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« Right now, cheap oil is a good thing | Main | Freedom Tower at World Trade Center is answer to tyranny »

March 27, 2009


jj mollo

Things can change fast if there's a good path. For instance, think about how fast hybrids have penetrated the American market. That would have happened anyway, but the high prices of fuel certainly encouraged it. Pretty soon we'll have plug-in hybrids, and then plug-in hybrids with flex fuel. As celulosic ethanol and bio-diesel become available, we'll be switching away from gasoline and relying more and more on alternative sources, providing a natural transition to pure electric cars. This will take some time I suppose, but high oil prices would hurry it along. Nuclear power is the obvious choice here, but somebody has to show some political courage for that to happen.

I believe, btw, that our biggest potential source of domestic fuel is conservation. It outstrips Saudi Arabia, and the best way to tap it is with high oil prices. Those prices can be high because of taxes that benefit the US government, or they can be high the old-fashioned way. Take your choice.

One of the biggest upcoming sources of conservation, at least for electricity, will be LED lighting. The consumer technology is just beginning, but it's amazing. I've got some 40 watt equivalent floodlights in my kitchen that use LEDs. They supposedly use only 3.5 watts each. That's over a 90% savings. The initial outlay is high, though I expect it to come down pretty quickly. I've heard that LEDs are coming out in new colors as well.

jj mollo

Note that this argument does not depend on my position regarding Global Warming. It's strictly economic and geopolitical.

David Holliday

A few thoughts...

If you want to tax oil tax OIL. Put the tax on the barrel not on the gallon. Taxing gasoline is just too narrowly focused.

The last time I saw estimates there were approximately 8 trillion barrels of untapped oil in the world. Worldwide cumulative usage to date is somewhat less than 1 trillion barrels. The world has a ways to go before it will be out of oil.

Within any cost structure, a certain level of business activity is sustainable. To put it another way, some businesses run at the margin. Increasing their costs will result in their failure. This in turn will result in other business failures until a new sustainable level of activity is reached.

There is no cost levied on a business that is not propagated through to the price of the good or service provided by that business.

When the government intervenes to influence, control or direct industry or markets, the unforeseen consequences are often severe.

The corollary to that is markets will react in the way that markets react regardless of any external pressure or desire to see them react in some defined way.

Only businesses provide jobs. Only jobs create taxable revenue.

Government is not a business. At its core it is a “repurposer” of the wealth of the nation.

You can't save the planet without people working to pay taxes that can be repurposed to that objective.

jj mollo

David, I think I agree with everything you said. I believe that the price of energy in general can indeed have a profound effect on the economy. A tax on oil would probably be better than a tax on gas, but a tax on either would be better than a tax on none. But the actual tax burden is a very sensitive economic issue and should be as closely monitored as the prime rate. For that reason I have suggested on several occasions that the tax rate should be flexible and administered by an organization similar to the Federal Reserve, or even the Federal Reserve itself. The mission assignment should be to reduce the use of oil by pushing the price up gradually enough that the economy is not damaged.

IMO, the money retained in our economy should be enough to produce many jobs. But more importantly, the resulting diversification of our energy structure will provide economic security and probably whole new industries that hire lots of people. The tax will exert a force that "repurposes" our wealth into avenues of greater future productivity. It will not diminish our wealth.

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hello friend excellent post about JJ: A U.S. gas tax would keep more money in the U.S. thanks for sharing!!

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