Terry Barnich had an oped in Sunday’s Chicago Tribune commenting on John Kerry’s energy proposals. Terry roundly castigates Kerry’s backward-looking thinking.
But the parts I find most interesting about the piece occur where he articulates a different vision for energy policy and strategy:
While Kerry’s proposal to deplete the strategic reserve is the most seriously wrong-headed, the rest of the proposal is no less misdirected. Kerry’s plan, like almost all energy plans since President Richard Nixon, sets as its central goal energy independence, which is characterized by weaning America from imported energy. The problem with this policy is that America’s thirst for fossil fuels is unquenchable and independence comes at the expense of draining America dry first.
A more thoughtful approach would put front and center a plan to integrate a single North American energy market with the U.S. as a consumption center nestled between the two ample supply centers of Mexico and Canada. There are enough oil and gas resources under the ground of those two reliable neighbors to supply the U.S. at current consumption levels for the next 100 years. The Bush administration has undertaken the first steps in this process by initiating the Canada-United States Smart Border Initiative, which is designed to jointly develop integrated energy infrastructures that should form a key building block in a more fully integrated energy market. …
A truly bold approach to the energy problem would recognize the power of thriving free markets to unleash the creativity of technological dynamism to exploit economic sources of energy. The creativity of free markets, not government subsidy, will relieve energy resource constraints. Kerry’s proposals totally miss the mark.
Sounds like a good idea to me.
I’d suggest a revenue neutral trade-off of increased taxes on oil imported from the Middle East, for decreased income or payroll taxes. To take away Saudi Arabia’s cost advantage in producing oil. Raising the price of their oil is really the only way to get us to use less of it.
Which brings me to what I suspect will be the next mistaken idea Kerry will trot out; Gregg Easterbrook’s recent error:
http://www.tnr.com/easterbrook.mhtml?pid=1524
Mandating higher mileage standards for pick-ups and vans. Which, if it happens, will most likely increase gas usage, because such vehicles will be cheapter to operate, and thus driven more. I’ve pointed Easterbrook to the Wm. Stanley Jevons discovery mentioned here:
http://www.uh.edu/engines/epi984.htm
but, so far, he hasn’t responded.
1) Oil is fungible, so attempting to differentially tax oil from certain regions is a futile bureaucratic nightmare.
2) Yes, CAFE standards are a dumb idea. The following is a good criticism:
http://www.cato.org/pubs/regulation/regv25n3/v25n3-8.pdf
(Full disclosure: the author of this article is my doctoral advisor.)
3) Concerning “energy independence.” One point that is often overlooked is this: even if we were able to reduce crude demand to that which could be met by domestic (and Canadian) supply, this would not insulate us from world energy prices. It is impossible to uncouple the US from world energy market prices, even if we can get out of actual trades. Thus, an OPEC cut would still raise our prices even if we don’t buy OPEC oil. Attempting to isolate the US from world prices would be another giant bureacratic folly which would serve only to increase costs to consumers.
I’ve suggested a similar solution to Mr. Sullivan’s: have a general tax on petroleum products and rebate the amount via a deductible on payroll taxes.
However, I expect it to work very differently than he. Current American energy practices, particularly in transportation, are very wasteful. This is an opportunity to pick up a lot of the low-hanging fruit; increasing the relative price of oil will get people to pay attention to cutting its use and substituting other energy sources where feasible. Once this is accomplished we will also have a body of technology related to fuel efficiency and petroleum substitution which we can export to the world.
This is OPEC’s worse nightmare.