy becomes more and more expensive. What should the role of the government be in times of energy scarcity?

Do we honestly believe, like Conservatives do, that the market will take care of us and that all we need to do is sit back and watch things unfold? Or, do we believe that there is a role for government and that strategic investments need to be made so our country is more prepared?

Note, I'm not advocating centralized state planning. I'm not advocating a pure market-based solution either. The idea that high gas prices are a natural carbon tax edges much closer to the view that all we need to do is get the markets right, which is wrong.

We need BOTH markets and governments to be working together, in order to solve climate change.