One of the most common complaints about the effectiveness of a carbon tax is that high gas prices have little or no effect on consumption. The recent decline in driving amounts (almost certainly due to high gas prices) puts this myth to rest, but just in case you weren’t convinced as gas prices have fallen, people have begun driving more.
The sharp decline in gasoline use earlier this year — with volume down nearly 10 percent in some weeks — suggested to many people, including the automobile companies, that a permanent change in American habits might be at hand. But with gasoline prices falling drastically in recent weeks, some American drivers are returning to their old ways…
Data compiled by MasterCard Advisors, covering both credit and cash sales of gasoline, had been showing a strong decline of gasoline consumption in early October, when prices were still high. For the weeks ending Oct. 3 and Oct. 10, for example, gasoline sales were down 9.5 percent and 9.7 percent, respectively, compared with the same weeks in 2007.
But a MasterCard Advisors report released Tuesday showed that in the last two weeks, with pump prices falling, consumption of gasoline was down only 6.4 percent in each week compared with the same weeks of 2007…
Tom Kloza, chief oil analyst at the Oil Price Information Service, said: “Demand is trickling back among everyday people.” He added that gasoline retailers around the country were telling him “they are probably past the bottom of demand destruction for 2008, meaning they see subtle signs that gasoline demand is increasing.”
And to top it off, all of this is happening even while the economy is in serious trouble. This should serve to silence those who continue to claim that price signals (such as a carbon tax) have no effect on consumption.
Related: This highlights the need for a price floor for gas.
Now is the time to take action so that consumption doesn’t spiral upwards when the economy eventually improves. Now is the time to, at a minimum, put a floor under the price of gasoline and other fossil fuels by beginning to phase in a carbon tax. Now is the time to make sure that an increasingly large portion of the price of gas is collected as carbon taxes to be returned to the American economy, instead of going to oil companies and oil producing countries.