From where do we import most of our oil?
Your first guess is probably wrong. Take a look at this map (click to expand):
(This June 2009 data comes from CoolInfoGraphics.)
The top oil suppliers to the US are (top supplier first):
- Canada
- Venezuela
- Mexico
- Saudi Arabia
- Nigeria
- Angola
- Iraq
- Russia
Is that in line with what you would have expected?
I was surprised to see Canada as number one and Saudi Arabia as number four, I would have thought the reverse. I read a very interesting article by Thomas Friedman http://www.nytimes.com/2009/09/20/opinion/20friedman.html?hp about oil imports and putting a $1 tax on a gallon of gas. Of course, most Americans would baulk at such a tax (and I don’t blame them), but his argument is intriguing and would do a number of things. First, it would lessen our dependence on foreign oil , if for no other reason than it would make driving more expensive and Americans would drive less and thus consume less. Second, the money generated would be enormous. I have no idea exactly how much money it would raise, but let us just say it would be a lot. That money, he advocates, should be used for developing other renewable resources (which I fully support), paying down the national debt (which I fully support), and for healthcare reform (which I fully do NOT support). One has to admit that this problem of American dependency on foreign oil will have to be dealt with sooner or later. The pain associated with such weaning will be enormous. I am normally against any taxes, period. But, something will have to be done in order to break this addiction. In a perfect world, we would divert already used tax dollars to deal with finding renewable energy resources and pay down the national debt, but I don’t see that happening anytime soon. Thus, perhaps it is time for us to endure a little pain now for the sake of the future?
ReplyDeleteOf course, a $1 gas tax of this nature could be a very regressive tax, hitting those in the lower income and middle income the hardest. Also, some people cannot alter their driving time much. Especially here in Texas. On top of that, look at what high gas prices did last summer ('08) - less people spent money because it was all going to gas. Which meant that 7-11 sold less food (their main money maker), less people traveled (affecting tourism), and less people had expendable income (thus affecting all business). So, I think one would have to examine the impact of a $1 tax. And I'm not sure I would believe the government would spend it wisely. Although I agree we need other sources of energy.
ReplyDeleteThe most surprising on the list to me was Venezuela. I thought we had reduced quite a bit there. Chavez should really, really love us.
Ben, you are not the only one supporting a tax on gasoline. These types of taxes are sometimes called "Pigovian taxes" after an economist named AC Pigou. The taxes are implemented to alter people's behavior. Probably the foremost proponent of a Pigovian gasoline tax is Harvard's G. Mankiw. He wrote an eloquent defence of such a tax in the Wall Street Journal a few years back: http://gregmankiw.blogspot.com/2006/10/pigou-club-manifesto.html. I didn't realize Friedman was also a member of the Pigou club, but I guess he is!
ReplyDeleteI tend to favor individual liberty and minimal taxation, so I would seek market solutions for the problem of using more oil than we produce. For example, if domestic consumption cannot meet production, then let the domestic prices rise, and let the domestic exploration and production resume. If the problem is that we are using up oil too quickly, then let the prices rise reflecting the scarcity of remaining oil, and let the entrepreneurs come up with good substitutes, which they will do when the prices of oil byproducts stay sufficiently high for sufficiently long.
anonymous,
ReplyDeleteyou are right about the impact of high oil prices on consumption. We saw a big drop in consumption in the US in the second part of 2008, which many attribute to the sustained high gasoline prices (even though the high prices were fading by then, they had been sufficiently high for long enough to alter people's consumption behavior).
With regard to people not being able to consume less gasoline when prices go up - people typically make adjustments in the long run as opposed to the short run. In the short run, the $1 gas tax may have virtually no impact on gasoline consumption, but in the longer run people will adjust - they will buy smaller cars, more hybrids, move closer to work, carpool etc.
This kind of adjustment to price changes in econ is called elasticity (of demand in this case).
One economist calculated that when oil prices doubled, consumption dropped only by 2-9% over the short run, but it dropped by 60% if prices stayed high over the longer term. (http://www.economist.com/finance/displaystory.cfm?story_id=11453090)
Jekabs and Anonymous,
ReplyDeleteI wouldn't say that I support a $1 tax on gas, but I found his argument compelling. As I stated, normally I feel, as you do, that market forces and individual liberty are the best way to solve economic problems. However, my main point in all of this, which I probably didn't articulate very well, is that we have a dependency problem, as illustrated by the graph posted. Buying such vast quantities from places like Venezuela, Saudi Arabia, and Russia is not in our national interest. Allowing market forces to work would be the natural and obvious way to move our country toward renewable resources. However, I find the dependency problem much more immediate and a threat to our national security. When framed in that view, perhaps a Pigovian tax is something to be considered?
By the way, excellent discussion going on here and also an excellent blog. I'm glad Rob told me about it. I may have to use this discussion in my class.
Ben