Gasoline prices are at an all-time high in Colorado, hitting an average of $3.09 per gallon on Monday for regular. As for premium, we can only echo J.P. Morgan’s crack about the price of a yacht – if you have to ask, you can’t afford it.
Analysts say part of the reason Colorado prices are so high is due to a fire at a Texas refinery that supplies 17 percent of the state’s gasoline. But nationwide prices weren’t much better – $3.05 for regular, just shy of the record $3.07 reached in 2005 after Hurricane Katrina.
Unfortunately, American consumers aren’t getting anything in return for these higher prices, which are simply fattening the profits of oil companies and crude oil producers. That’s because – unlike sales taxes which automatically keep pace with price increases – motor fuel taxes are unit taxes. Colorado collects 22 cents on every gallon of gasoline sold and 20.5 cents on diesel fuel. The federal government taxes gasoline at 18.4 cents per gallon and diesel at 24.4. Because these levies don’t keep up with inflation, Colorado’s fuel tax has lost half its purchasing power since it was last raised in 1991.
Higher prices aren’t all bad – they spur motorists to buy more fuel-efficient vehicles or take more environmentally friendly ways of getting to work, like bicycling or transit. European nations long ago added enough taxes to drive their gasoline above the equivalent of $5 a gallon – and boast a much more energy efficient transportation system than the U.S. does.
If Colorado were to add a nickel a gallon to its fuel tax for each of the next five years, it would generate about $625 million a year by 2012 to the Highway Users Trust Fund – roughly doubling the money available for state, county and municipal transportation needs.
Congress should likewise act to encourage conservation and discourage price gouging by raising the federal fuel tax a dime a year for the next 10 years. The extra revenues could be used to meet national infrastructure needs and underwrite energy conservation efforts – as well as help balance the budget.
Of course, higher prices aren’t the only way to curb demand for gasoline. We commend the Senate Commerce Committee for voting Tuesday to raise the Corporate Average Fuel Economy standard to 35 miles per gallon by 2020. The full Senate and the House should follow suit.
Americans, with only 6 percent of the world’s population, consume 25 percent of its energy. Reducing our voracious demand for gasoline is a necessary first step in the fight against global warming.
