Tax Gasoline, Or Saudi Arabia Will
February 2, 2022
by William P. Meyers

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OPEC taxes U.S. drivers far more than our governments do

Americans scream when politicians even talk about raising the tax rate on gasoline. It happens when the federal government considers it and it happens at the state level. Strangely, our car and truck drivers may complain a bit, but are normally resigned to much greater gasoline price increases then they are imposed by the Saudis and other foreign oil-producing nations.

A higher gas tax, especially a federal one, would be a blessing in many ways. Sure, the day it is imposed gas prices will jump, but that will be a temporary effect. In time the gas price at the pump should work out to what it would be without the American gas tax. What will happen is the Saudi Arabian and OPEC and Russian effective taxes on American gasoline will be forced down by the law of supply and demand. Note these "taxes" are usually called something else, like price setting or export controls. But they have the same effect as taxes on prices at our pumps.

The big difference is the OPEC tax on gasoline goes to (drum roll): OPEC states. An American tax on gasoline would go the U.S. government. There is could be spent on U.S. bridges and roads or however our Congress directs. Is that not better than it making Saudi Arabia, Iran, Russia, and the Gulf Emirates richer? You bet it is.

Right now the price of gasoline in the U.S., and most of the world, is set by OPEC and friends. They have economists who can tell them how to maximize profits. They maximize profits largely by restricting the amount of oil and gasoline they sell to be something less than demand (or what they could produce if they were willing). That drives up prices. They would like to sell a higher volume of oil at the high prices, but if they increase production, the supply/demand equation kicks in and they can end up making less money in total.

Americans are so anti-tax crazy they can't think clearly about this particular situation. Yes, gasoline is a big part of many American's budget. And so are other taxes the governments, state and federal, need to charge to maintain roads and bridges or build new ones. But most of the high price is going abroad. The exception is when the oil for the gas is produced in the United States, which gives powerful corporate interests a reason to lobby to keep gasoline taxes low.

Raise the federal tax, or combined state and federal tax, by $1.00. Changing at the pump prices from from, say, $4.00 to $5.00. Sure, that would be a hardship for many. But because it is a hardship, on the whole, people would drive less. There would be less demand for gasoline. So pretty soon there would be less demand for OPEC oil. Then OPEC would have two choices to continue to try to maximize profits: to cut production, or to maintain production. Maintaining production means the price of oil drops, and profits equal volume times price, so profits drop. Cutting production means the price of oil stays flat (more or less), but volume falls, so profits drop. So the Islamic economists will run to their computers and run scenarios to see which case causes profits to fall less, both in the long and the short run.

The laws of supply and demand, and pricing, would indicate that aside from Saudi political will, the end result will be gasoline closer to $4.00 than $5.00. Well within the normal range of where it fluctuates apart from new taxes. Other factors help with this, like people choosing to choose new cars with better mileage, like hybrids or electrics, which make for lower demand longer-term.

Scientists and environmentalists want lower gasoline consumption because it is a direct contributor to carbon dioxide production, greenhouse gases, and global warming. They appeal to altruism, which is fine, but that seldom works as well as appealing to selfishness, or the communal selfishness known as nationalism.

The question to ask is, do you want your gasoline dollars to go to Saudi Arabia or the United States?

I have not taken a poll, but my guess is the United States.

Build a campaign for higher gasoline taxes on that. Sure, it would take some massive education efforts. But maybe not so much, since many Americans already side with environmentalists. A federal tax would work better than separate state taxes, but states could benefit. Each state could get a percentage of the new taxes in the form of highway funds. You could even track transactions and refund some percentage to the end users. Get a check at the end of the year, curtesy of the gas tax, and know the money really came by cutting into Saudi Arabian profits.

Think about it.