Europe has extraordinarily high auto fuel taxes and as a result has a robust market for small, fuel efficient vehicles. The U.S. has eschewed this approach, sacrificed on the almighty altar of “consumer choice”, making do instead with the byzantine CAFE or corporate average fuel economy. Automakers, domestic and foreign-based alike, have deftly gamed this system to the point of laughingstock. Ford even utilized a provision in CAFE to expedite transfer of production to Mexico prior to NAFTA.

If there is one lesson that should have been taken from the gasoline price spikes of spring 2008 (not to mention those of the two oil embargoes) it’s that high prices at the pump did more for demand for fuel efficiency than CAFE ever has. When prices were peaking last spring Toyota decided the Highlander plant is had under construction in Mississippi would instead become a Prius plant. Chrysler was left particularly vulnerable as the only manufacturer without a subcompact product and thus perceived as not having any fuel efficient models, exacerbating their irrelevance in the suddenly fuel conscious marketplace. As gasoline prices fell with the economic collapse automobile sales followed suit but mix rates for larger vehicles returned to levels seen before the price spikes. That Mississippi Toyota plant under construction, the one that was repotedly three quarters complete? Mothballed. Indefinitely. The last thing Toyota (or any manufacturer) needs in a severely contracted market (from 17 million units/year to 12 million in 2008; projected 10 million in 2009–would be lowest since 1982) is even more excess manufacturing capacity in a contracted market.

High fuel prices through taxation would at least mitigate if not prevent the level of profiteering by Big Oil. Consumers/taxpayers would instead get something more in return while moving toward a policy of reducing consumption of non-renewable, carbon-based fuels and hopefully toward reduced overall energy consumption.