Gas Tax Revisited

I last wrote about the numbers being a bit “off” on the gas tax. I stand by the “general” analysis, since the discussions in the media centered around the “average American” but I wanted to discuss a bit more in depth, some other confounding variables.

Of course, the first is the diesel tax. Most Americans don’t drive diesel cars. But virtually all tractor-trailer rigs run on diesel. And the tax on diesel is higher than on gasoline. And, of course, trucks put more miles on the road than general use automobiles. This does mean a larger share of the $10 billion in tax revenue comes from trucking than from automobiles, both in miles driven and cost per gallon.

One could argue that since a disproportionate amount of the tax-revenue comes from commercial trucking, that this explains the lower savings per American. Perhaps. But one must remember that unlike the gasoline tax, the tax on diesel fuel ends up raising the cost to deliver goods–a cost that is passed through to the consumer.

The Washington Post article “A holiday from gas prices? – Fat Checker” points out that, when legislators in Illinois (including Obama) passed a similar tax holiday, the prices went down about 3%, and thus “only three fifths of the savings from reduced taxes was passed on to consumers.” The problem is, that sort of measure assumes that the price of gasoline would have remained steady throughout the period. Now, perhaps the analysis actually considered this reduction relative to the gas prices around the country, and what they meant was something like “relative to other prices without tax reductions” but that was not mentioned in the article. So–while we may not see a full 18, or 24 cent reduction at the pump, that does not mean that we aren’t saving that amount.

The Post article cites economists as pointing out that the increase in price could be due to an increase in demand. You know that pesky price/demand curve? And far be it for me to argue with the practitioners of the dismal science. Although I would point out (as I mentioned in the previous post) the demand for gas/diesel is generally thought to be relatively “inelastic” with regards to changes in price.

Just some points of clarification.

For discussion purposes, I would love you have you share here what your average weekly gasoline consumption is, and what you expect to consume over 12 weeks this summer. In my previous post I mentioned that I suspect most people fill up their tank at least once a week–so how much fuel do you use?

Leave a comment!


8 thoughts on “Gas Tax Revisited

  1. I have 4 adults living in my household and my fleet includes (actual mileage given):

    1 Jeep Wrangler (13 mpg)
    1 Mazda Tribute (24 mpg)
    1 Toyota Corolla (35 mpg)
    1 Suzuki GS 700 (55 mpg)

    My *current* fuel bill runs in the neighborhood of 32-42 gallons per week.

    In the summer I conduct research with commercial motor carriers; each visit to interview truck drivers is a 108 mile round trip. At 5 visits per week, plus up my fule consumption numbers by another 15 gallons.

    Net summer fule consumption: 50 gallons per week.

    Add two car trips @ 1,800 miles each . . .

    the 0ther steve

  2. Net effect over 12 weeks plus two trips yield 600 gallons plus 120 gallons.

    Yeah, 720 gallons of gas June-August.


  3. Steve

    That’s interesting. Assuming we actually do save 18 cents/gallon, that would mean your family of 4 would save $129.60. That is roughly the $30 mark that Obama was talking about.

    On the other hand, $30 each, for a family of 4, adds up to “real money.”

    Am I safe in assuming that the mileage demand is “price inelastic” (that’s work related, mostly?)

  4. Inelastic?


    Gas would have to go above $8/gallon before I would seriously change my driving behaviors or patterns (or even consider public gtransportation).

    On the other hand, $150-$200 per week for gas is about what I spend on entertainment; and considerably less than what I piss away on interest charges and other stupid stuff.

    So frankly, when the cost of being able to travel great distances in relative comfort at high speeds approaches the cost of, say, liquor and eating at restaurants . . .

    It’s all relative. Many people at the lower end of the economic ladder spend much more on cigarettes, booze, and lottery tickets than they do on gasoline. People at the higher end spend much more on dining out and fine wines than they do on gasoline.

    I mean, c’mon- until gas gets up to $8/gal, LIFE GOES ON!

    the other steve

  5. I fill up my tank (about 8 gallons) every three weeks. My wife is about the same. She used to fill up her hybrid only every four weeks or so until her job moved to a new building with a longer commute.

  6. Hmmm yes the whole hybrid thing. O.K. for $15,000 I have a Toyota Corolla that gets 35 actual mpg.

    For the Prius (should we include the subsidy in the price? We should, actually), without subsidy you are paying at least $22,000 up front. I will be extremely charitable and not include the government subsidies, and ignore the battery replacement issues, etc. The Prius gets (again, being charitable) 50 mpg.

    So we have an up front $7,000 cost difference, and a long term 15 mpg mileage difference. Assuming they both hit the junkyard at 120,000 miles:

    $15,000 + $4*120,000/35 = $28,714
    $22,000 + $4*120,000/50 = $31,600

    Working the math the other way, gas needs to increase to $6.81 per gallon for the Prius to make “break even” with the Corolla.

    (p.s. you should check out the research on petroleum geology and where oil really comes from. Some *very* interesting findings on how oil is created. Yes, if it came from decaying organic matter we would have run out years ago. But since it doesn’t . . . )

    the other steve

  7. The deal with hybrids is that unless you are a city driver you are not going to save a hell of a lot. The energy transfer to the batter comes with braking on a Prius and if you are not braking a lot, the energy has to come from gas or the batteries will wear out way before their end date.

    In the end it’s all physics. We can either cut back on how much energy we produce (like that’s going to happen) or increase the amount of fuel to supply energy use.

    Every study I have been reading this summer on consumer habits suggests that we are not in a social or psychological position that is even close to being ready to make actual cut-backs in our spending to make up for current fuel costs. Just look at figures for dining out and box-office figures at the theater. One less movie a month and one less dining experience would probably make up the pump costs for a lot of families each month.

    The US was just, and still is, really really fortunate to have such cheap energy costs. Petrol anywhere else, save maybe Saudi Arabia or Venezuela, is more expensive than here. The fact is that the US continues to be middle of the pack. Europeans have better use of public transportation and smaller cars in general. Time to make palpable consumption habits and for a lot of people to stop whining if you ask me.

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