To some, high gas prices have a silver lining

A sprinkling of experts and consumers welcome paying extra at the pump.

from the June 11, 2007 edition

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The backsliding could happen again, some analysts warn, if gas prices plunge.

Under pressure from competitors and Congress, US automakers say they will produce more high-mileage models.

High gas prices may not only be desirable, but vital, says John Sterman, a professor at the Sloan School of Management at the Massachusetts Institute of Technology in Cambridge. A recent study he co-wrote found that sustained high gasoline prices are a critical factor in developing US markets for alternative-fuel vehicles. But prices would need to go up to and remain at European levels of $4 to $5 a gallon, he says.

In the US, however, gas prices typically soar, then sink back – but to levels higher than before. That lulls the public into feeling price hikes are temporary despite the long upward trend, economists say. To ensure that gas prices send a long-term "price signal" to consumers and industry, some economists are calling for a gasoline tax of 50 cents to $1 per gallon – on top of today's 18 cents per gallon federal tax.

Revenues from such a tax could be used to develop new energy technologies, with most of it returned to US taxpayers in the form of income-tax refunds. Such a tax would hit those that drive more miles for work and low-income drivers the hardest. Even so, economists say it should be possible to target refunds to them.

"There is indeed a bit of a silver lining to higher gas prices all by themselves," says N. Gregory Mankiw, an economics professor at Harvard University and former chairman of the President's Council of Economic Advisers from 2003-05. "But high prices by themselves are not as attractive as if those prices are higher because of taxes – because unlike our government, the Saudis aren't going to give you a tax rebate."

Energy-security experts say a gas tax could in the long run replace some of the costs taxpayers already pay – but don't see at the pump – to maintain military forces that keep global oil lanes open. Yet the gas-tax idea is a "third-rail" for most politicians, who fear nobody would support it.

Well, maybe not nobody. A February 2006 New York Times poll showed 85 percent of Americans opposed a gasoline tax, but 55 percent favored it if it would cut reliance on foreign oil, and 59 percent supported it if it would help curb global warming.

"It's like tough love," says Mr. Cunningham in Denver.

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