The $4 dilemma
By Russ Olexa
September 2009 - When gas hit $4 per gallon last summer, it effectively stopped the sale of high-profit SUVs and trucks for the auto industry. In turn, it might have also led to the events that helped put Chrysler and General Motors in Chapter 11.
But the domestic automakers--and even the foreign automakers--face a catch-22. Although there's demand for SUVs and trucks when gas is at $2 to $3 per gallon, when it inches up to $4 per gallon, their sales dry up. When fuel prices are at their highest, so are the sales of the more environmentally friendly cars. When prices are at a reasonable level, consumers are less apt to consider hybrids or electric vehicles.
From what I've heard at various automotive conferences, the domestic automakers want the government to set prices at $4 per gallon by taxing fuel. Currently, the federal tax is set at 18.4 cents a gallon.
Although a tax increase would be extremely unpopular with anyone who drives, it would help provide a viable short-term and long-term future for hybrids and electric vehicles. This would ultimately benefit all Americans.
At $2 or less per gallon, few people are interested in gas-saving vehicles--and that's the problem. If everyone started buying hybrids and electrics, the demand for gas would drop, thereby lowering fuel prices. But in that vicious cycle, gas-powered vehicles would be back on top again, with high gas prices soon to follow.
It's really a roller coaster ride. One day, they're up; the next, they're down. Maintaining a steady price would allow for more consistent sales. And with any luck, the initiative could help wean the United States from its dependence on foreign oil. It might even inspire a workable energy policy that seemingly no president has yet to take seriously.
But would it be political suicide for those in office? Do Americans want the government fooling around with gas prices that are so near and dear to their wallets?
Without a workable energy policy or high taxes on gasoline, we'll have $2-per-gallon gas, which will go back up to $4 per gallon--or even more once this recession ends.
Either way, we all might end up sitting in long lines at gas stations like in the 1970s, waiting to see whether the oil will run out or just become a trickle. Unless, of course, you're driving an electric car.
Posted by Anonymous Monday, September 14, 2009 10:52:17 AM
just what we need, the government taking and spending more of our money. wake up america, we need lower taxes and less government involvement. the amount of money the big three pay for benefits that were built into autoworkers contracts is a big reason they went under.
Posted by Anonymous Friday, October 02, 2009 10:15:36 AM
The government does not need to set the price of anything! What ever happened to free markets and competition? Setting gasoline prices to force individuals to buy fuel efficient cars is social engineering! It unfairly penalizes users of trucks and vans for business use.
Posted by Anonymous Friday, October 02, 2009 10:14:29 AM
This is the reason people have lost all faith in the Automotive
industry. A company that needs the government to fix their problems
does not deserve to be around. .
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