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Using taxes to keep gasoline prices high makes sense to some
Bob Davis, Wall Street Journal via Environmental Economics
With gasoline prices topping $3 a gallon and consumers searching for relief, what’s the smartest thing the government could do? Make sure the prices stay at least that high, say some economists.
That answer may seem crazy. Higher pump prices reduce what consumers can buy elsewhere, undercut economic growth and force people to think twice before driving.
But the last is precisely the point. High prices could boost conservation and diminish the country’s oil thirst. The last time that happened was from 1978 to 1981, when average gasoline prices rose about 90 cents to $2.86 a gallon in today’s dollars, and gasoline consumption fell 11%, while imports slumped 28%. Tighter fuel-efficiency standards also played a role.
But those gains were ephemeral; when gasoline prices declined, consumption and imports soared. The same pattern is bound to occur today unless the government intervenes, through higher taxes, to assure that pump prices will continue to pinch. Taxes can change long-term behavior, as long as taxpayers believe the levies are here to stay.
(12 September 2005)
Recommended by Ianqui at The Oil Drum. For a similar point of view, see Matthew Yglesias on Elastic Gas. Many comments appear at all these sites.
More Blood, Less Oil
The Failed U.S. Mission to Capture Iraqi Petroleum
Michael T. Klare, TomDispatch
It has long been an article of faith among America’s senior policymakers — Democrats and Republicans alike — that military force is an effective tool for ensuring control over foreign sources of oil.
Franklin D. Roosevelt was the first president to embrace this view, in February 1945, when he promised King Abdul Aziz of Saudi Arabia that the United States would establish a military protectorate over his country in return for privileged access to Saudi oil — a promise that continues to govern U.S. policy today. Every president since Roosevelt has endorsed this basic proposition, and has contributed in one way or another to the buildup of American military power in the greater Persian Gulf region.
American presidents have never hesitated to use this power when deemed necessary to protect U.S. oil interests in the Gulf. When, following the Iraqi invasion of Kuwait, the first President Bush sent hundreds of thousands of U.S. troops to Saudi Arabia in August 1990, he did so with absolute confidence that the application of American military power would eventually result in the safe delivery of ever-increasing quantities of Middle Eastern oil to the United States. This presumption was clearly a critical factor in the younger Bush’s decision to invade Iraq in March 2003.
Now, more than two years after that invasion, the growing Iraqi quagmire has demonstrated that the application of military force can have the very opposite effect: It can diminish — rather than enhance — America’s access to foreign oil.
…Despite the debacle of Iraq, most senior policymakers appear to retain their blind faith in the efficacy of military force as a tool for securing access to foreign sources of petroleum. This, as Iraq makes painfully clear, is delusional. Yet they persist in risking the lives of young Americans and others in their continued adherence to a failed and immoral strategy. Any attempt to reconstruct American foreign policy on a more rational and ethical basis must, therefore, begin with the repudiation of the use of force in procuring foreign oil and the adoption of a forward-looking energy strategy based on increased conservation and the rapid development of alternative fuels.
Michael T. Klare is the Professor of Peace and World Security Studies at Hampshire College and the author, most recently, of Blood and Oil: The Dangers and Consequences of America’s Growing Dependence on Imported Petroleum (Owl Books) as well as Resource Wars, The New Landscape of Global Conflict.
(20 September 2005)
Long article by liberal-left analyst of oil and US foreign policy. The original article has a preface by Tom Engelhard. Also posted at Znet: Engelhard’s preface and Klare’s article
-BA
Canada’s energy ministers claim they’re powerless in face of volatile prices
Chris Morris, Canadian Press via Yahoo!News
ST. ANDREWS, N.B. (CP) – Canada’s energy ministers say they have no control over volatile petroleum prices and they’re warning Canadians to prepare for a tough winter.
Between lobster dinners and golf games at a pricey New Brunswick resort, the provincial and territorial ministers had nothing but bleak news Tuesday as they advised Canadians to tighten their belts for the coming energy chill.
“I want to emphasize that this country is going to have a tough winter,” said Ontario Energy Minister Dwight Duncan.
“If we have a cold winter, that’s going to make it even worse. Last time I checked, natural gas prices have gone up 64 per cent since January. That’s going to impact on folks’ bills. I’m not sure most Canadians have come to terms with that reality yet.”
(20 September 2005)
Same plea from many governments.. wonder why France found it so easy? -LJ
Energy market braces for ‘national disaster’
Kim Khan and Charley Blaine, MSN Money
Oil analysts and executives are preparing for Hurricane Rita’s impact as energy prices rise across the board. Stocks move lower.
The oil industry is bracing for a disaster as Hurricane Rita hit Category 4, with the potential to reach Category 5, and heads towards energy infrastructure in Texas.
“If (Rita) keeps going on its current path, it’s going to basically destroy the rest of the (energy complex Hurricane) Katrina didn’t,” Matthew Simmons, CEO of independent energy investment bank Simmons & Co. International, told CNBC’s “Squawk Box.”
“It’s a problem that could easily be as significant in my opinion, and I hope I’m overly exaggerating this, as Pearl Harbor,” Simmons said. It could take two or three years to recover from the two storms, he added.
Given than four oil refineries are already down, Rita “really is a national disaster,” Valero Energy (VLO, news, msgs) CEO Bill Greehey told Reuters.
(21 September 2005)
Oil, gasoline rise as platforms in path of Hurricane Rita shut
Mark Shenk, Bloomberg
Crude oil and gasoline jumped as Hurricane Rita threatened production platforms, refineries and rigs in the Gulf of Mexico, less than a month after Hurricane Katrina struck.
Exxon Mobil Corp., Chevron Corp. and ConocoPhillips are among the companies that have evacuated staff from platforms in the Gulf. Rita is scheduled to reach the coast of Texas on Sept. 24. About 30 percent of U.S. oil production comes from platforms in the Gulf, and 44 percent of U.S. refining capacity is in Louisiana and Texas.
“Rita is developing into our worst-case scenario,” said John Kilduff, vice president of risk management at Fimat USA in New York. “This is headed right into our other major refining center just after all the damage done to facilities in Louisiana. From an energy perspective it doesn’t get any worse than this.”
(21 September 2005)
Related story at the Guardian: Oil prices surge amid Hurricane Rita fears.
Governors ask for inquiry on oil prices
NY Times
CHICAGO, Sept. 20 – The governors of eight states sent a letter on Tuesday to President Bush and Congress calling for an investigation into profits made by oil companies after Hurricane Katrina and asking for legislation that would require the companies to refund to customers any profits deemed excess.
“When the wholesale price of gas went up by 60 cents almost overnight, oil companies were obviously using the most devastating natural disaster in our nation’s history to reap a windfall at the expense of American consumers,” said the letter, which was initiated by Gov. James E. Doyle of Wisconsin and was signed by governors from Illinois, Iowa, Michigan, Montana, New Mexico, Oregon and Washington.
“To price-gouge consumers under normal circumstances is dishonest enough,” the letter stated, “but to make money off the severe misfortune of others is downright immoral.”
The letter cited an analysis by Donald A. Nichols, an economics professor at the University of Wisconsin at Madison, who reported that gas prices surged disproportionately compared with crude oil price increases. The price markup from crude oil to gasoline has almost tripled since the hurricane, the report said.
(21 September 2005)
Related story at the Portland Oregonian: 8 governors ask Bush to examine gas costs, profits
Ventura county supervisors assail Bush’s energy plans
Catherine Saillant, LA Times
The board votes to send a letter opposing administration moves to expand oil drilling off the coast and in Los Padres National Forest.
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Ventura County supervisors Tuesday waded into the controversy over oil and gas drilling in the county’s backcountry and off its coast by opposing the Bush administration’s energy-development plans.
Although the board has no say in a decision, it made clear its opposition to administration plans to make leases available in Los Padres National Forest, which straddles Ventura and Santa Barbara counties.
Supervisor Steve Bennett, who asked his colleagues to take a position, said it’s important to let federal policymakers know that local officials support conservation as a way of dealing with diminishing oil supplies at home and abroad.
“Don’t put the environment at risk just because we lack the political will to increase fuel-efficiency standards,” Bennett said.
(21 September 2005)
