With the price of oil having touched $100 per barrel and gasoline over $3.00 per gallon, Americans are beginning to adjust, just as they did in the late-1970s and early-1980s. They are looking to buy gas-sipping hybrids instead of gas guzzling SUVs, and compact urban condos or smaller, more efficient suburban homes, rather than sprawling exurban McMansions. Some are carpooling, others switching to mass transit, scooters, motorcycles or even bicycles. The boom in rooftop solar is so strong that there is a shortage of panels. American business has also started to make changes. Investment capital and research dollars are pouring into alternative energy sources. The nuclear energy market has revived. After killing off the electric car and fighting fuel economy standards, General Motors is desperately trying to develop a plug-in hybrid while killing off the H1 Hummer.
What are we, a bunch of idiots? OPEC knows that what most Americans really want is to be fat, lazy, and stupid, and that our politicians get elected by pandering to our worst instincts. As soon as conservation and alternatives begin to make a dent in our fossil fuel dependence OPEC will, as in the mid-1980s, pump up production and cut the price of oil. And as soon as it does Americans will forget all about our long-term economy, our national security, and the global environment, and suck that cheap oil like a pacifier. Those who conserve will again be derided as losers, as the winners drive more massive vehicles designed to cause rather than suffer fatalities in a crash, and those who invest in energy alternatives will go broke. Until they have us over a barrel yet again.
We’ve had more than 25 years of pandering since former President Carter was mocked for declaring the energy crisis the “moral equivalent of war.” Well, how do Americans like the consequences? Our economy is being drained by funds sent overseas for oil, to people are now buying up our country. We are now the world’s greatest debtor, and soon we may no longer be the world’s reserve currency. Some of those being enriched by our oil dependence dislike us and, depending on which regime gets its hand on the loot, may use the money to visit violence upon us. Perhaps catastrophic violence, the likes of which this country has never seen. These problems are above and beyond the global warming threat for which, as a result of our President’s rubbing our indifference in the face of all the people of the rest of the world, our children will be blamed even if others contribute as much or more to the problem. And now we can’t easily stop being dependent on fossil fuels and foreign oil if we wanted to. We’ve bought and built 25 years worth of vehicles and buildings that will force us to use more fossil fuels whether we want to or not, because it would cost much more energy to replace them than to burn the extra fuel to operate them.
The only energy policy the United States needs is for Americans to admit that fossil fuels, because of their environmental and, in the case of oil, economic and national security damage, need to be expensive rather than cheap. If the market makes them so, then fine. If the market, in the short run, does not, then the government should step in and ensure that those who make changes and invest for the long run are not made the worse for it. Elected officials do not need to decide which energy solutions to force Americans to choose. After all, when they do so, they tend to be influenced by whoever provides the most in campaign contributions. Elected officials just need to make sure Americans, American businesses, and American communities have an incentive to seek energy solutions.
I propose that the federal government require that oil refiners buy oil, whatever the source, for a theoretical price of $100 a barrel, and pass that cost on to their customers. If the could get the oil for less, the federal government would put a 95 percent tax on any savings they got from buying it cheaper, and they would take just an extra five percent in profit. (For integrated oil companies, that would be a 95 percent tax on the difference between their cost of upstream production and $100 a barrel). That $100 a barrel would be adjusted upward for inflation or median household income, whichever was greater, under a law with a sunset period of no less than 30 years. For consumers, therefore, the price of gasoline, heating oil, and kerosene would always be the equivalent of $100 a barrel, from now on.
No doubt there would be some attempts to evade the tax and increase the profit, no doubt there would have to be an IRS examiner always on hand at every oil facility, and no doubt there would be scandals about the government making consumers pay more to benefit Exxon and BP. No matter. The goal would not be to collect revenues, and if the market price stayed high enough that no revenues were collected, that would be fine. The goal would be to ensure that those who invest in alternatives, and those who conserve, would be guaranteed a 30-year investment horizon during which they needed only be competitive with oil at $100 a barrel, not at $75 per barrel or $50 per barrel or $25 per barrel. That includes investment in domestic oil production, which costs much more than Saudi oil but in many cases can be produced for less than $100 a barrel. The tax would nearly wipe out that advantage, without discriminating against foreign suppliers.
Natural gas doesn’t have the national security issues of oil, and burning it causes less environmental harm. But burning natural gas does contribute to global warming, and depletion will gradually make the United States dependent on supplies from outside North America. Therefore, the federal government should make sure the price of natural gas remains high, though not so high as oil. Say the energy equivalent of $80 per barrel. Once again, those buying natural gas – say utility companies – would be required to pass on the equivalent of that amount to their customers, with the federal government taking 95% of any savings by purchasing gas for less and the utilities keeping the rest in profit.
The United States has plenty of coal, and coal presents neither the economic nor natural security issues of oil. But coal is the dirtiest fuel, so dirty that it wrecks the local environment as well as our global environmental future. The damage is so great that those who sell coal should also be required to sell it for the energy equivalent of $100 per barrel of oil, and since coal is cheaper to produce, this would likely generate significant federal government revenues given a tax of 95 percent on the difference.
If, however, those burning coal in large quantities (ie. power plants) could remove the pollutants from the air, including carbon dioxide, those revenues could be refunded back to them. The refund would be in proportion to the reduction in emissions below the level mandated by government regulations. If all of the emissions were removed, all of the money would be refunded, save a small fee for administration. Power plants seeking such refunds could have an IRS examiner and an EPA technician on-site at all times. A mandated high coal price, therefore, could, among other things, encourage the development of “clean coal” if that technology ever works.
A similar refund could offset the higher cost of natural gas for those who refine it into hydrogen for fuel cells while keeping the carbon out of the air.
I’ll say it again, in case you didn’t read the title – keeping the price of fossil fuels high is the only energy policy the United States really needs. Our energy and environmental problems will not be solved by five policies enacted by a Congress driven mostly by campaign contributions. They will be solved by having people, businesses and communities try 100,000 things, 10,000 of which will work, 1,000 of which will work well enough to stick around, and 100 of which will work well enough to make a significant contribution. Neither Congress nor the President and their advisors can correctly identify those 100, many of which do not yet exist, and neither Congress nor the President has the right to use the power of government to constrain or prohibit the other 99,900 other possible solutions.
What is the solution? For Americans to continue living exactly as they have, but with business making this possible with different energy production technologies? Different energy conservation technologies? Do Americans need to make lifestyle alterations, and if so which ones? The answer may be all of the above. It may also be different in different places. It may be different for different people. It may be different at different times. I’ve already been pursuing my own solutions for my whole life.
And my choices, according to federal policies, political pandering, and 25 years of automobile company advertisements, makes me a sucker, a loser, a fool, and someone in need of Viagra. I’m thinking of one SUV ad in particular, in which Joe Sixpack is working out in a gym and hoping to attract chicks when a loudspeaker announces that the lights are on for his wimpy, sensible mini-van, since he doesn’t own a macho SUV. “Busted.” And I’m thinking of Republican attacks on do-gooder environmental rules, and Chuck Schumer’s press conferences on oil company price gouging every time the price of gasoline goes up.
I don’t think we can stop the pandering or the advertisements, but at least we can change the policy so OPEC doesn’t have the ability to put conservation and alternatives out of business anytime it wants. That’s what I want and we need the federal government to do. What we don’t need is a bunch of politicians telling us how to solve our energy and environmental problems.