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Hey, I'm just looking at the averages!

$4 a gallon petrol will not be enough to force a major shift in the choice of vehicles. We in Europe almost have $7 a gallon petrol right now. If you'd have that, you would get a real shift. If the vehicle fleet becomes more like Europe, you get more small cars and less cheap SUVs and pickup trucks; luxury SUVs will remain more or less the same as people driving them still have enough money to pay for that kind of petrol.

Could be that the US market functions differently from the EU market in various ways (due to poorer public transport and the aforementioned social factors in driving SUVs). So even with $7 petrol the shift towards a smaller vehicle fleet could be quite slow.

Also see this post by Atrios plus the comments.

by nanne (zwaerdenmaecker@gmail.com) on Wed Jun 20th, 2007 at 01:35:18 AM EST
[ Parent ]
It's not the absolute level that matters, only the rate of change. We stopped increasing gas taxes in Europe 10 years ago, and look at the results - we're back to big SUVs and increasingly heavy cars. Fuel efficiency is barely a concern, because gas is again cheap, relatively speaking.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Jun 20th, 2007 at 05:54:10 AM EST
[ Parent ]
With regard to cars, I think car taxes, yearly but especially on new cars, are much more promising (because they're less politically dangerous) than fuel taxes.

The eco tax in Germany was introduced in 1999 and ramped up until 2003 (increasing taxes on petrol by 30% and on diesel by 50%). Since then fuel prices have continued to rise. Still, I see hordes of Cayenne, Touareg, M Class, X5, Q7 SUVs all around me. The problem is that European SUVs are largely luxury SUVs and the people who can afford them, the haves and the have mores, can also easily afford higher gas prices.

The kind of fuel taxes that you need to curb this kind of luxury consumption are just not going to get a political majority. Atrios is right on that in the US and his point also goes for the EU. We can talk about what would work as if we are detached from the need to command political majorities and detached from the constraints of existing institutions, but I don't think that is very useful.

Fuel taxes in the EU will first require a new treaty or a two-speed Europe because they now require unanimity. And even then, I think it is very optimistic to even hope for an increase of 50 eurocents, phased in slowly.

by nanne (zwaerdenmaecker@gmail.com) on Wed Jun 20th, 2007 at 06:54:23 AM EST
[ Parent ]
The fuel tax was raised at the height of the second oil price shock in then West Germany. Admittedly, Kohl came... but with a coup, not an election victory.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Jun 20th, 2007 at 10:05:44 AM EST
[ Parent ]
I think Jerome is correct instating that it's not the amount of the price of petrol overall that causes a shift in vehicle type but the amount over a short period of time.  Two examples:

(1)  The 1973 Yom Kippur War and ensuing petrol price increases and shortages caused a major change of vehicle usage in the US.  The congress enacted legislation in 1975 that mandated increased mpg and this did rise until 1987 to 26.2 mpg. (http://uspolitics.about.com/od/energy/i/cafe_standards.htm ) All of this occurred due to the "shortages" and doubling of the price per gallon.  If I recall correctly the price was about .32 cents per gallon and rose to something like .79 cents give or take.  The prices in GB, where I was at the time were already hitting a quid for a UK gallon - about $2.40.  Upon our return to the US in 1976, we were able, by 1978 or so to buy a Honda Civic than got 42-48 mpg, and the trend was definitely downsized foreign made vehicles.  I've never bought anything but Honda sedans or hatchbacks since and the Honda became for a time the most popular car on the road.

The unfortunate loophole in the 1975 legislation was that it exempted small trucks, thus over time even though petrol prices have risen, so have wages, and people became accustomed to paying more (still only $1-$130) until a year or two ago.   The small truck loophole led to invention of "cars" built on truck frames, thus the SUV with no cap on mpg.

(2) One of my relatives manages a small business providing a line of products including installation. The business runs on a shoestring budget in order to make a profit because the products are probably considered non-essential luxury items, but lots of people that don't make huge salaries want them.  Most of the companies employees are basically unskilled workers when hired on but they receive training and are paid relatively low wages.  When the price of petrol started to rise dramatically a year or so ago quite a few employees said they would have to quit because they could no longer afford to commute from outlying areas (lower housing costs).  The company held fast and the price of petrol gradually became lower.  Now, even my relative is worried that the company, which uses a fleet of inexpensive relatively low petrol mileage vans, will not be able to afford the price of petrol soon.  He has to replace the fleet soon, but there are no real choices on the market that meet the company's size requirements.  Should the price of petrol suddenly hit $4-$5 this summer, the company (typical of many I suspect) and its employees will face a major crisis.

I can swear there ain't no heaven but I pray there ain't no hell. _ Blood Sweat & Tears

by Gringo (stargazing camel at aoldotcom) on Wed Jun 20th, 2007 at 10:57:42 PM EST
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