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My 4-point plan to cut U.S. energy use
I want us to get real about wasteful, gas-guzzling vehicles and other stuff that soaks up too much electricity. Now, its your turn: Tell me how we can boost supplies.
By Jim Jubak
How many times over the last year -- as oil was on its way to $75 a barrel and gasoline crept toward $3.50 a gallon -- have you said, "I could come up with a better energy plan than these bozos?"
Well, here's your shot. In today's column I'm going to lay out my four-step solution to our current energy crisis -- well, actually half the crisis. My plan focuses on the steps we should take to reduce our demand for energy.
My challenge to you is to tackle the other half of the solution and come up with ideas for increasing energy supply. You can use my plan as a template for the level of detail and specificity I am looking for in your own ideas and then send them to me. No idea is too outrageous, too controversial or too impossible. (As you'll see in a little bit when you get to my national energy-efficient refrigerator lottery plan.)
Remember, we're brainstorming, and the point is to come up with a better energy plan that anything we've heard from Washington.
But do try to go beyond the "Encourage more ethanol (or whatever) production" level of suggestion. Tell me how you'd go about this. Taxes? Production subsidies? Time travel? Aid missions from aliens? Whatever.
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Please don't engage in the kind of wishful thinking that has so dominated energy planning in Washington for decades. The bozos in Washington, D.C. have set the bar for energy planning rather low. The half-baked proposals coming from our "leaders" range from the laughably self-serving -- like that $100 gas rebate to every voter er, I mean driver -- to the deeply cynical -- like the proposal to give the president authority to up the fuel economy standards for new cars beginning in 2009.
Not hard to do better than that.
But don't be too hard on the politicians. It's difficult to come up with creative ideas for solving an oil crisis when you're so beholden to the oil and gas industry -- the same oil and gas industry that contributed $26 million to candidates running for the House, Senate and White House in 2004 and $34 million in 2000 (ranking oil and gas as No. 13 among donor industries in 2004.) About 80% of the money in each of these years went to Republicans and 20% to Democrats. (Want to see who got what from whom? Check out the database at the Center for Responsive Politics.)
So we've got a definite advantage in formulating our plans. We're not beholden to anyone. Just to the prosperity of future generations and the security of our country.
My plan isn't about short-term fixes. I don't think you can quickly and painlessly reduce the price of oil and gasoline in a world where, thanks to China and India, demand is moving steadily higher, and where supply, for a combination of political and geological reasons, is having trouble keeping up even as constantly increasing prices encourage more and more exploration. I think we can take steps now, however, that will reduce our own demand for oil, and that will work to keep the global price of oil lower over time and to lessen the amounts of cash that we have to send to oil producers.
Higher oil prices are like a tax on our economy and the result -- over time -- is less to go around for future generations in our country. Higher oil prices are inflationary, and inflation reduces the future value of savings. Higher oil prices give people less money at the end of every month to save, reducing the amount that we can put away to prepare for the day when the country is, on average, considerably older. And higher oil prices mean we've all got less to spend on other things.
But our dependency on imported oil and gas also diminishes our national and global security. The competition for resources that is already underway raises tensions around the world and encourages local commodity wars. A tight global supply of oil gives leverage to oil producing countries to, at best, get an improved deal in the global economic system for their own citizens, but at worst, to follow narrowly nationalistic dreams of power. It doesn't help the United States to achieve its goals in the world, either when so many with so much less can so readily conclude that our only goal is keeping control of as much of the world's oil as we can.
So here's my four-point plan for solving the current -- and future -- energy crisis. After you've read it, send me your own ideas. Don't think you need to send a complete plan; single ideas are just great. I'll publish the best in a future column.
Raise gasoline prices to $4 a gallon
To discourage demand for gasoline, slap enough federal taxes on gasoline to raise the price to $4 a gallon. It sure looks like $3 gas isn't enough to produce a very big change in consumers' behavior. Sales of older-model SUVs have indeed plunged, but that seems to have more to do with the age of the design than with the price of gas. Sales of General Motors' (GM, news, msgs) new Tahoe SUV, on the other hand, climbed nearly 35% in April; sales of the GMC Yukon and Cadillac Escalade jumped 36% and 127%, respectively.
Average daily demand for gasoline for April was 9.127 million barrels, according to the U.S. Department of Energy. Thats roughly the same as the 9.125 million barrels used in April 2005. Holding demand steady when the economy is growing at better than 4% isn't nothing, but it's not enough. Looking at the sensitivity of demand for gasoline to its price, many economists see $4 a gallon as the point at which higher prices really begin to bite.
Make the price increase permanent
Further discourage demand by guaranteeing that gasoline prices will stay at $4. (It might even be good to index the taxes to inflation so that the price of gasoline stays at $4 in 2006 dollars.) It's not just higher prices, but the duration of higher prices, that matters. If consumers think that $3.50-a-gallon gas is just a price spike that will soon go away, they'll grit their teeth, pay what it takes and continue to behave just as they have.
It's the same thing at the production end. Companies won't invest in additional capacity -- and the country badly needs additional refining capacity -- unless they're convinced that prices high enough to earn the profit projected by the company's investment plans will stick around for a while. ExxonMobil (XOM, news, msgs), for example, said that, despite record profits, it won't be building any new refineries anytime soon in the United States because it doesn't believe that current high gasoline prices are here to stay.
Create a national energy-efficiency lottery
Set aside a quarter of the revenue from the additional gas taxes to set up a national energy-efficiency lottery to put more efficient vehicles and appliances on the road or into homes.
To enter the lottery, you have to be the owner of a working but older energy-inefficient car or refrigerator, for example. The prize in the lottery would be the money to buy a new energy-efficient car or refrigerator. The government would set (gradually increasing) standards for energy efficiency, but a lottery winner could buy any model off the energy-efficient list.
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