Private Tutoring for Irrational Consumers

Now is the time to raise gasoline taxes.

Libya isn’t an especially important oil-producing nation. It contributes a mere two percent of the total oil on the world market. Nevertheless, the civil war going on there now is enough to drive up prices at the pump. Of course, speculation has a lot to do with that, but the speculators are only being realistic – they’re not causing a scarcity of oil, they’re only betting on it becoming scarcer.

This Libyan civil war demonstrates once again that the days of cheap oil are gone forever – even if some car buyers refuse to acknowledge that fact and just came home in a shiny brand new sport utility vehicle (SUV). On the subject of SUVs, last year alone they accounted for a sales increase of 21 percent. No other segment of the vehicle market is more popular in Germany. These SUVs represent a tragic case of wasted money, again proving that car buyers are clearly more irrational than oil speculators. Many of these customers appear incapable of imagining rising gas prices in the future. That’s why they’re in dire need of government help – in the form of increased fuel taxes.

Enraged conservatives like to think of energy taxes as punitive taxes, designed to make everyone’s life miserable. Wrong. They’re self-help for particularly stupid consumers. Raising energy taxes now would merely anticipate the increasing scarcity of oil, something unavoidable over the medium term. So higher gas taxes would actually be a blessing to SUV fans: higher taxes might prevent them from buying a gas-guzzler that is only guaranteed to lose resale value over time.

German politicians brazenly believe consumers cannot take higher fuel taxes as long as oil prices are on the rise. Exactly the opposite is true: because oil prices are rising steeply, gasoline taxes should be raised immediately.