by Charles Krauthammer
11-11-05
Thank God for $ 3.50 gasoline. True, we
had it for only a brief, shining moment, and there is not much good to be said
about the catastrophic hurricanes that caused it. But the price was already
inexorably climbing as a result of 2.3 bn Chinese and Indians industrializing.
Their increased demand is what brought us to the energy knife's edge and makes
us so acutely vulnerable to supply disruptions.
Yet, the Senate is attacking the problem by hauling oil executives to hearings
on "price gouging." Even by Senate standards, the cynicism here is breathtaking.
Everyone knows what the problem really is. It's Economics 101: increasing demand
and precariously tight supply.
Yet for three decades we have done criminally little about it. Conservatives argued for more production, liberals argued for more conservation and each side blocked the other's remedies -- when even a child can see that we need both:
Demand.
Just yesterday we were paying $ 3.50 a gallon at the pump and were ready to pay
$ 4 or $ 5 if necessary. No blessing has ever come more disguised. Now that we
have lived with $ 3.50 gasoline, $ 3 seems far less outrageous than, say, a year
ago. We have a unique but fleeting opportunity to permanently depress demand by
locking in higher gasoline prices. Put a floor at $ 3. Every penny that the
price goes under $ 3 should be recaptured in a federal gas tax so that Americans
pay $ 3 at the pump no matter how low the world price goes.
Why is this a good idea? It is the simplest way to induce conservation. People
will alter their buying habits. It was the higher fuel prices of the 1970s and
early '80s that led to more energy-efficient cars and appliances -- which
induced such restraint on demand that the world price of oil ultimately fell
through the floor. By 1986 oil was $ 11 a barrel. Then we got profligate and
resumed our old habits, and oil is now around $ 60. Surprise.
The worst part is that much of this $ 60 goes overseas to foreigners who wish
us no good: Wahhabi Saudi princes who subsidize terrorists; Hugo Chavez, the
mini-Mussolini of the Southern Hemisphere; and (through the fungibility of oil)
the nuclear-hungry, death-to-America Iranian mullahs. This is insanity. It makes
infinitely more sense to reduce consumption, drive the world price down and let
the premium we force ourselves to pay at the pump (which begins the conservation
cycle) go to the US Treasury. If the price drops to $ 2, plough that $ 1 tax
right back into the American economy by immediately reducing, say, Social
Security or income taxes.
The beauty of a tax that keeps gasoline at $ 3 is that it obviates the waste and
folly of an army of bureaucrats telling auto companies what cars in which fleets
need to meet what arbitrary standards of fuel efficiency. Abolish all the
regulations and let the market decide. Consumers are not stupid. Within weeks of
Hurricane Katrina, SUV sales were already in decline and hybrids were flying off
the lots.
Supply.
For decades we'vebeen dithering over drilling in a tiny part of the Arctic
National Wildlife Refuge. Look, I too love the caribou. They are sweet,
picturesque and reputedly harmless. But dire predictions about the devastation
that Prudhoe Bay oil development would visit upon the caribou proved false. They
have thrived.
Let's get serious. We live at the edge of oil shortages and in perpetual
vulnerability to oil blackmail. We have soldiers dying in the oil fields of the
Middle East, yet we leave untouched the largest untapped oil field in North
America so that Lower-48ers can enjoy an image of pristine Arctic purity. This
is an indulgence bordering on decadence.
As is our refusal to drill on the continental shelf. Offshore drilling
technology is far safer and more efficient than it was decades ago, when this
prohibition was passed. We're starving ourselves.
The same logic applies to refineries. We have not built one since 1976. Gasoline
doesn't grow on trees. The US refining industry operates at 96 % capacity. That
is unsustainable. We need the equivalent of the military base closing
commission, whereby outside experts decide which bases should be closed in the
national interest. A refinery commission that would situate 15 new refineries
scattered throughout the United States (some perhaps on Army bases scheduled for
closing) would spread the pain, depoliticise the process and arm us against
future shortages.
With these simple steps, we could within a decade finally escape the oil
noose. But don't hold your breath. The Senate just loved its little
oil-executive inquisition. The House stripped out the ANWR drilling provision.
And there is not a single national politician who dares propose raising gas
taxes by even a penny.
We are criminally unserious about energy independence, and we will pay the
price.
Source: The Washington Post