The U.K. taxes gasoline as if driving were a sin

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Commentary: The U.K. taxes gasoline as if driving were a sin

September 22, 2000

BY DAVID DEROSA BLOOMBERG NEWS

NEW CANAAN, Conn. -- The way the U.K.. taxes fuel you'd think it was a sin to drive a car. At the equivalent of $4.50 a gallon, no wonder folks are out in the streets. And the really inflammatory part is that taxes represent about 75 percent of the pump price, equivalent to a 300 percent tax on gasoline.

Everyone knows that taxes are a part of modern life. But what does it mean when the price of an important commodity like fuel oil is three-quarters tax? It might mean the government looks at the use of energy the same way as it does alcohol and cigarettes. In effect, the U.K. has a sin tax on gasoline.

Environmentalists in the U.S. might agree with this policy on the grounds that every link in the oil chain -- from extraction, refining, transporting, and finally, consumption --exacts a toll on the environment. Britain, like many countries, has an environmental movement. And the Labor Party government of Prime Minister Tony Blair has been cozy with environmentalists, especially on the issue of "greenhouse gases," which are alleged to be the cause of global warming.

So maybe it isn't surprising that Blair, who promised not to increase income taxes, would support a bill to raise the fuel tax. Acknowledging that the price of petrol handicaps some constituents such as farmers, Blair says the increase is justified because the government needs the money to pay for running the public health system.

What's at Stake

But hold the phone. As protesters in the U.K. effectively stopped gasoline deliveries to filling stations this week, Blair justified his effort to break the protests by saying, "Real damage is being done to real people. Lives are at risk."

Lives are at risk? Then maybe activities that use energy are important, after all. So important that with the protests or without them, there is no excuse for having the equivalent of a 300 percent tax on gasoline.

Put it this way. When you tax something like fuel at such colossal rates, you are putting the national welfare in balance. And you are putting lives at risk.

Now, here's a radical thought. I submit that the U.K., and much of Europe, consumes far too little energy. That's right, too little energy is being consumed because these countries are forced to make economic decisions based on an artificial, non-market price for fuel.

There is such a thing as being too energy efficient. The one thing we do know is that when cars and trucks are being designed for Blair-style energy prices, the wrong designs are on the road.

A far greater issue is what this tax does to U.K. manufacturing and commerce. Everything in the country is planned around a phantom energy shortage for transportation.

The people are talking, Mr. Prime Minister. Your taxes have driven gasoline prices to absurdly high, fake levels. Maybe it took crude oil prices to climb to near a 10-year high to awaken people. And perhaps one day you will be proven right. Global warming from fossil fuels may be a menace to mankind. But in the meantime, your energy policy looks more like you are trying to get U.K. motorists ready for a new ice age.

David DeRosa is president of DeRosa Research & Trading and manages an investment fund. He is also an adjunct finance professor at Yale School of Management. The opinions expressed are his own.

http://www.auto.com/autonews/cwirh22_20000922.htm

-- Martin Thompson (mthom1927@aol.com), September 23, 2000

Answers

You think this "tax them dunrned energy users out of their skulls" strategy is frightening? Read Al Gore's book, EARTH IN THE BALANCE. He wants to do the same thing.

-- JackW (jpayne@webtv.net), September 23, 2000.

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