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April 24th, 2009

Is Gas Too Cheap?



AutoNation’s CEO Mike Jackson seems to think so. But before you light the torches and summon the pitchforks, hear him out. Granted, you still may disagree, but he makes a valid point.

In a recent interview with Fortune’s Carol Loomis, Jackson said that establishing a “revenue-neutral gas tax” would help establish a floor under gas prices at about $3.50-$4.00 a gallon. Jackson insisted his strategy of taxation in order to establish the price floor shouldn’t begin until after the economy recovers.

If your first thought is “is this guy crazy?”, I’m sure you’re not alone. But Jackson is the CEO of the nation’s largest auto retailer, and if high gas prices adversely affect anyone, it’s him.

Jackson explained that the price of gasoline directly influences the model of vehicle consumers are willing to buy. Without higher gas prices the migration towards more fuel-efficient vehicles will never happen. This is why, as Jackson puts it, “our energy policies have failed for 50 years“:

The biggest lie in American politics is the following combination: “I care passionately about America’s dependence on imported oil and we must do something about it, and I’m passionate about global warming–and I strongly believe we should have cheap, affordable gasoline.” There’s intellectual dishonesty in those assertions coming out of the same brain and the same mouth at the same time. That’s what Washington has been saying for 15 years, and that position guarantees you failure.

However, a migration is occurring that Jackson feels is here to stay. AutoNation’s  sales have begun trending towards more imports. When asked whether he foresees a migration back towards a domestic-dominated market, the CEO simply responds “no”:

The year the domestics had 70%-75% market share was before the arrival of globalization. The idea that the U.S. auto companies could ever rebuild their share domestically to 50%-60% is out of the question. The only market in the world where you still have high domestic penetration is Japan, and it’s basically not an open market.

What’s more important to you, “greener” energy policies or cheaper gasoline?

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2 Responses to “Is Gas Too Cheap?”

  1. Tim Manni Says: April 24th, 2009 at 11:24 am

    Hey Don,

    Thanks for reading and sharing your opinions. We hope to hear from you again soon.


  2. Don Sabatini Says: April 24th, 2009 at 11:17 am

    Yes, We can’t say Gas price is cheap now. Lets hope it becomes cheap in the near future.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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