NEW YORK -- With all the partisan debate over spending cuts in the U.S., energy policy seems to be pretty far down on everyone's agenda. That's a shame because there is probably no other single area that could have a bigger impact on the country's finances. Think of it this way: Every 10 percent reduction in the price of oil represents a $36 billion tax cut for America.
The United States imports 10 million barrels of oil a day. At a price of $100 per barrel that's $365 billion a year that the country is being "taxed" by foreign suppliers. It is an urgent national priority to reduce this cost both in financial terms and for national security. And, no, the recent drop in oil prices and promised relief at the gas pump projected for the summer doesn't change a thing. If anything, it should inspire the U.S. to act more aggressively to drive prices down further.
Fortunately, the means are at hand to make a meaningful impact on this cost and keep the savings home. Here four ways it can happen.
Hold Mideast allies to their word -- Some of the current cost may be temporary and described as a risk premium for uncertainties in the Middle East, particularly Libya. Libyan production is 1.9 million barrels per day of high quality oil, which is roughly 2.5 percent of world output of 84 million barrels a day. Eventually there is every reasonable expectation that Libyan production will come back, as Col. Qaddafi will be ousted and the oil will be quickly produced (Qatar has already indicated that they would help with the transshipment) or he will somehow survive or some kind of compromise be reached, in which case Iran or some other country will undoubtedly facilitate the sale of the oil. In the meantime, Saudi Arabia has indicated that it would increase production by 3.5 million barrels a day and Kuwait has indicated they would increase production by 500,000 barrels per day to offset any shortfall from Libyan production. It is unclear whether such added supply has come on the market but it is clear that one way or the other, adequate supply and lower prices are at hand if Saudi Arabia and Kuwait keep their word. We should put the pressure on to see they do and that the markets acknowledge it.
Start leveraging natural gas to electrify vehicles -- The United States can take its massive natural gas reserves and supply them to our utilities, which are underutilized at night, to produce electric power to drive electric and hybrid vehicles. This is a multi-year program that will not be achieved instantaneously, but starting it can materially affect the current expectations and behavior of those who own oil. Historically those expectations have been for ever-increasing prices because of worldwide demand and an increased number of autos. But should those expectations be changed sellers would tend to sell. Cheating by OPEC members would tend to increase and it would be extremely difficult for the cartel to enforce its quotas. A significant failure of United States policies over the last 40 years since the first OPEC embargo has been inaction on our part to reduce demand and as a consequence expectations.
There are major side benefits to this approach. We would create a major worldwide auto industry with advanced technology and real jobs for our labor force. Much of this technology and know-how could be exported for the benefit of our companies and our country. Of course much of the natural gas would come from shale and we must carefully identify what risks that poses to the water supply and to the environment.
Increase gasoline taxes --There is little doubt a gas tax would lower demand. Any regressive aspect could be moderated by either income tax benefits or rebates to the lowest income segment of the population. Tax benefits to businesses that reduce their gasoline consumption could help ease the burden on commercial users.
Stop throwing good money after bad -- Counterproductive policy such as those involving ethanol should be abandoned. Not only do these approaches not reduce the demand for imported oil but they raise the price of corn and other food imports. The consequence of the latter plus the price of oil is an income squeeze on the lowest income parts of not just the United States but the world. The subsidies would be better spent on alternative energy sources like wind and solar that could cut demand for oil.
The fact that the U.S. is more obsessed with cutting taxes that it pays to itself than with cutting the "taxes" it pays to OPEC is a situation that must be corrected. Energy policies that address supply and demand for gasoline are the answer.
So the next time that someone tells you that alternative energy is too expensive, ask them to google up Milton Copulos.
See Moving Beyond Oil and Energy Catalyst as well as related posts at www.aesopinstitute.org
Forget natural gas. The Energy Catalyst and competitors in the wings are safer, simpler and less expensive.
All fossil and radioactive fuels may soon prove inertial.
How fast they are superseded is an open question, but if the nation really decided to move beyond them it would surprise almost everyone to discover how rapidly that might be accomplished.
The price of oil is in a strong nonlinear relationship with the price. During the recession the price dropped dramatically yet demand dropped less than 2%. Now the demand is back and we refuse to add to the supply which = higher prices for all.
Stupid energy policy. Not to mention the fact that gas and oil are often found together.
Gasoline Demand Still Falling
Reuters
It's population and it's also a touchy subject. To anyone with first grade math skills you can see the only way to control increasing demand is to stop increasing our population - at least at it's record pace.
There are several reasons why it's so unpopular to talk about population. Economics, religeon, cutlures and peoples constititional right to act like selfish clods and have lots of kids.
The easiest way to cutail our history of doubling of population every 50 years is to look at immigration. It accounts for about 80% of our growth from via one million allowed in legally, the 12 or so million here illegally and those two groups high birth rates.
The other thing we can look at are the many rewards and programs that prop up reproduction. For every child you have you pay much lower taxes, yet you burden the country more.
It's a subject few can talk about without either calling someone with my views names or implying I have ra.cist or xenophobic agendas. Due to that few have the courage to speak out about it. And no politicians have the honesty to address this issue openly.
I guess for the time being the groups pushing for one world economies, world wide redistibution of wealth and corupt governments are winning the hearts and minds of this country.
No wonder they have had mini-earthquakes there. Besides it is bad for the drinking water and we know how companies don't care.
2.5 million fraced well world wide. A few hundred local groundwater wells (at most) compromised. Doesn't sound like a problem to me.
AMERICAN PEOPLE:
it only refers to the top 1% of LARGE MONEY. - that's billionaires, wall street execs, bankers, trust fund babies, and old money elite.
the other 99% are apparently only useful as ballot handlers, cannon fodder, and servicers. so when
someone is pontificating about what the "american people" want or expect and desire or need
that's who they are talking about. so if that isn't your income range - you know the pontificator
ain't talkin bout ya'll.
But cutting the price of oil is not the ultimate goal.
Cutting the cost of energy to our society - especially the poorest - is our ultimate goal.
Not producing greenhouse gases is critical.
Want to increase it - but not hurt consumers.
So, tax carbon fuels at the original seller.
Give the tax revenue to citizens.
Better to Tax gasoline and refund the money to consumers.
That's why they need to be taxed at the maker.
That's why we need to give the tax revenue to the people who buy everything.