And, as I've said many times before, a dollar raised by a gas tax, does not equate to a dollar removed from the economy. Somewhere in the economy someone is using less gas because of the marginally increased cost. The market clearing price of oil is also marginally lower, because of the reduced demand. Oil exporting nations essentially subsidize the gas tax, via a lower price of oil. And the dollar, has not been destroyed, the government can recycle it in a number of ways. Either directly to the people, or via investment in public goods. The government has to fund its spending one way or another (unless it simply prints money, in which case inflation taxes everyone), so whining about any particular tax isn't called for. The real issues, are how much, and what sort of government services do we need. And what is the best way to raise the revenue to pay for them.

I'm not trying to come up with an excuse to stop an increase the gas tax. I think that you are correct that the present price for gasoline is too low. As I have stated previously, I think that the gas tax should have been increased gradually, starting after the first round of OPEC action in 1973. As a national policy, we could have added at least $2 per gallon to the pump price by now. But, our political/business class did not do this and wasted a great opportunity to modify everyone's perceptions and purchase decisions for more than 35 years. Simply put, the U.S. consumer should now be paying prices near those seen in Europe or Japan, IMHO.

But, that did not happen and now (if the Peak Oil Prophets are right), it's too late to increase the gas tax quickly enough to really make a difference. That's because, as the market showed us last summer, a small short fall in supply will likely result in a big boost in oil prices. If that spike was actually the result of peak production, the future can only give more of the same as the inexorable clash between increasing population and demand per capita meets declining supply. This is NOT a repeat of the world oil situation seen in the 1980's, when the Saudi's possessed extra production capacity and were able to flood the world market in 1986 and drive the price down to $10 per barrel.

Remember that our politicians are trying desperately to stimulate economic activity and a sudden $2/gallon boost in the gas tax would produce just the opposite. And, every few years down the road, the tax would need to be boosted again and again, as the global shortfall increased and inflation diluted the impacts of previous taxes. As the taxes are increased, I would expect that there would be many attempts to bypass the Tax Man, just as were seen in regards to liquor taxes during Prohibition. We have drug laws which act as 0% import quotas which has resulted in a thriving black market for drugs, so strict import quotas would be problematic as well.

I think we are faced with a dire situation, no matter what happens with the financial crisis. A system of rationing with tradeable allocations would hit the heart of the problem, which is individual consumption, and stimulate individual action to reduce oil demand, while minimizing further disruptive effects to the rest of the financial system. I think that a major requirement should be that unused allocations would revert to the "energy bank" after a short period, with payment at current market values being credited to the holder of those allocations. This would reward frugal consumers and minimize hoarding of allocations or physical product.

Fixing the energy problem is a bit like building a boat while living on another boat floating alongside. The old boat is rotting and there are holes in the bottom, so we need to finish building the new boat before the old one sinks. I fear that we may not get-er-done in time...

E. Swanson