Politicians Should Look Abroad for the Source of Our Energy Woes
Sharp and unexpected rises in oil and gasoline prices make the public agitated—and politicians downright silly.
This time, the politicians' catalogue of nonsense is a long one: Speculators are manipulating global oil prices; the budget deficit has driven up oil prices by driving down the dollar; they are even peddling the simpleminded nostrum that a temporary holiday from the modest federal gas tax would offset the price hikes or even bring those prices down.
Amid the predictable foolishness, a reasonable approach emerged that both presidential candidates actually embraced, if reluctantly and somewhat elusively. Democrats finally agreed that we should allow companies to drill offshore if it can be done without environmental damage. Even if it won't produce any oil for several years, it could generate jobs promptly. For their part, Republicans grudgingly accepted substantive measures to increase energy efficiency and the use of alternative fuels.
But if they're looking for the actual culprits for the gas prices that now ail most Americans, they'll have to cast their eyes beyond our own shores. Most informed people and every energy economist know that in the $10 billion-a-day commodity market for crude oil, the only force that can move energy prices day to day beyond where the market dictates are the state-owned oil companies of Saudi Arabia, Russia, Iran, and a handful of other countries that control 80 percent of the world's reserves and nearly as much of the world's daily oil production. To put it in perspective, the three biggest U.S. oil companies—ExxonMobil, Chevron, and ConocoPhillips—account together for less than 4 percent of worldwide reserves.
The Russian invasion of Georgia underscored the influence of a few nations over the world's most important economic commodity and once again made it an important geopolitical issue. While Georgia's pipelines are only one of several sore spots for Vladimir Putin, effective influence over them fits nicely into his campaign to centralize the Kremlin's control over Russia's enormous oil and gas reserves and production—second in the world to only Saudi Arabia—and use them as geopolitical tools. With Putin's confiscation of the Yukos oil conglomerate, the key institution for this strategy is Gazprom, the huge, state-owned natural gas conglomerate that today supplies nearly one third of the gas needs of France and Italy, more than 40 percent of Germany's needs, 60 to 70 percent of gas consumption in Austria, Hungary, and Turkey, and virtually all the natural gas used in Greece, Finland, and most of Eastern Europe. Gazprom is not only also developing the vast Shtokman gas field in the Barents Sea to produce liquefied natural gas for the U.S. market, it also has absorbed Russia's largest oil producing company, Sibneft, with more reserves than any nation except Saudi Arabia and Iran.
Putin does not hesitate to use Russia's outsize presence in oil and gas markets for political ends. Gazprom earns notoriously low profits, even with recent high prices, because Putin purchases domestic public support by setting Gazprom's prices for most Russian customers at one fifth or less of world prices. Putin also ties Gazprom's foreign prices to the political support other countries pay his regime: Countries in his favor pay as little as one fourth as much as countries in disfavor. In 2006, for example, following the Orange Revolution in the Ukraine, Gazprom quintupled its charges to the new Ukrainian government. When the new government balked, Putin threatened to cut off its gas and oil supplies in the dead of winter; and when the European Union protested, they received the same threat.
In this energy and geopolitical environment, and with Putin's Kremlin watching closely, it surely makes little sense for the U.S. government to single out U.S oil producers for special taxes. Windfall profits taxes have never made much sense to most economists because they penalize companies for selling into boom markets. It would be like applying a special, additional tax to homeowners who sold during the bubble or shareholders who sell during a strong bear market. Nor does it make any sense to take an existing investment credit and declare that henceforth a few large oil companies will be ineligible. Whether prices are high or low, oil companies should pay the corporate tax like everybody else. If politicians decide they want more revenues from corporations, they should raise the rate—for better or worse. Even better, Congress could eliminate tens of billions of dollars in special tax subsidies for particular industries—including oil—and use some of the revenues to expand support for energy efficiency and alternative fuels, and the rest to lower the corporate tax rate.
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Reader Comments
economy
I may not have answers for our economy but every suggestion helps. ask the people for their input. quit blameing republicans and democrats. Put our heads together and lets get
ourselves out of this. I think the president should put a hold
on this TV transition. Feb. 15. People are losing their homes and cars now their TV. Lets close our boarders and take care of our selves. Easier said then done Mabey But if we don't make it so easy for them to get assistence & jobs when they are here
maybe so many wont want to come. We need to revisit some of our
welfare programs. Not enough help to do this then lets take some of the people behind the desks and let them walk the beat.
and by that I mean actually see where the money is going. Maybe
offer incentatives to people for turning in people when they see the money being misused. incentatives can work for alot of things let the people work for you, Taxes,crimes,They need help nd so does the government. Lets not be greedy anymore look where that got us morgages, interest rates, and gas prices. a little is better then nothing. We need to start capping some of the influxtion of these things. Before things get worse. I know everyone can backtrack a little. I don't mean cut in half cut down. These big conglomarates. Oil co. morgage co. banks, loan co. Real estate. Rent prices for bus. is crazy look at all the empty buildings. I would like to open a small bus. can't afford rent. So their are pioneers out there that would like to do this bring back some jobs but can't because out of the space rent.
lets all keep thinking of ways to get out of this let the people open their minds and the governent bend their ear. We
can do this United we Stand Divided we fall.
Our future economy and our competitive position in the world
Our future economy and our competitive position in the world will depend on inexpensive and abundant energy. Energy is the basis of all of the world’s economies. The country that has the lowest cost of clean energy will have a significant leg up in the future world economy.
The primary source of energy for most of the economies in the world today is oil, coal and natural gas. These are commodities that are purchased on a worldwide market. We all pay the going rate and therefore we all have the same basic cost of energy.
We are currently faced with peak oil. In the next few years our existing oil will diminish and demand will increase. Supply and demand dictates that the world wide price of oil will continue to escalate.
A new paradigm for worldwide economic competition:
The country that has the lowest cost of energy will be able to supply goods and services to the world for a lower cost or a higher profit margin. This would also mean a higher standard of living and a more robust economy for a country that has the lowest cost of clean energy.
Sufficient amounts of clean energy, will probably necessitate constructing multiple large nuclear power plants. Wind, solar, geothermal, tide and wave power are all great and will probably not be enough to meet the realistic demands of our economy.
Basically we need to:
• Add a carbon tax or cap and trade system that will sufficiently add to the cost of those who pollute. Use the revenue from this tax to subsidize alternative energy.
• Carbon and pollution cost will also need to be added to imported goods.
• Fast track the construction of nuclear power plants and utilize the technology that will transfer large amounts of power for long distances with little or no line loss.
• Add a tax to gasoline that will gradually increase, on a timescale, to a very significant amount. This tax money will go into a fund that can only be used to subsidize the purchase of the cleanest most gasoline efficient cars.
The abundant power of the nuclear plants can also be used to generate hydrogen gas. The hydrogen gas can be used in many ways; a substitute for gasoline, diesel, home heating, etc.
The gasoline tax and subsidy for the purchase of small clean cars will dramatically change the cars that are produced. The manufacturers will be scrambling to create the cars that receive the greatest percentage of the subsidy. Theoretically one could buy the equivalent of a Toyota Prius and have the government pay for one half or more.
These are drastic economy shaking ideas.
The reality of our needing to eliminate our dependence on foreign oil and the immediate and real threat of catastrophic climate change, justify and demand drastic changes.
Creating our new energy environment, and fast tracking these changes, will invigorate our present economy. Fast tracking means, environmental impact report not needed and a moratorium on lawsuits. The environmental impact of the status quo is obvious
oil energy crisis
short memories are the problem
this happened 1973 1979 etc. the energy crisis is solved by developing new technologies and new energy goals not by staying in the same short term dumb loop. the politicians need to define and enact this as the new reality instead of continuing the above.
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