Well, here we go again.Three years ago, when oil prices spiked over $100, Americans momentarily freaked.
The world had changed forever! We had to build more efficient cars! We needed a green energy policy!
But then the global economy crashed, oil prices fell back below $100, and we went right back to business as usual.
And now the global economy is growing again, oil supply is steady or declining (because there’s just not enough oil out there to increase supply), the Middle East is descending into chaos, and oil prices are skyrocketing again.
Enough. It’s time for this ridiculous shock therapy to end.
What really screws the economy and American citizens is not high oil prices, it’s the yo-yoing of oil prices. Prices move up and down so fast that consumers and companies can’t adjust fast enough. Instead of making sound long-term plans, they get caught in violent short-term panics. Then things go back to “normal,” the panic ends, and nothing ever changes.
Over the long-term of course, given a finite supply of oil and ever-increasing demand for it, oil prices are going to keep on rising. And remaining in denial about that–and postponing the day that we actually deal with it–isn’t going to help anyone.
So what can we do about it?
Well, we can develop a comprehensive long-term energy policy. This policy would include LONG-TERM investments in sustainable energy sources (not short-term tax breaks that can be killed at any time), as well as investments in other conventional energy sources that aren’t oil. And, it would include a phased-in gas tax that would gradually increase prices at the pump to make alternatives relatively more affordable and encourage companies and consumers to conserve more gas.
Importantly, this gas tax should not a flat-rate gas tax. It should be a floating-rate one…one that would adjust to the price of oil (and help minimize price spikes).
And it should not suddenly be enacted now, because then it would be another hammer blow to a fragile economy. It should be phased in over several years, with a year or two of warning, so people and industries have enough time to adjust.
For example, the US could peg gas prices at a minimum of $5 a gallon after 2015 by phasing in a tax starting in 2013. Whatever gas would cost on the open market (benchmarked to the price of oil), the tax would make up the difference between that and $5. If the market price for gas went over $5, the tax would disappear.
Yes, free-market folks will scream. Yes, the oil industry will scream. Yes, folks who love gas-guzzlers will scream. Yes, those who regard cheap gas as a constitutional right will scream. But we’ll be better off in the end.
Folks who want to drive gas guzzlers will still be able to. Our deficit will be slightly less horrific (new tax stream). And everyone will be incented to buy technologies that are better for everyone, helping to launch dozens of new industries in the process.
The Libyan crisis is just the latest reminder of the stupidity of our current energy “policy.” And remaining in denial about that isn’t going to help us avoid the next one.
See Also: Time For A Gas Tax
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