photo credit: Lori Greig
I wrote a post a couple of weeks back saying that the sooner oil reaches $200 per barrel, the better. Unsurprisingly, it generated a bit of comment!
So I was mighty chuffed to read Thomas Friedman’s superb Op-Ed in the New York Times yesterday where he made a very similar argument.
Thomas said:
there is no short-term fix for gasoline prices. Prices are what they are as a result of rising global oil demand from India, China and a rapidly growing Middle East on top of our own increasing consumption, a shortage of “sweet” crude that is used for the diesel fuel that Europe is highly dependent upon and our own neglect of effective energy policy for 30 years.
Cynical ideas, like the McCain-Clinton summertime gas-tax holiday, would only make the problem worse, and reckless initiatives like the Chrysler-Dodge-Jeep offer to subsidize gasoline for three years for people who buy its gas guzzlers are the moral equivalent of tobacco companies offering discounted cigarettes to teenagers.
I like the discounted cigarettes to teenagers analogy but it doesn’t go far enough. You give discounted cigarettes to teenagers, you kill them. You give discounted petrol/gas and you kill the planet. In effect, with its massive subsidies for oil companies (subsidies for oil companies? who thought that was a good idea?), this is what the United States administration has been doing for decades. But we digress.
He goes on to quote the arguments of energy economist Philip Verleger Jr. who wants a “price floor” - a guaranteed minimum price below which gas will not go:
$4 a gallon for regular unleaded, which is still half the going rate in Europe today. Washington would declare that it would never let the price fall below that level. If it does, it would increase the federal gasoline tax on a monthly basis to make up the difference between the pump price and the market price.
To ease the burden on the less well-off, “anyone earning under $80,000 a year would be compensated with a reduction in the payroll taxes,” said Verleger. Or, he suggested, the government could use the gasoline tax to buy back gas guzzlers from the public and “crush them.”
But the message going forward to every car buyer and carmaker would be this: The price of gasoline is never going back down. Therefore, if you buy a big gas guzzler today, you are locking yourself into perpetually high gasoline bills. You are buying a pig that will eat you out of house and home. At the same time, if you, a manufacturer, continue building fleets of nonhybrid gas guzzlers, you are condemning yourself, your employees and shareholders to oblivion.
With the current high prices for gas/petrol in Europe and the US, the message is starting to get through. Te demand for hybrid cars is growing daily as Thomas noted when he went to buy a new one:
I was visiting my local Toyota dealer in Bethesda, Md., last week to trade in one hybrid car for another. There is now a two-month wait to buy a Prius, which gets close to 50 miles per gallon. The dealer told me I was lucky. My hybrid was going up in value every day, so I didn’t have to worry about waiting a while for my new car. But if it were not a hybrid, he said, he would deduct each day $200 from the trade-in price for every $1-a-barrel increase in the OPEC price of crude oil. When I saw the rows and rows of unsold S.U.V.’s parked in his lot, I understood why.
The absolute worst thing which could happen now would be for oil prices to drop again. Companies who had invested heavily in renewables would potentially go out of business and fuel efficiency would no longer be a primary concern for car buyers.
No, high oil prices are a good thing. Nothing will move us off the carbon economy as effectively as a strong financial incentive.
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