DailyDisgust pere on fuel efficiencyPosted: March 5, 2012
Below is my father’s take on the issue of fuel efficiency that I posted on yesterday. He knows this stuff much better than I! (Emphasis added.)
The gasoline demand snap-back effect from increased fuel efficiency will not be substantial. Because the demand for gasoline is highly inelastic, the net effects of substantially increased fuel efficiency standards will be substantial reductions in gasoline demand. Because people will spend less for gasoline, they will buy more goods and services, increase savings, and reduce debt. The economy and employment levels will improve as more goods and services are produced to meet increased demand. .
Increasing gasoline taxes is a very poor alternative for tighter fuel efficiency standards. In the short run, gasoline use will not decline very much since transportation is essential and mass transit alternatives are limited. In the long run, unless they are required to do so, automobile producers will not substantially improve fuel efficiency. Since people will spend more for gasoline, purchases of other goods and services will decline and the economy and employment will weaken. While government tax revenues will increase, given past political behavior, tax rates for corporations and upper income individuals will likely be reduced with hardly any benefit to others.
Few if any serious individuals argue for an efficiency-only energy policy. Increases in clean energy supply is very much needed. However, there are very substantial gains that can come from increased energy efficiency. The most effective way to assure energy efficiency improvements is through mandated efficiency standards.
So there you have it. Thanks, Dad!