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Relief to Working Families: Recommendations from the Center for American Progress
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Relief to Working Families: Recommendations from the Center for American Progress

Hurricane Katrina has drawn greater attention to the need for a comprehensive response from the federal government to the immediate crisis of high oil and gas prices throughout the country. In the short term, the White House will be tapping strategic oil reserves to help compensate for the loss of more than 1 million barrels in refining capacity as a result of the storm. More…

Katrina sent oil prices above $70.00 per barrel with the cost of oil predicted to rise further; some predict prices will soar to $80.00 per barrel by the end of September as the availability of already scarce refined products grows tighter in the wake of the storm. More…

The short-term solution of tapping strategic oil reserves will not reap immediate benefits and fails to address the country’s gasoline shortage. In addition, President Bush missed a golden opportunity in his address to the nation regarding Hurricane Katrina, to call for conservation of gas.

Atlanta is already being affected with long lines and some prices climbing to over $5.00 per gallon. In response, Governor Sonny Perdue announced that the state of Georgia will be waiving gasoline regulations to help stave off the escalation and potential supply issues associated with Katrina. More…

In the majority of states from California to Michigan, to Virginia gas prices soared to over $3.00 per gallon in less than 24 hours. More…

With the federal government dragging its feet in generating long term solutions and already high gas prices, made worse by the impact of Katrina, many constituents are turning to their local statehouses for relief. Taking the issue into their own hands, state legislators are responding with creative answers:

This week the state of Hawaii will embark on a radical experiment to cap the wholesale price of gasoline at $2.74 per gallon, including taxes. The cap itself would be indexed to average wholesale prices in other parts of the United States. For consumers this would mean retail prices of about $2.86 a gallon in Honolulu would remain steady. More…

Although the effects of the price controls in Hawaii remain to be seen, other states are watching and considering similar responses. In California, for example, state Sen. Joe Dunn (D-Santa Ana) will reintroduce legislation that would give the California Public Utilities Commission the power to regulate gasoline prices. More….

Although not as dramatic as the course taken in Hawaii and possibly California, other states are attempting to develop creative resolutions to respond to the growing concern of their constituents. In New York, for example, legislators are seeking greater promotion of mass transit use through the transportation bond act, a November ballot measure that would authorize $2.9 billion in borrowing to promote investment in mass transit. More…

In New Jersey, lawmakers are considering selling state toll roads to keep gas taxes level. More…

In Canada, Europe and Australia, companies have been leasing, operating and maintaining toll roads for years. The first domestic toll road privatization recently occurred on the 7.8 mile Skyway running from Chicago to Indiana when the Chicago city government signed a deal receiving $1.38 billion to lease the Chicago Skyway for 99 years to the Cintra Macquarie consortium, a Spanish infrastructure company. For New Jersey, if a private operator is given toll collection rights with the ability to raise them, the state could make upwards of $10 billion per year. More…

To provide relief to their constituents legislators in Wisconsin, Michigan and Missouri are considering state sales-tax holidays on gasoline. i.e., blocks of days during which gasoline purchases made by individuals would not be subject to a state gasoline tax.

Gas taxes are often the largest factor in price differences among states. For example, in Maryland state taxes on regular gas total 23.5 cents per gallon, while in Virginia state tax is 17.5 cents per gallon. In addition to gas taxes, other factors may also affect price differences between states. Environmental regulations force some areas of the country to use cleaner-burning gasoline, which may affect prices. Some states prohibit companies that refine gas from operating stations. This means that all Exxons and Chevrons in a state, for example, must be operated independently. The Federal Trade Commission staff has said companies that operate both refineries and stations have efficiencies that can bring prices down. Finally, many states carry broad laws that prohibit the use of below-cost prices to drive competitors out of business. Sometimes called minimum-price or fair-marketing laws, these laws are aimed at protecting independent gas stations from below-cost pricing by Wal-Mart Stores Inc=, Costco Wholesale Corp. and other big-box retailers. Similarly states such as Florida also have laws that prohibit price gouging for gasoline and other items during a state of emergency.

In addition to focusing on gasoline prices, state lawmakers are also beginning to take action on the potential for exorbitant heating costs this winter. In Massachusetts, State Secretary of State William Galvin is proposing a moratorium on natural-gas price increases through the winter as well as suspension of the state sales tax on home insulation. More…

Heating oil recently hit a new closing high on the New York Mercantile Exchange rising more than 2 cents to $1.9357 per gallon.

Many of the responses from states are only short term solutions and the effects of their actions remain to be seen. However, absent a direct response from the federal government, states will continue to be asked to take proactive and innovative steps to address the issue.

The Center for American Progress has developed a number of progressive policy recommendations to provide relief for working families dealing with high oil and gasoline prices. While a few of the recommendations are outlined below, the full report can be found here.

Feebates

Unlike tax rebates, feebates provide a direct signal of the value of efficiency to consumers where they pay the most attention – at the sticker price. A fee or a rebate is assigned to each individual vehicle type based on a fuel economy benchmark set annually for each vehicle size class. Buyers of more efficient vehicles receive a rebate; buyers of less efficient vehicles pay a fee. Feebates should be designed to be revenue, technology and vehicle size neutral in order to preserve customer choice.

Although customers receive the rebate for efficient vehicles, manufacturers will want to make the price of their vehicles more attractive by increasing the efficiency of their vehicles for less than the cost of the rebate. Eventually feebates could make corporate average fuel economy standards and the gas guzzler tax irrelevant, but the standards should be kept in the short-term to prevent backsliding.

While not specifically designed to help low-income drivers, feebates may lower the cost of some cars to an accessible point for them, and over time feebates will lead to a more efficient used-car fleet. In addition, feebates could help lower the costs of the low-income scrap-and-replace program. Feebates will also help small business owners purchase more efficient vehicles and save on fuel costs.

As an additional incentive for early adopters of the most efficient automobiles, single occupant hybrids should be allowed in high occupancy vehicle (HOV) lanes. While advanced vehicles remain a limited portion of the market, this would further stimulate purchase and use of efficient hybrid vehicles.

Scrap and Replace Programs for Working Class Families

It is often difficult for working class families to afford vehicles that are reliable, safe, environmentally friendly and fuel efficient. One answer to providing more fuel efficient and environmentally friendly vehicles to working class families is through a “scrap-and-replace program.” Some states have effectively used pure scrappage programs, which are designed to get the most polluting cars off the roads. Scrappage programs accelerate natural vehicle retirement by allowing for the purchase from owners of older cars, which are then typically crushed into scrap metal.

Taking this process one step further could serve to provide access for working class families to fuel efficient cars. Just as the government helps low-income households meet their home energy needs through the Low Income Home Energy Assistance Program, progressives should adopt a policy that helps low-income drivers scrap their inefficient vehicles and replace them with efficient cars. This would help buffer them from volatile gasoline prices, decrease oil consumption, improve air quality, and create good jobs in the United States.

Some other options for providing working class families access to more fuel efficient cars include: federal procurement of a large volume of efficient cars for lease to qualifying individuals; and credit assistance to individuals who may not qualify for new car loans to purchase efficient vehicles.

Replacement tire standards

Under federal fuel-economy standards, automakers equip new vehicles with tires that have a lower rolling resistance, which leads to higher fuel efficiency. By requiring replacement tires to be as efficient as new car tires, gasoline savings would begin immediately, saving over 7 billion barrels of oil over the next 50 years. This savings would help lower-income drivers in particular because they are more likely to drive used cars with replacement tires.

“Low rolling resistance tires” cost consumers only $5 to $12 more than conventional tires. But within a year, the average driver would recover the additional cost of the more efficient tires, and over the 50,000-mile life of the tires, the typical driver would see a return of $50 to $150. California has already established standards for tire efficiency and labeling that have encouraged consumers to purchase the most efficient tires.

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More:

States Are Talking: What States are Saying About the Issue

What Can You Do?

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