Gasoline: setting the floor at $4 per gallon

A few weeks ago during a speaking engagement in Ann Arbor, respected auto industry analyst David Cole noted that if the price of gas were to fall dramatically, all the progress recently made in the area of alternative fuel vehicles would be for naught. His experience, he made clear, had shown him that not even the most promising projects and the best of intentions could compete with cheap oil.

However persuasive the scientific evidence of global warming, or believable the projections showing that the Earth’s supply of oil is running out, in Cole’s opinion it wouldn’t matter. Cheap oil won out in the 70′s, and it would win out again. And for this reason he suggested that we consider setting a floor on gasoline prices — an amount below which gas could not be sold.

Monday, when I noticed gas prices in Michigan had dropped to an average of $2.07 per gallon, or approximately half of what they had been earlier in the summer, it made me wonder how we can possibly keep the momentum going in the direction of plug-in hybrids and other non-petroleum-driven forms of transportation.

It seems to me that $4 per gallon is the magic number. When we hit $4, that’s when people started talking seriously about alternatives. That price, in my opinion, is where we need to stay. And I think our leaders know it. The question is, does anyone have the political will to push for it in an economic environment such as this one?

If not a setting a floor on gasoline prices, how about imposing an additional tax whose proceeds would go toward building alternative energy infrastructure?

At some point in late 2006, I got inspired to do the impossible and help popularize the idea of a more significant tax on gas. I was eventually sidetracked, but here are my first thoughts in all their naïve glory.

The people of the United State, should immediately impose a $0.25 per gallon tax on gasoline. Three-fifths of the proceeds from said sales would then be directed toward in-state research universities to help fund projects that would, either by increasing fuel efficiency or by developing alternative sources of energy so that they’re ready for market, lessen our nation’s dependence on petroleum. The remaining $0.10 per gallon would be distributed as follows. Half would go toward in-state mass transit and half would be directed into a central, federally controlled institution, like the National Science Foundation. These central funds would be used to operate a governing organization charged with bringing the best and brightest scientific minds together (not unlike what was done under the Manhattan Project) to assess the various state initiatives, and to make decisions as to where to invest additional funds and resources.

Logistically, I’m not sure how a setting a price floor would work, but a tax seems fairly straightforward to me. Whether it’s $0.25 or $2.00 a gallon, it would be added on to the price of a gallon of gas. Our distribution systems would stay the same. Fuel stations would still compete on price, just as they do today. Granted, my early stab at a solution has some holes in it, but I think it raises some points worth discussing. I really think that, if a politician could articulate to us what the objectives are, and tell us exactly what the money would be used for, it might have a chance of gaining public support. Anyway, I thought it was time for us to discuss it again. We have to do something before cheap gas sets us back for another generation.