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Saturday, April 23, 2005

OPEC's renewed leverage 

The Capital Spectator -- an interesting econoblog I had not seen before -- has a crisp post up on "the new new golden age of OPEC." In particular, the very anonymous author points to China's famously increased demand for oil -- its imports are up 23% in the last year -- and concludes that the incremental supply can only come from OPEC. Previously, according to Spectator, spikes in the price of oil have unleashed new non-OPEC supply, such as from Mexico, the North Sea and the North Slope. This time, there is no evidence that significant non-OPEC supplies are forthcoming.

While I think that command-and-control regulation is not the answer, I do wish that the Republicans would be more thoughtful on energy policy. You can be correct that corporate average fleet economy requirements and synfuels are bad policy and still worry that we are damaging our economy and funding our enemies by importing so much oil at such high prices.

Cheap gasoline is a dangerous addiction for the country, and something we can easily do without if we are willing to endure the slightest inconvenience. The parking lot at our offices is packed with massive SUVs. Nobody carpools to work even though it would be very simple for most people to share a ride. Our household consumes about 2000 gallons of gasoline directly each year (in our own cars), and we could easily cut 10-20% out of that figure (Thursday afternoon we drove three cars to my daughter's softball game because none of us could be bothered to drive three miles out of our way!). We don't save that gasoline because, as a value proposition, it is so damn cheap. Compared to virtually every other liquid -- including imported bottled water, perhaps the most wasteful product widely sold in rich countries today -- gasoline is an unbelievable good value, even at today's prices.

We need to increase the taxes on oil significantly and steadily over a period of years so that the economy has time to adjust. The additional revenue can be returned to the current generation in the form of tax cuts or other subsidies to lower-income people or the next generation in the form of lower government debt. In either case, we would be paying ourselves rather than the Arabs, and building a stronger America.

10 Comments:

By Anonymous Anonymous, at Sat Apr 23, 08:54:00 AM:

Nice post, although I would like to hear more details about what you consider to be "command and control regulation". Mileage standards, for instance?

I think you are correct that higher gasoline taxes would be extremely useful (but then I'm a liberal so this is no surprise).
I can only offer the depressing observation that if Republicans, by some miracle, proposed higher taxes on gasoline, it would be used against them in future elections. It's such an easy target for political ads.

- Levi  

By Blogger TigerHawk, at Sat Apr 23, 09:31:00 AM:

By "mileage standards," I trust you mean the Corporate Average Fleet Economy ("CAFE") standards originally imposed during the Carter Administration. Yes, I think that the CAFE standards are bad policy. They did increase the fuel efficiency of the American fleet, but only at great cost. We would achieve much greater gains at much lower cost to our economy by taxing gasoline. If that means we have to rebate the checks to working people, so be it.

I agree with your last observation -- the Democrats (or their allied 527s) would hammer any Republican who voted for a gas tax. Even the environmentalists have become so partisan that the Republicans could not count on them for air support, however much higher gas taxes would help their pet causes.  

By Blogger james82, at Sat Apr 23, 07:08:00 PM:

No taxes, it hurts the economy - especially the less wealthy and small businesses. Or, tax, but less wealthy and small businesses would get it back as a tax refund. What really needs to happen is more nuclear power plants built and electric cars. Future generations will look at our burning oil the way we look at the use of leeches for medicine.  

By Blogger Screwy Hoolie, at Sun Apr 24, 08:57:00 AM:

"future generations"

Now that's optimistic.  

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