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Oil prices recently soared to around $150 a barrel. Today, the price of oil has fallen back to under $90 a barrel.
The price of self-serve gasoline rose to over $4.00 a gallon. The price of gas is now less than $2.90 a gallon. Good
times have returned. Gas up; get back on the highway; maybe it’ll be OK to buy that gas guzzler; who needs
alternative energy? How soon we Americans forget. Is there a politician out there with the intestinal fortitude to
tell the truth and to propose the bitter medicines that need to be taken? We have been, we are, and, if we go back to
our bad old ways, we will in the future, be held captive to foreign sources of gas and petroleum. The time to act is
now and the action required is for the federal government to impose a tax on imported foreign petroleum that will
maintain the price of gas in the $5.00 to $7.00 range for a guaranteed and significant amount of time, perhaps 10
years.
When gas prices rose to over $4.00 a gallon, the American consumer screamed for congressional investigations of
petroleum companies, SUV sales plummeted and hybrid vehicles became the rage. Suddenly, Nuclear power was no longer
a dirty word, and a dozen technologies for potentially supplementing or replacing petroleum came into
vogue.
At that time it was noted that “Most experts agree that the surest way to reduce demand is to raise gas taxes, as
Europe has done” (Ref. 1). Well, now is the time to get serious and
do just that. To do otherwise is to face the prospect of future and continuing shortages of energy, of rising energy
prices, and of the prospect of being held hostage to hostile and despotic countries such as Iran and Venezuela.
Let’s remember, a significant portion of the world’s oil reserves lies in the Middle East, a region that Islamic
radicals are trying desperately to take over and control.
As stated in Ref. 2, “If America is to meet its energy needs, at least in the near
future, then the U.S. must get serious about energy conservation. One way to encourage, if not force, energy
conservation, is to increase the cost of energy, gasoline in particular. Americans, as in most of the world, would
then take the necessary steps themselves to reduce gasoline consumption. We would drive less, and buy more energy
efficient vehicles. We would demand that such things as computer synchronized traffic signals be extensively
introduced.”
In addition to encouraging and enforcing energy conservation, increasing the price of gasoline makes it financially
feasible for companies, large and small, to invest in the discovery of domestic sources of petroleum and, more
importantly, in the development of alternate sources of energy.
One way to maximize the good from oil’s present price plunge is to slap on a significant per-barrel import fee.
Such a step would preserve the incentive to keep drilling for new domestic oil sources and keep us from abandoning
all of the many well-along undertakings to develop alternative energy sources.
So, where is the leadership to implement such a step, as least the political kind of leadership?
Government action is needed now. To date, we have seen congressional foot-dragging in supporting offshore wind farms
and exploratory drilling in the Arctic National Wildlife Refuge and on the continental shelf. In addition, the
government must speedily act to maintain high fuel prices. “A lot of money is being invested in alternative energy
sources, and many of these endeavors will come a cropper if the assumption of ever-higher oil prices proves false.
Then there will be ever-louder cries for expensive government subsidies to help out.”
(Ref. 3)
Quite a while back, crude oil prices fell to below $60 a barrel and gasoline prices dropped to near $2.00 a gallon.
Within weeks of the price of gasoline falling below $2.50 a gallon, “consumer interest in gas-guzzling SUV’s is
making a comeback. And interest in hybrids and other fuel-efficient vehicles appears to be dropping. . . . The
recent drop in gasoline prices shows once again that consumers have a short memory when it comes to the effect gas
prices have on their shopping behavior.”(Ref. 4)
America must bite the bullet and instead of thanking the Arabs and nature for a likely temporary drop in oil and
gasoline prices, we must instead keep our eye on the long range (10, 20 or 50 years into the future) objectives and
realities. We need stably high oil and fuel prices for not just a year or two, but indefinitely. We need to make
sure that energy conservation is a long-term way of life. We need to make it highly attractive to find new sources
of oil and gas and to bring to market alternative sources of energy and their associated infrastructures. To
accomplish these objectives, we need to ensure that gasoline prices remain at or above the $5 to $7 a gallon level
and that the cost to the American consumer of imported oil remains extremely high. If we are to solve America’s
energy dilemma, the American public must demand that their politicians stop pandering to short term solutions that
provide immediate gratification to their constituencies, but which, in the long run, place this country in much more
serious trouble. Unfortunately, the legislative and executive branches of our government have, to date, exhibited
little intestinal fortitude in looking beyond the next elections.
Failures to implement meaningful long term solutions for our energy dilemma are prime examples of this reckless
behavior.
Representative Ed Markey of Massachusetts has stated that "A $6 gallon of gas - offset by a deep cut in income
taxes - would go a long way to stimulating conservation and new technologies."
(Ref. 5) Can we expect Congress to follow up? We, the American
people, must demand that our politicians take the difficult steps.
“The best way . . . to reduce fuel use is to get us into smaller lighter cars. And the way to do that is with a
very, very stiff gas tax [or a very, very stiff tax on imported petroleum].”
(Ref. 6) Another benefit of a significant imported petroleum tax or a
very high gas tax would be the economic starvation of certain terrorist-loving nations.
What could the government do with a major increase in revenues from a high imported petroleum tax or significantly
higher gasoline taxes? I’m sure the politicians in Washington won’t have a problem figuring that one out. I might
suggest some of the following: improved mass transit; rebates to individuals and companies that cannot afford the
increased fuel cost; incentives for the development of alternative energy supplies; rebates to individuals and
companies that replace non-renewable greenhouse gas producing fuels with renewable energy sources and with energy
sources that reduce or eliminate greenhouse gases.
So, are our elected officials on board? Are they ready to swallow the bitter medicine? Perhaps, most importantly, is
the American public ready to make the short term economic sacrifices necessary to achieve long tern energy
independence? It’s hard to prove it in many cases.
“The U.S. congress is getting in the way of . . . big plans to spread solar thermal plants across America. . . .
With Partisan gridlock threatening the renewal of alternative energy tax credits that expire Dec., 31, Nevada
Solar One has shifted its focus outside the U.S. It has built no U.S. plants besides its Nevada flagship, instead
opening four plants in Spain” (Ref. 7)
“Congress seems intent on repeating the mistakes of the 1970s and early 1980s during which time the government
attempted to micromanage the energy market and pick winners and losers. The results were dismal then and there is
no reason to believe the outcome would be any different today.”
(Ref. 8)
“Rep. Edward Markey, D-Mass, pushed to have [a] ban” inserted in the Democratic-backed” “new energy bill being
considered in the house that would prohibit “oil and gas drilling” in “New England’s famed Georges Bank fishing
grounds” (Ref. 9)
“The House moved toward a vote yesterday to end the longtime ban on oil drilling in the Atlantic and Pacific waters.
Republicans called it a Democratic ruse that would leave most untapped offshore oil out of bounds.”
(Ref. 10)
Referring to a Democratic bill on off-shore drilling, “Democrats get to tell voters who are pressuring lawmakers to
do something about high fuel prices, that they support offshore exploration - knowing all along that the plan
they’ve concocted all but guarantees it will never happen.”
(Ref. 11)
Are Americans as changeable as the weather? “Just when Ford catches up to $4 gas with a huge overhaul of its
factories, the price of fuel may [has] come crashing down. God forbid.” With the price of gasoline surging to over
$4 a gallon this past summer, the American car buyer tended toward the smaller more fuel economical vehicles. The
trend has been short lived. “There’s been a rush to small cars, but that doesn’t mean the shift is permanent,” Data
from Edmunds.com “show that as gas prices have moderated in recent weeks [note that we are talking about weeks and
not months or years] - falling to $3.69 the week of Aug. 25, from a peak of $4.11 on July 14 [and gas is now
selling around $2.80 a gallon] - interest in small cars is leveling off, while interest in previously declining
segments such as compact crossover SUVs is on the rise. Even hybrids are cooling off, with consumer interest down
34% compared with June’s figures.” The fickleness of the American car buyer is also evident from the results of the
Arab oil embargos in the 1970’s. “After the first oil shock in 1973 it didn’t take long for Americans to return to
their gas-guzzling ways, with a preference for large cars and big V8 engines, . . . At the second shock in 1979,
Americans began shifting to more fuel-efficient Japanese cars. That lasted until baby boomers [in the 1990s] turned
it around with their need for kid-haulers.” (Ref. 12)
The United States must begin now “to take the necessary steps to avert a future when energy becomes less available
and far more expensive. . .. By 2030, world demand for energy will grow even faster than U.S. consumption. … The
rampant [world] demand for energy will create fierce [global] competition for scarce resources. The United States
must prepare for this reality. Unfortunately, the nation is not making enough progress in developing new energy
resources and shifting demand to more secure and renewable sources. . . . The upshot is that we need to do more,
and do it faster, to address the enrgy needs of the future.”
(Ref. 13)
Inaction on the part of the government is one thing, but actions that are counterproductive or wasteful of resources
are another matter. Raising the cost of oil and gas to minimize their consumption and to encourage the development
of alternatives is the most likely means of moving this country in the direction of energy independence. Certainly,
government and industry collaboration is highly desirable or even essential, but unwise government behavior is akin
to releasing the proverbial bull in a china shop. “Few things prompt Washington policy makers to forget their
professional belief in the efficiency of free markets faster than $100-A-barrel oil prices - or even the threat of
them.” Case in point - the Energy Independence and Security Act of 2007 which followed upon the rise of the price
of oil to $100 a barrel. The bill mandated the use of biofuels, i.e., ethanol. This biofuel mandate bets on a
particular technology and most experts will quickly admit that it is almost impossible to predict the best
technology. “Economists like to let the markets determine what [technology] has the best chances. . . .
Historically, there are no good examples of it [mandates] working in alternative energy. One reason economists tend
to be wary of mandated consumption levels is that they can have unintended consequences for related markets.” . . .
For example, the effects on the agricultural sector have been various, complex, and many would say disastrous. It is
estimated that biofuel production consumes around 45% of the U.S. corn crop, resulting in higher animal feed prices,
higher consumer food prices and reports of hunger in less developed nations. There is also the view that ethanol
requires the consumption of more petroleum to produce than it actually saves. The failure of mandates and the need
to create an economic environment within which alternative technologies can be developed is illustrated by the
Energy Security Act of 1980. This “legislation created the U.S. Synthetic Fuels Corporation, which was meant to
establish a domestic industry that produced liquid fuel from tar sands, shale and coal. . . . But in the early
1980s, the price of oil fell to $20 a barrel. With no prospect of producing synthetic fuels at a price competitive
with that of oil, the Synthetic Fuels Corporation was finally shuttered in 1986. . . .The Synthetic Fuels
Corporation and today’s Renewable Fuel Standards differ in many ways. But the efforts behind them do reflect a
common theme: the federal government’s attempt to select a particular technology and create a market for it.”
(Ref. 14)
We need to have our government impose a tax on imported petroleum or on fuel such that the price of gasoline is in
the $5 to $7 a gallon range. “This would provide critical protection for long-term investments in alternative
energy, otherwise at risk from a sharp fall in gasoline prices.”
(Ref. 15) And we need our politicians to take a neutral position on
developing technologies. They and we must let the market decide on the winner(s). We need to take these steps
now. Do we and our elected officials have the will?
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References:
- Thoughts - on the Business of Life, Malcolm S. Forbes, Forbes, Pg. 140,
October 16, 2006.
- Solving America’s Energy Dilemma, David Burton, www.sonofeliyahu.com, 2005.
- Powerful Antiterror Weapon - Unused, Steve Forbes, Forbes, Page 23,
October 26, 2006.
- Cheaper gas prices fuel SUV comeback, Jay Fitzgerald, Boston Herald, Page 24,
October 10, 2006.
- The world in his hands, Brett Arends, Boston Herald, Page 23, May 2, 2007.
- Wanna pay $7 a Gallon?, Jerry Flint, Forbes, Page 50. July 2, 2007.
- Turning Up the Heat, Maha Atal, Forbes, Page 34, September 1, 2008.
- Congressiona energy bill fuelish, foolish, Mac Owens, Boston Herald, Page 20,
December 7, 2007.
- Bill bans drilling in Georges Bank, Metro.Boston, Page 05, September 17, 2008.
- House takes up offshore drilling, Metro.Boston, Page 09, September 17, 2008.
- This energy bill is missing energy, Boston Herald, Page 24, September 18, 2008.
- Whipsaw, Joann Miller, Forbes, Pages 38 - 40, September 15, 2008.
- U.S. Faces Global Competition for Energy, Lawrence P. Fartrell Jr., National Defense,
Page 6, September 2007.
- The Mess of Mandated Markets, David Rotman, Technology Review , Pages 90 - 92,
March.April 2008.
- Regan Redux - Ending America’s Malaise, David Malpass, Forbes , Page 25,
September 29, 2008.
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