We'd all benefit from higher gas prices

Virginia McConnell

TEXT OF STORY

TESS VIGELAND: Lots of talk, no action again today on a bailout package for U.S. automakers. President Bush warned that bankruptcy for any of the Big Three would be devastating for the economy.
But Treasury Department officials said they had no timetable for a decision on rescue monies.

Meanwhile, the debate rages on over how Detroit got itself to this point. They didn't innovate fast enough.
They didn't stay competitive. Foreign auto companies led the way with fuel efficiency.

Commentator Virginia McConnell says there's plenty of blame to go around, and we should start by looking in the mirror.


VIRGINIA MCCONNELL: Detroit has been very good at producing vehicles Americans want to buy. Over the past 15 years the Big Three had record sales of trucks, vans and SUVs -- including the two largest sellers in the U.S. In a world of low gasoline prices and rising incomes, this was a business model that made sense.

Yes, auto companies resisted early regulations, but in the end they complied. Today's vehicles are enormously cleaner, more fuel efficient, and have much more power than their counterparts of 30 years ago.

Yet, in spite of these achievements, there's still a fleet of large, gas-guzzling vehicles on America's roads.

Why? In part because of the low price of gas in the U.S. over the past 20 years. Congress had the opportunity to gradually raise federal gas taxes to reflect the environmental and political costs of driving, but they did not.

The last tax increase, all of 4 cents a gallon, was in 1993. So our federal taxes on gasoline remain the lowest in the developed world, resulting in gas prices that are less than one-fourth those in both Europe and Japan. No wonder these countries have been able to engineer smaller, better, fuel-efficient vehicles.

Now we are at a crossroads. Companies that survive this economic downturn must continue the transition toward greener vehicles. But this transition will be neither quick nor cheap. Recently passed fuel economy standards are a step in the right direction, but high gas prices are essential. They provide incentives to manufacturers to produce the new generation of vehicles, and for consumers to buy them. The recent run-up in oil prices showed us what a powerful force the market can be in influencing purchase decisions and spurring innovation. Now, with gasoline back to $1.50 a gallon, sales of hybrid vehicles are faltering.

So, let's stop expecting the car companies to protect us from ourselves. If we want less dependency on foreign oil and reduced greenhouse gases, we'll have to put policies in place to achieve this. If we do, the automakers, whichever ones remain, will figure out how to get us there.

VIGELAND: Virginia McConnell is a senior fellow at Resources for the Future, a think tank in Washington D.C.

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