Gert van der Hoek
In Memoriam - Editor, Senior Moderator
October 19, 2008
What?s Really Wrong With the Price of Oil
By ROGER LOWENSTEIN
Long article from NYT; conclusion:
It would be a tragedy if falling prices were to extinguish such alternatives (alternatives to oil,ed) and ? given the time lag inherent in energy development ? leave the country vulnerable to a yet another round of shocks. There is no disputing, as Ben Bernanke said, that recently falling oil prices are giving the economy a shot in the arm. But new energy projects also create jobs, and though oil prices impose a cost, Europe has lived with high prices (because of the imposition of taxes) and adjusted to them.
What can Washington do now? McClendon, the Chesapeake chief executive, whose company is active in the Marcellus, is angling for federal subsidies to help service stations convert to natural gas. This is what every energy pioneer wants: subsidies for what it does.
But Congress is probably not the optimal institution for anointing technological winners. Its mandate to use corn for ethanol, while it has done wonders for Iowa farmers, has led to sharply higher corn prices and has not added much (if anything) to the country?s energy supply.
And even if politicians act with the purest of motives, there are simply too many possibilities for the car of tomorrow (fuel cells, nickel-hydride or lithium-ion batteries, natural gas, biofuel from wood chips and oil itself) to know which will prove the most feasible.
The government could help finance basic research, but there is no reason to rule out any source ? oil included. By restricting offshore drilling, the United States is shunning an estimated 18 billion barrels of oil (equal to 80 percent of our proven reserves). As McClendon says, it?s hard to fault Mexico or Saudi Arabia for not developing their fields to the max when the U.S. declares its own territory off-limits.
What the country doesn?t want is to remain dependent only on oil ? to lose the urgency to develop alternatives. It happened once before. After the gas lines of the ?70s, Jimmy Carter declared that solving our energy problems was the moral equivalent of war. Then, in the 1980s, Americans forgot.
The way to avoid a repeat is to dust off an idea that Gerald Ford once proposed: a tax on oil. Ideally, it would kick in only if the price fell back to, say, $70 a barrel. The beauty of this tax is that, very likely, no one would have to pay it.
The tax would merely serve as a floor ? a new lower bound. Auto companies would never have to worry that cheap gas would tempt consumers away from efficient cars; investors could finance development of batteries and fuel cells, because cheap oil could never undercut them.
Oil itself would be used more sparingly and last longer. The oil market did its part when it sent the price to almost $150. The government should make sure there is no going back.
http://www.nytimes.com/2008/10/19/m...r=3&oref=slogin&ref=magazine&pagewanted=print
What?s Really Wrong With the Price of Oil
By ROGER LOWENSTEIN
Long article from NYT; conclusion:
It would be a tragedy if falling prices were to extinguish such alternatives (alternatives to oil,ed) and ? given the time lag inherent in energy development ? leave the country vulnerable to a yet another round of shocks. There is no disputing, as Ben Bernanke said, that recently falling oil prices are giving the economy a shot in the arm. But new energy projects also create jobs, and though oil prices impose a cost, Europe has lived with high prices (because of the imposition of taxes) and adjusted to them.
What can Washington do now? McClendon, the Chesapeake chief executive, whose company is active in the Marcellus, is angling for federal subsidies to help service stations convert to natural gas. This is what every energy pioneer wants: subsidies for what it does.
But Congress is probably not the optimal institution for anointing technological winners. Its mandate to use corn for ethanol, while it has done wonders for Iowa farmers, has led to sharply higher corn prices and has not added much (if anything) to the country?s energy supply.
And even if politicians act with the purest of motives, there are simply too many possibilities for the car of tomorrow (fuel cells, nickel-hydride or lithium-ion batteries, natural gas, biofuel from wood chips and oil itself) to know which will prove the most feasible.
The government could help finance basic research, but there is no reason to rule out any source ? oil included. By restricting offshore drilling, the United States is shunning an estimated 18 billion barrels of oil (equal to 80 percent of our proven reserves). As McClendon says, it?s hard to fault Mexico or Saudi Arabia for not developing their fields to the max when the U.S. declares its own territory off-limits.
What the country doesn?t want is to remain dependent only on oil ? to lose the urgency to develop alternatives. It happened once before. After the gas lines of the ?70s, Jimmy Carter declared that solving our energy problems was the moral equivalent of war. Then, in the 1980s, Americans forgot.
The way to avoid a repeat is to dust off an idea that Gerald Ford once proposed: a tax on oil. Ideally, it would kick in only if the price fell back to, say, $70 a barrel. The beauty of this tax is that, very likely, no one would have to pay it.
The tax would merely serve as a floor ? a new lower bound. Auto companies would never have to worry that cheap gas would tempt consumers away from efficient cars; investors could finance development of batteries and fuel cells, because cheap oil could never undercut them.
Oil itself would be used more sparingly and last longer. The oil market did its part when it sent the price to almost $150. The government should make sure there is no going back.
http://www.nytimes.com/2008/10/19/m...r=3&oref=slogin&ref=magazine&pagewanted=print