Zhackwyatt: Instead of the govt. trying to influence personal choice and decisions when it comes to making a purchase, lets just let the free market decide.Gas prices will increase over time on their own regardless of a tax.  

I disagree..
Look how well the “free market” responded to $4/gallon gas last year. It sat there like a deer in the headlights. The technologies needed to transition away from fossil fuels (and the time will come) require investment, incubation, and incentives for development during the years leading up to their need. By implementing a gas tax, the “free market” has a feeling for the direction of the U.S. energy policy and would then, in theory, begin investing in alternative technologies.

jeff j: $5 gallon gas already caused the worse depression in 50 years in 07 -08 . Oh yeah rise gas to $6 NO make it $12 a gallon , A nice man manmade world emergence (( “Never let a crises go to waste” David AXLEROD chiefofstaff))  (Quote)

That’s why we need a Floor Tax to encourage investment in alternatives, not a flat tax. What’s going to prevent another price spike in 2010 or 2011? How much investment is being poured into commercializing alternative fuels?

A floor price doesn’t have to be outrageous; it only needs to be around $70-$80/barrel, according to investors. The relationship between the price for a gallon of regular gasoline, and the cost of a barrel of oil is the following:

Y = -1.1669E-04*X^2 + 4.1977E-02*X + 5.1297E-01, where Y = cost of a gallon of regular gasoline, and X = cost of a barrel of oil.

Using this formula, $70 barrel oil equates to an average cost of regular gasoline of $2.88/gallon. Thus a floor would mean that gasoline would never sell for less than $2.88/gallon regardless of the price of oil, but it could go higher. If it did go higher, there would be no tax. Is that to much sacrifice to encourage investment to commercialize alternatives to gasoline? The goal would be if the price went higher, consumers could purchase alternatives to gasoline and thus drive the price back down. We can’t do that now.

Good conversation, and I do appreciate and respect your comments – I’m not offended that you disagree.

Dr. Ibringdoh: “Big government is a double culprit in this matter because they (a) restrict domestic energy production and (b) manipulate the currency by using the credit system to replace currency that migrates overseas.
‘Big Oil doesn’t own the oil, they just refine it.’
Before you make a statement like that, I would appreciate it if you defined two terms:
1. Big Oil.
2. Ownership.”:

By “Big Oil”, I was implying the US refiners (Exxon, Texaco, Chevron, etc.), the companies that were getting hammered in the press when their profits were at record highs last year. (BTW, I have no problem with their profits, it was still only about 10% of their operating costs, which was unchanged from prior year percent+ profits– but that’s another discussion). By states, I was referring to countries. The oil, and access to that oil, is controlled by countries…including the U.S.

Dr. Ibringdoh: First, you are assuming fuel/gasoline to be the driving source of demand for oil. Oil is used for many things not directly related, and in fact, just about anything you have that is made using plastic is made using oil as the base raw material. My point is that just because gasoline demand falls, this does not necessarily indicate that oil demand will fall:

I’m not assuming, I’m using EIA data. In Aug 2009, finished gasoline, jet fuel and distillate fuel oil account for 75% of the Total Crude Oil and Petroleum Products for the month. Finished motor gasoline alone accounted for half (49.4%). So according to the EIA, gasoline, jet fuel and distillate fuel oil are the driving source of demand for oil, but your are correct, it is not the only source of demand. Nevertheless, I would like to see substitutes developed for gasoline, jet fuel and distillate fuel oil using domestically produced alternatives. BTW, I’m a big fan of Natural Gas, specifically Methane, and I lump that into domestic alternatives to oil. As I’m sure you already know, methane can readily be converted into Fischer Trope liquids that are compatible with today’s motor vehicles. Coal can even be converted into methane using anaerobic digestion without releasing CO2 during the conversion. (Do a search on MicGas if you’re curious).
The problem isn’t a lack of alternative liquid fuel technology; the problem is a lack of capital to commercialize it because investors aren’t convinced petroleum will stay above the break even costs.

Dr. Ibringdoh: “Protectionism, in a sense, is what got us into this mess: We ran massive trade deficits, spent money we did not have, limited domestic resource production, and relied upon the credit system to replace currency that migrated overseas. The result was a gradual devaluation of our currency, which when coupled with growing demand for oil, drove the cost of oil to where a market correction ensued — with many other consequences to the economy.”:

What protectionism? Are you referring to environment protectionism and the impact it’s had on oil drilling in the US? A floor tax limits demand, our environment polices have limited supply, thus it’s like comparing apples to oranges in my opinion. That said however, for the most part I agree with you here. Imported oil was and continues to be one of primary drivers of the trade deficit. The fact that we have been prevented from developing domestic sources of oil has only made it worse.

Dr. Ibringdoh: If you protect alternative fuel start-ups against oil or other competition, you will similarly inflate the value of these fuel starts above what they are worth, and leave them vulnerable to a market correction after businesses have invested hundreds of billions of dollars in the technology. The result, IMHO, is likely to be that you destroy what it is you seek to protect.
:

I agree that a floor will inflate the price of oil above the market equilibrium price once alternatives to oil began to displace it in the market, and economics 101 teaches that will likely result in surplus of oil on the market. However, I respectfully disagree with the rest. How exactly is a surplus of oil on the global market a bad thing for a country that currently imports more than 70% of its oil? Especially if at the same time domestically produced alternatives are developed and enter the market? Will that not serve to help lower the trade deficit? Now if a floor tax created a scarcity of oil, then I’d be concerned due to the relative inelastic demand for oil. Of course, that’s the situation we are in now – what’s going to happen to the price of oil when the economy recovers? If oil becomes scarce (for what ever reason), there will be pain and no quick and easy solutions. Where as, if there is an oil surplus, oil exporting nations will just have to cut back production – OPEC has a lot of practice doing just that.

While I disagree with you on the impact a floor tax, I absolutely agree with you on our monetary policy. So when do you think the hyperinflation will begin and the dollar plummets? On the positive, it will solve the mortgage problem (sarcasm).