Finally, a gas tax proposal I could accept:
Sen's argument is that because the supply of oil is fairly inelasticand production is mostly controlled by a cartel, if we imposed a tax oncrude oil rather than gasoline, the overwhelming majority of the cost would be borne by producers rather than consumers.
As a result, a crude tax would raise the price of gas at the pump(thus encouraging fuel conservation) but it would raise federal revenueby much more than it raised consumer cost. That would allow thegovernment to provide a lump-sum rebate to all citizens thatsubstantially exceeds the increased costs of fuel, thus making thisproposal much more politically viable than a conventional gas tax.
The only problem is, it wouldn't work. The point of a cartel is that they control enough of a resource or market that you can't unilaterally impose conditions on them. If we decide to bleed OPEC and they decide to starve us, they'll win. America simply cannot produce or import enough oil from non-OPEC sources to satisfy our demand at a reasonable cost for any length of time.
Moreover, while a decade ago OPEC may have eventually needed to return to us because they needed our business, now, with the accelerating consumption of China and India, a few long-term contracts will alleviate much of their hurt and freeze us out of low-priced oil well into the future. And trust me, China would be very eager to lock in energy supplies for their next few decades of growth. So while I'm all for the proposal, even if we could pass it, OPECs responding oil shock would drive prices so high that we'd quickly capitulate. Unless we coupled the program with a severe and effective set of conservation measures that radically lowered our usage in the period directly before, we just wouldn't have the flexibility on the demand side to stick with the tax.
