Bailout Plan: Gas Price Floor

Friday, November 21, 2008

Daniel Sperling,director of the Institute of Transportation Studies at UC Davis, talks about his proposal to bail out the auto industry by implementing a $3.50 price floor on gas.


Daniel Sperling

Comments [23]


The market should set has to be a REAL market, and right now IT JUSY AINT"T SO. Every person who uses fossil fuels of any kind is getting "free parking". parking? You and me and everyone else is getting to "park" carbon dioxide in the atmosphere for free. As documented in countless books and scientific studies, this accumulated CO2 will have significant impact on the earth and its occupants. Adaptation to thse conditions, if that is in fact possible, will cost enormous summs. These future costs are completely "off the books" at this time as we squander free CO2 parking space. THAT IS NOT A "FREE" MARKET!!!!! All fossil fuel consuption must carry a CO2 tax that reflects the real value of greenhouse gas parking space!!!!! If not now......for God's sake when?!?!?!?

Nov. 21 2008 05:56 PM
lee from Los Angeles

agreed. a higher tax on gas rather than a price floor makes much more sense. take los angeles. this summer when gas prices were near $4 a gallon, record numbers of commuters were riding bikes, taking the bus and the subway and carpooling. everyone noticed the difference in traffic and congestion.

Now that gas is back to $2.50 the freeways are a mess and going home at 5:30 pm is like entering the first ring of hell.

keeping gas prices high does encourage more responsible driving behavior.

But please don't give the revenue to the car companies, instead invest in public transportation.

Nov. 21 2008 04:09 PM

Alex from brooklyn is right. A price floor simply encourages gas companies to mark up their prices to the floor price, incrasing their own profit manifold while reducing the state's price floor revenue to zero.

If you are going to get revenue from taxing at the pump, you have to use a monotonic tax rate function--that is, the higher the market price, the higher the price at the pump. A price floor creates a situation where the slope of the pump price to market price function goes to zero, which gas companies will take advantage of to maximize profit.

Nov. 21 2008 11:41 AM
Ben Thompson from NYC metro area

Works for me. Liberty used to be the American way.

Nov. 21 2008 11:13 AM
Voter from Brooklyn

Maybe you have a point #17. Liberty and unfettered free markets for all! That’s liberty with no artificial price points, no government interference, and no subsidies. America will have more liberty, freedom, and fairness than it’ll know with what to do.

Nov. 21 2008 11:02 AM
Richard from Bedford, New York

To the extent that oil becomes in short supply, the price will increase with or without a fuel tax. We have seen this already. The price is established by the higher cost of the marginal producer, and traditional producers reap windfall profits as a result. With a fuel tax that softens demand, the actual price of fuel to the consumer will not necessarily be greater, dollar for dollar by the amount of the tax, because some of the burden will come out of the excess profits of the non-marginal producers.

Nov. 21 2008 11:00 AM
Ben Thompson from NYC metro area

How about instead of the usual plans for top-down governance and artificial price points, we let people live in liberty?

Nov. 21 2008 10:53 AM
Voter from Brooklyn

NO, NO, NO! I support the idea of a floor on gas prices, much like so called sin taxes, it is a way of controlling behavior that is antithetical to public health and safety (well, at least in theory) and the money should be used solely for public health and safety... infrastructure and road/highway safety. The money should not go to Detroit, nor bio fuels, nor wind, hydro, or ethanol. Higher gasoline prices will make these technologies more competitive. Leveling the playing field is the only subsidy they need. And as for Detroit R&D, let the corporate executives chip in some of their millions to keep the companies viable if profits aren’t doing it.

Nov. 21 2008 10:43 AM

re auto -- and the risk that gm et al will crash -- also silly of course. if they do crash, then better companies -- and w/out legacy costs -- will immediately take their places. have hope in america!

Nov. 21 2008 10:41 AM
Micheal from Manhattan

Oh so he has a book top plug!

lets put a tax on books about how to "solve problems" Save some trees and wasted time as well

Nov. 21 2008 10:40 AM
Eric from B'klyn

“No matter how much you tell the market what you want it to do, it is the price signal that markets respond to,” said Dan Kammen, expert on energy innovation, from the University of California, Berkeley. Therefore, “anyone who invokes markets and doesn’t want to invoke a price signal failed Econ 101. We invoke the market in energy, but we don’t use it. If you want a market to produce something and there is no price signal, you don’t have a market.

The way to trigger the market, to launch the 10,000 innovations in clean energy in 10,000 garages and 10,000 laboratories all over the country is to create a price signal. The market will give us what we want only if we give the market the signals it needs: a carbon tax, a gasoline tax increase, a renewable energy mandate, or a cap-and-trade system that indirectly taxes carbon emitters—or some combination of all these.

Nov. 21 2008 10:38 AM
Alex from brooklyn

Re: guest's admitting that he doesn't actually mean $3.50 at the pump.

1) Don't talk down to WNYC listeners like this. If you want to do it on the price of oil (i.e. price/barrel on the big global markets), fine. Just admit that up front.

2) Pegging it to the global oil price has much the same effect. You've moved the problem, not corrected it. The oil sellers wouldn't have the competitive pressures to keep the price of oil down. The american companies would just sign long term contacts at $85 (or whatever the floor was) that also had price breaks elsewhere. Kinda like corporate kickbacks. On the books it would look like $85/barrel, but it would still work out for them.

And utterly unworked idea.

Nov. 21 2008 10:38 AM

i would support adding a 1 or 2 dollar per gallon tax -- as w cigarettes -- but a bottom makes no sense except in completely state-controlled economies.

Nov. 21 2008 10:38 AM
hjs from 11211

we should pay the real cost of oil, oil has been subsidized for years

Nov. 21 2008 10:37 AM
professional photographer

& can we do the same thing with professional photographic services pls?

Nov. 21 2008 10:36 AM
Voter from Brooklyn

Five dollar gasoline!!! That’s what we need, $5 gasoline for all private vehicles. A lesser amount, perhaps a $3.50 or a prevailing rate to be determined in some manner for non-profits directly serving the community, freight vehicles, and fleet vehicles.
Any taxes collected on the $5 rate (which will vary) should be subject to audit annually and publically available. The taxes should not, I repeat, SHOULD NOT go to the American auto industry. Taxes should go to infrastructure and safety programs. Consumers will dictate what happens to Detroit. At $5/gallon, I suspect there will be many fewer SUVs sold. (Saying that people will remember the gas prices of ‘08 and adjust their buying if there isn’t a floor is, to be polite, naive and silly, baby boomers didn’t remember the late ‘70s before buying the SUVs they bought 20 years later.)
As far as price gouging is concerned by the oil companies… If they gouge, increase their taxes dramatically. The government does have leverage to keep them honest.

Nov. 21 2008 10:36 AM
Harry Burger from Long Island


That would be good only for the auto companies. We need steady HIGH gas prices to give incentive to development of alternative energy sources. I would like to see a separate tax on gas where all the money goes into subsidizing green energy, readjusted every year to make sure that the green option is constantly cheaper. Only then will everyday Americans make the switch. If we don't green up yesterday, climate change is going to beat the world bloody.

Nov. 21 2008 10:34 AM
Alex from brooklyn

This might be a good idea in principle, but it is crazy in practice.

There are competitive pressures that push the price of gas down. If everyone knows that gas will never be less than $3.50/gallon (or whatever it is set at), the oil companies and retailers will set their prices appropriately. There will end up being no additional tax at the pump. It will just swell the coffers of the oil companies with huger profit. (Yes, huger. Deal with it.)

The tax would have to be some special kind of oil company tax after the pump. Some kind of windfall profits tax on the industry. Something. But it would not/could not happen at the pump.

Nov. 21 2008 10:32 AM
Smokey from LES

There's an analog to this proposal - years ago, it was boom and bust in the oil production business and so Texas developed an allowable system - based on price and availability, you were only allowed to produce your well for a certain number of days to level out the price.

Now we have a different reason for stabilizing the price - and keeping it high enough for new technologies to develop with some certainty.

Nov. 21 2008 10:32 AM
Tony from San Jose, CA

That is an excellent idea... only if well managed. That is that all the management fees are born by the government and the money collected goes directly back to people, i.e. every quarter, every single taxpayer receives a check form the IRS. The money does *NOT* go to the government.

Nov. 21 2008 10:29 AM
Robert from NYC

As a non-driver I'll be as selfish as any driver who replies here. As a non-driver I hope gas goes up to $10+ /gallon and stays there so that we finally get to using alternative fuels.

Nov. 21 2008 10:28 AM
Micheal from Manhattan

Another ridiculous scheme that soaks under compensated citizens. Increasing prices hurts all of us. Reallocating production capacity does not. Ok so we have excess auto capacity. That means that we dont need new model cars from over 15 different manufacturers every 12 months. This economy cant absorb the output from domestic manufacturers alone. CBS reports that when Toyota USA is in a position of excess production, that workers are put on furlough at full pay fixing up their cities. The auto sector must be designed so that their output can easily be retooled into other products. While labor is redirected into sectors that need their productivity, while keeping their pay. New models should be released on an 18 month schedule with different companies new cars released in different times of the cycle. This policy should be reviewed every 10 years.

Nov. 21 2008 10:25 AM
Chris from NYC

I have been appalled at the way gas prices have been allowed to fall. It seems obvious that there should be a floor to prevent us from going to back to our old ways, although I must admit that I do not own a car (but rent frequently). In light of current ecomonic circumstances it seems there should at least be a minimum incremental increase say, additional tax of ten cents/gal every year for the next 10 years. It would gradually bring people up to speed, remind them that they need to trade in their gas guzzlers for a more efficient vehicle, give them some time to adjust, and contribute funds that could be used for infrastructure repair and/or the overall "greening of America"

Nov. 21 2008 10:10 AM

Leave a Comment

Email addresses are required but never displayed.

Get the WNYC Morning Brief in your inbox.
We'll send you our top 5 stories every day, plus breaking news and weather.