The danger of low prices

Good news at the pump must not halt efforts to end our oil addiction and shift to alternative energy

November 21, 2008|By Mike Lebson

Bad news about the financial and economic crises just keeps coming, but in recent weeks there's been rare good news: a major drop in gasoline prices. In the short to medium term, it is true that falling oil prices are good for the economy. Everything from buying California grapefruits to operating school buses becomes cheaper when the price of gas goes down. Consumer confidence increases; people spend money; the economy is boosted.

But there is a dark side to declining oil prices and the resulting short-term economic benefits: The public and policymakers will breathe a collective sigh of relief that the energy crisis has passed, and gratefully take that hot issue off the national agenda. Stricter legislative requirements and green incentives for automakers will be gone, funding for research on alternative energy sources will dry up, and the nation will return gleefully to gas-guzzling SUVs (truck sales have already started to rise). Campaign rhetoric about borrowing money from China to pay Saudi Arabia for oil will be quickly forgotten.

"But our leaders said it's a national security issue," you protest. "That won't happen!" Recent history shows otherwise. The baby boomer generation remembers well the oil shocks of the 1970s and early 1980s. The national agenda then was full of debates about alternative energy, energy independence and the economic pain of high oil prices. Jimmy Carter wore sweaters in the White House to promote energy conservation.

Then, over the course of the 1980s, oil prices declined to pre-1973 levels. Ronald Reagan had Mr. Carter's solar panels removed from the White House. The 1990s saw the return of big, gas-guzzling cars. Little was heard in the national debate about alternative energy.

Over the summer, while gas prices were soaring, a friend told me conspiratorially: "Do you know what the ideal price of oil is for the oil producers? A hundred, then thirty, then sixty." The high prices make enormous profits for the producers, then a decline shuts down public pressure for alternative energy, bankrupts the green entrepreneurs and keeps us guzzling oil. Then $60 a barrel doesn't seem bad at all.

How do we keep up the momentum for alternative energy? Some economists have suggested a gas price "floor" or a substantial gas tax - $1 a gallon or more - but this is not practical. A year of woeful tales about truckers, school districts, heating oil customers, airlines and others hammered by high oil prices would cause enormous public outcry.

A better solution is to establish new taxes on the profligate energy consumers. For example, we could apply a 20 percent additional sales tax on new, privately owned SUVs and trucks; levy a carbon tax on home and commercial energy usage that is higher than the national average (prorated for household and business size); and impose a fee for driving in cities during peak hours, like London's "congestion charge."

Most of the revenue gained from these measures could be applied toward research and development of alternative energy sources. The rest could be diverted toward "carrots," such as rebates for households and businesses that keep their energy consumption to a minimum, and for new purchases of alternative-energy vehicles.

There would also be substantial cash awards for research institutions that make breakthroughs in the search for practical alternative energy.

Finally, the federal government needs to make a crucial, and very careful, decision on which alternative fuels are going to be pursued at the mass level. Hydrogen? Ethanol? Compressed natural gas? Electricity? If there is going to be a substitute for the ubiquitous gas stations, plans need to be made now on how and when that enormous conversion process is going to occur.

If we lose sight of alternative energy and energy independence as a top priority over the next few years, we will see the same cycle repeated again and again in coming years. It is up to President-elect Barack Obama, national and state legislators, and average citizens to keep up the pressure to finally break our oil addiction.

Mike Lebson is an instructor in the political science department at the University of Maryland, Baltimore County. His e-mail is mikegvpt@gmail.com.

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