Seacoast NRG

With the price of gasoline approaching $4 per gallon, and the price of diesel already exceeding that level, many are asking what the Congress, and our Presidential candidates, will do to reduce gas prices.

Exactly the wrong question.

There is very little the Congress, the President, or the government in general can do to influence the price of gasoline, which is largely market-driven.  About the only tools available to the government are legislation, which can be used to set the federal gas tax, and the very limited ability to affect supply, through releasing oil to the market from the Strategic Petroleum Reserve.  Neither has any long-term effect on reducing the price of gas.

Unfortunately, two of our Presidential candidates, John McCain and Hillary Clinton, are now pandering to the national audience of consumers by proposing a “gas tax holiday” this summer.  I’m happy to note that at least for now, Obama, to his great credit, has said no to this idea.  McCain meanwhile has gone further to say on record that he’s looking to roll back taxes on corporations, including oil companies, and to make permanent the once conscience-offending Bush tax cuts. 

The federal tax on gasoline is currently set at 18.4 cents per gallon, which is approximately 5% of the pump price at $3.50 per gallon. rolling gasoline prices all the way back to the good old days of…March, 2008In recent months, however, the average price of gasoline has jumped by more than 50 cents.  In other words, a federal gas tax holiday would have the amazing effect of rolling gasoline prices all the way back to the good old days of…March, 2008.  The savings would amount to less than $4 on a 20-gallon fillup.  For a consumer driving 15,000 miles per year at 20 mpg, the annual savings, if the tax vacation lasted an entire year, would amount to only $138.   For a part-time rollback of taxes, such as is being proposed for this summer’s driving season, the total savings would be far less.

Obama alone has recognized the tax holiday as a political gimmick, and has publicly stated his opposition.  Now just watch in the coming days as the two cutthroat candidates opposing Obama, each of them millionaires several times over, attempt to make political hay of Obama’s opposition, under the rubric of it being elitist, out of touch with the needs of mainstream citizens, or even vaguely unpatriotic (read: closeted Muslim).

As for the rest of us, are we really so stupid as to believe that a promise of temporary, and almost trivial, savings on gas prices is an acceptable alternative to a sound energy policy?  It does not speak well of us that we let our polticians make such assumptions about the electorate.  We should expect better of them, and much more importantly, of ourselves.  We should demand that the candidates, and the media, respect our intelligence, and present us with reasoned policy, not pandering.  But then I guess that might sound elitist.

Yes, granted, oil company profits and executive compensation are obscenely high.  And yes, the rapidly increasing price of gasoline genuinely hurts consumers, particularly the working poor, and small businesses.

But here is the real reason gasoline prices continue to climb, and it cannot be fixed by any vacation:  the supply of oil that can easily be brought to market is essentially maxed out; worldwide demand, meanwhile, remains high, and continues to climb, if not accelerate. As for the rest of us, are we really so stupid as to believe that a promise of temporary, and almost trivial, savings on gas prices is an acceptable alternative to a sound energy policy?Those who believe in the phenomenon called Peak Oil would say that worldwide crude oil production, currently around 85 million barrels per day, is at or very near its peak, and that future years will bring only a steadily diminishing supply to the market.  Political and social instability in oil-producing regions, increased extraction and production costs, the maxing-out of refining capacity, soaring worldwide demand, and the unforgiving fact that oil is a finite resource–all generate market pressures to push prices upward.  Were it feasible, alleviating the first three of these pressure sources–instability, cost, and capacity–could temporarily drive down prices.  But regardless, at some point, and some would say that point is now, oil demand and oil supply will painfully diverge.

Which brings us back to policy.  Reducing prices generally encourages consumption.  Manipulating taxes in an attempt to somehow make gas cheaper will, in the long run, only exacerbate the problem, and should be recognized for what it is:  an attempt to buy votes.

The question we should be asking, then, is not, what will you do to give me back my cheap gas, but rather, for my sake and the sake of my children, what will you do to lead us into a productive and sustainable energy economy?

If we accept that oil is limited in supply, then we must seek to reduce demand, and use what we have more effectively, via efficiency and that favorite personal virture, conservation.  Raising the cost of energy by raising energy taxes, such as by a gas tax or carbon tax, would be one way to drive demand down.  not, what will you do to give me back my cheap gas, but rather, for my sake and the sake of my children, what will you do to lead us into a productive and sustainable energy economy?Unfortunately, raising taxes now, even in a slow, incremental fashion, would undoubtedly be a bad idea at a time when the economy is already threatening to fall into a recession. Furthermore, a gas tax, although easy to implement, is regressive, in that it tends to hardest hit the poorest members of the economy.  Any increase in any energy taxes would need to be carefully planned, with the population of consumers well-informed and prepared long in advance, and then implemented at a time when the economy is healthy and able to absorb the impact.  In short, such an exercise, which would impact not only our own population, but others as well, would require true leadership and statecraft.  Yet what we are most commonly seeing now and have seen in recent years is neither of these.

The energy problems we face are years, if not decades, in the making, and will require years, if not decades, to correct.  If only there was a leader who would have given us a realistic and straight talk about our future energy needs, energy supplies, and the costs to both our wallets and our environment. If only we had been told–and led through–a process to rethink and re-engineer one of the largest assumptions supporting our economy–that of cheap and endlessly abundant energy. If only we had been told–and led through–the logic of the inevitability of diminishing oil, rising prices, and been plainly told that demand must be driven down, using both positive (tax credits and loans for long-term investments in eliminating fossil fuel demand) and negative (increased gas and energy taxes) incentives.

Then perhaps years ago we might have started large-scale investments in what is likely to be the number-one jobs-producing industry this century: clean energy.  Then perhaps we might have accepted an incrementally increasing gas tax as a means to prepare us for higher and higher gas prices down the road. Then perhaps we’d already be building new energy infrastructure, and already seeing our demand for fossil fuels start to slow and decline. Then perhaps we’d be viewed differently around the world, instead of as a wasteful and arrogant nation, unable to embrace an opportunity for changing our economy.  Then perhaps the world would see that we, too, could and would make sacrifices; could and would put desires for consumption and immediate gratification aside to help future generations; could and would truly lead.  Instead, we have a leader who merely proclaims that our nation is leading the world in clean energy and green technologies, then tells us to be true patriots and go shopping.  We should be offended by both statements.

We actually had an opportunity for the kind of leadership that I describe.  We had it, and let it slip by, almost 8 long years ago.  And now, instead of seeking new opportunities to discuss policy and the plans to fix our problems, even the so-called leftist mainstream media (such as ABC) now inanely question our candidates–or rather, just one of them–about lapel pins.  It is a proper and approved lapel pin, you see–no, not a sound, reasoned, science-based policy, but a lapel pin–that is the sign of a true and patriotic leader.

And another opportunity may just slip us by.