Should You Pay $6 Per Gallon?

With gas prices constantly hitting new records, John McCain struck a populist chord last week with his proposal for a gas tax holiday. After all, with pump prices for regular now averaging $3.57 a gallon, who wouldn't like to lop off the 18.4-cent federal tax on each gallon you pump into your car this summer? It seemed like such a good idea Hillary Clinton jumped on the gas tax holiday bandwagon too. Only Barack Obama said he didn't like the idea because it takes funds from federal roadwork. However, Obama did vote for a similar gas tax holiday as an Illinois state senator in 2000.

But America's top car dealer says what we really need in this country is high gas prices—something in the neighborhood of $6 a gallon—if we ever really want to tackle the critical issues of the day: global warming and our oil addiction. "The biggest lie in America politics today is to say you care deeply about global warming and advocate for the price of gas to go down," says Mike Jackson, CEO of the AutoNation car dealer chain. "Those are mutually exclusive concepts."

The fact is, as much as we gripe about gas prices, we're pumping just as much of the precious liquid into our tanks as ever. Every day in America we burn through 391 million gallons of motor fuel. That burn rate is the same as last year, when gas prices were 70 cents per gallon lower. And gas consumption is up 18 percent from a decade ago. The federal Energy Information Administration just predicted we would finally begin to curb our consumption this year for the first time since 1991—by an underwhelming 0.3 percent.

What's driving this demand? Our lust for large cars and long trips. Oh sure, small car sales are rising and SUV sales are tanking. But in the last 20 years the weight of our rides has increased by nearly half a ton per vehicle, while the average horsepower has climbed from 118 to 223 ponies under the hood, according to the EPA. And as we have migrated ever deeper into the exurbs, the average miles driven per household has jumped 42 percent, from 19,000 miles in 1980 to 27,000 miles last year, according to federal statistics. Last year car buyers ranked fuel economy 17th on their list of priorities, just below cup holders and the car's stereo system, according to a survey by CNW Research, a respected automotive market analysis firm.

Now, with panic at the pump, mileage matters more. But we're not dramatically downsizing our rides the way our parents did after the oil embargos of the 1970s. Instead, many of us are just tightening the belt by one notch, like Eileen Noren. With fillups now hitting $100 on her hulking Infiniti QX56 SUV, she is ready to replace it with something slightly smaller—a seven-seat Chrysler Town & Country minivan. The Infiniti gets 12 mpg in the city and 18 on the highway, while the Chrysler gets 16 mpg in the city and 23 on the highway. The Wilmette, Ill., mother of four expects to save $20 to $30 a week at the pump. The only trade-off: the minivan has one less seat than the SUV. Still, she won't have to resign from the mom's carpool consortium for the track team. "We'll just drive one fewer kid," she says.

Back in the days of gas lines and stagflation, our parents ditched the Chevy Caprice and replaced it with one of those new little Datsuns. But we're not making that kind of transportation sacrifice today, even though we've blown past the inflation-adjusted record gas price of $3.40 a gallon set back in 1981. Why not? Because we're a far more affluent nation today, and the prospect of $4 gas just doesn't threaten the family budget as much as it used to. Back in 1980 gas and oil expenditures accounted for 5 percent of our personal income. Today, even at these prices, gas accounts for just 3.5 percent of our personal income, according to the Bureau of Economic Analysis.