Like many environmentalists, I tend to think that gasoline prices—even at today’s wallet-rending heights—are still too low. 

[Picture me ducking under my desk right now, trying to avoid rocks that angry consumers are aiming my way.]

Here’s what I mean.  Petroleum has lots of so-called “external” costs—costs that are borne not by the consumer, but by society at large. Whenever I burn a gallon of gas in my car, for example, I’m creating pollution and climate-warming emissions; fostering overseas military entanglements; increasing the risk of oil spills and pipeline leaks; siphoning money from the local economy into the bank accounts of unsavory oil magnates; yadayada.  Each of those factors carries a cost—sometimes intangible, often hard to quantify, but real nonetheless. 

If I had to pay those costs at the pump—through higher taxes, for example—I’d wind up buying less gas, while also (at least potentially) providing more funding for solutions to the problems I’m creating.

But here’s the funny thing; it seems to me that as the market price of gas rises, the “external costs” could rise too.  That is, the more expensive gas gets, the higher the gas tax should be.

Here’s why.

  • Take, for example, this article from The Christian Science Monitor, covering some of the wacky energy plans that energy companies are beginning to dust off, now that high petroeum prices have made previously uneconomical projects seem profitable.  The headline is a pretty good synopsis:

    “With oil at $70 a barrel, firms try coal, shale, even turkeys”

    That’s right, there are energy companies trying to turn turkey innards into a petroleum substitute.  Desperate times, desperate measures, and all that.

    The big story here, though, is that high prices are building some momentum building for alternatives to oil.  But many of those alternatives—coal-to-diesel projects, extracting oil from oil sands and shale, etc.—may actually be worse for the planet than ordinary petroleum.  Many of them involve even greater global warming emissions, while ramping up air and water pollution and scarring previously untouched landscapes. 

    Just so, high oil prices are ramping up profits for big oil conglomerates that stand in the way of progress on global warming, while boosting incomes for some unsavory regimes overseas.

    So while many environmental advocates may be secretly (or not so secretly) happy about rising oil prices, perhaps they shouldn’t be.  In the long run, a higher market price for oil may simply increase the environmental and security costs of our oil habit.  Even if higher prices force us to consume a bit less, the overall impacts of our consumption may go up. 

    Now, I’m not sure this line of reasoning would hold up to closer scrutiny.  But if it does, it may put enviros in a bind: rising oil prices may make it all the more important to increase taxes on petroleum.  Only rising taxes will make consumers pay for the full costs of their petroleum habit.

    But how likely is it that we can get politicians to raise gas taxes when outrage over gas prices is at its highest?