Sunday, May 08, 2005

Hoping For Higher Gas Prices

It is oh so fashionable for politicians of every stripe to decry the current high gas prices confronting Americans at the pump. The President wishes he could wave a magic wand and bring prices down, but ruefully admits that he cannot. In the meantime, what he offers is mostly a plan to suck the last remaining drops of U.S. oil from the ground, and he makes the silly claim that doing so is one way to help us become "less dependent" on foreign oil. Good lord.

Critics of the President say he's not twisting the Saudis' arm hard enough; that he should be pressuring them to increase their own production and thus drive prices back down. It's as if they think there's a spigot somewhere that can be continually opened wider to satisfy ever increasing world demand.

No politician appears intelligent enough to grasp the truth, or courageous enough to state it plainly to the American people: higher, not lower, gas prices are the only way out of this mess. But instead all they express is gratuitous chagrin, whining for a return to business as usual where Americans don't have to contemplate limits on their use of energy. This is leadership?

As I have explained elsewhere, we have reached, or have nearly reached, the beginning of a permanent structural supply shortage in the world oil markets. Trying to squeeze out additional production is unlikely to satisfy rising demand, and were it possible to increase production in the short term it would just delay necessary action that we should be taking now.

The hard truth is that we are entering a new phase of permanent scarcity in the oil economy. This will be a very different experience from what we've grown accustomed to. It is way past time to ask where we go from here.

The only way to find our way to some kind of sustainable energy future is for prices to rise so high that we are compelled to work toward viable alternatives. We've done a dismal job of that so far.

In the time ahead, the main beneficiary of rising oil prices will be the oil producers. They are poised to get very rich because of our tragic shortsightedness. It needn't have been so.

We could have started working on this problem long ago, but we lacked the political will to do it. Remember the "BTU tax" proposed by Bill Clinton in his first term? That went over (as my mother might put it) like a turd in a punch bowl. Clinton's proposal was a solid step in the right direction, but it was squashed by politicians on all sides. (Shame on you David Boren, former Democratic senator from Oklahoma.)

The BTU tax would have raised the price of energy by taxing energy. But it could have done so in a "revenue neutral" manner by including offseting tax reductions in other areas. Higher energy costs would have nudged the economy in a healthier and more sustainable direction, and encouraged investment in renewable energy alternatives and higher efficiency. The net increase in the cost of energy would have gone into American pockets instead of to the Middle East.

Over a decade has passed since Clinton's proposal, and all we've learned since then is how to make bigger SUVs. We still need higher gas prices--much higher. And we'll get them: market forces will see to that. This will cause great suffering and substantial economic decline. To a large extent, it's our own damn fault.

Copyright (C) 2005 James Michael Brennan, All Rights Reserved


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