Crazy: The Downside of Lower Gas Prices

I just paid $1.98 per gallon for gas and hated it!

Call me crazy but I'm sure I'm not the only person who thinks that lower gas prices are a bad thing.

We've seen this movie before...in the 70s high gas prices killed the gas guzzling station wagon and large car market and ushered in a period of smaller more fuel efficient cars. But that certainly didn't last long since before you knew it SUVs, Hummers and all sorts of gas hogs were once again taking over the streets.

Now where are we?

Prices spiked in the summer, SUV and light truck sales tanked, and all the car manufacturers were rolling out plans to build hybrids, electric cars and smaller more fuel efficient models. That's in danger now with the drop in oil prices but the thing about it, this drop is not sustainable.

Robert Samuelson (yep the same guy who wrote that Econ 101 textbook Paul Samuelson wrote the textbook...thx WC) has a proposal that I think should be seriously considered:

Raise fuel taxes the equivalent of one cent a gallon per month for four years (total: 48 cents). For now, consumers would benefit from most of the lower prices, but they'd also be on notice that prices won't permanently stay down. To offset any depressing effect of higher fuel taxes, we could lower other taxes in lock step. But the signal of higher long-term prices should affect Americans' driving habits and vehicle purchasing preferences. Congress has increased fuel economy standards for new vehicles from today's 25 miles per gallon to 35 mpg by 2020. But it must also create a market in which buyers favor fuel efficiency.

Charles Krauthammer (it's rare that I agree with him) also makes a similar proposal:

Announce a schedule of gas tax hikes of 50 cents every six months for the next two years. And put a tax floor under $4 gasoline, so that as high gas prices transform the U.S. auto fleet, change driving habits, and thus hugely reduce U.S. demand -- and bring down world crude oil prices -- the American consumer and the American economy reap all of the benefit.

Politically, either of these proposals would be hard to pass but for the long-term good of the country and the environment they are both steps in the right direction.