MODERN TIMES
Art Hobson
ahobson@uark.edu
NWA Times 20 December
2008
Finding the
opportunities in expensive gasoline and recession
Marie
and I have decided to apply for a bailout. What with the bad economy, the bearish stock market, me out
of work (others might call it "retirement"), and higher liquor taxes,
we're short of cash. We gave up
our corporate jet months ago, and might even have to forego our spring trip to
Mexico. So we're planning to join
the free soup line along with the underpaid, deserving, and fiscally prudent
execs from AIG and GM who, through absolutely no fault of their own, have stood
helplessly by as others flushed their businesses down the toilet. We estimate that a bridge loan of one
billion, maybe even less, would do it.
We'll pay it back from our real estate investments. Washington will never miss it amid the
$700 billion and $7.76 trillion figures they've been tossing around this
year.
But
regardless of our personal plight, the country stands on the edge of huge economic,
energy, and infrastructure decisions.
We made a big wrong decision last June and July when the price of
gasoline stood at over $4 per gallon.
That price represented not, as most drivers thought, a disaster, but an
enormous opportunity. We could have
made a national decision to permanently maintain the price of gasoline at say
$4.50 through federal taxation.
The benefits would be enormous.
Here's why.
First,
it would send a clear signal to Detroit and to consumers. Detroit would finally go "all
in" for producing energy-efficient vehicles. Americans would shop seriously for gasoline efficiency and
alternative transportation.
Second,
falling U.S. demand would drop the per-barrel cost of oil, bringing a bonanza
for the U.S. treasury. At today's
pump prices, the additional federal tax needed to bring the price up to $4.50
would bring in $600 billion per year in additional revenues. The first use for this money should
clearly be assistance for lower-income people who are hurt by high gasoline prices. Second should be alternative
transportation infrastructure, then income tax reductions for all Americans,
then reduction of the national debt.
Third,
consider what happens if there's no stiff U.S. gasoline tax. Once the global economic recession subsides,
global oil consumption will again increase and per-barrel prices will quickly
return to their previous highs, because the world is running out of easy oil
and countries such as India and China are increasing their consumption. Oil-producing nations will then be in
luck and Americans will be out of luck.
That $600 billion per year which could have flowed to the U.S. treasury
will instead flow to Exxon, Shell, Saudi Arabia, Iran, etc. Brazil's difficult deep-sea drilling
project, a project that depends on oil prices of at least $120 per barrel, will
garner big profits, as will Canada's Alberta tar sands project and other
difficult oil projects. Look at it
this way: Prices will go up
anyway, and the only question is do we want the profits to go to the U.S.
Treasury or to Exxon etc.
Fourth,
a guaranteed floor of $4.50 per gallon would stimulate serious innovation in
America, innovation on cellulosic biofuels, innovation on batteries for plug-in
hybrids, innovation on strong lightweight materials for high-efficiency car
bodies, and so forth.
And
fifth, the beneficial effects for global warming would be enormous.
A
stiff gasoline tax would reduce U.S. consumption dependably and long term. Global consumption would eventually
recover and per-barrel prices would reach new heights, but by that time
America's overuse of automobiles would be somewhat tamed and alternatives would
be available. A wiser American
public could again impose new gasoline taxes to hold down consumption and keep
their cash in the U.S. instead of shelling it out to Saudi Arabia.
Is
it too much to hope that the incoming Obama administration, bursting with such
talented individuals as Nobel-prize-winning physicist (I mention proudly)
Steven Chu, would see the logic of a stiff gasoline tax? This policy is supported by nearly
every significant energy policy expert I've come across, including Thomas
Friedman in his wonderful new book "Hot, Flat, and Crowded: Why We Need a Green Revolution, and How
It Can Renew America."
If
the nation can't find the nerve to levy a big gasoline tax, then at the very
least let's not blow the opportunity presented by the current recession. Figures of $500 billion to $600 billion
have been mentioned for infrastructure projects that can help pull our economy
out of the ditch. U.S. House
Speaker Nancy Pelosi is urging that the money be spent "in a new, green
way that causes a green revolution in our country." Her use of Friedman's term "green
revolution" is striking, and admirable. She's mentioned improvements to our electric power grid to
accommodate renewable energy sources, and increasing broadband (i.e.
high-speed) internet access.
Everybody's
also talking about road and bridge projects. I certainly hope that this refers only to the repair of
existing roads and bridges, rather than new roadway such as widening I-540 to
eight lanes, or the Northwest Arkansas Council's disastrous "western
beltway" concept. Unlike new
roads, projects that would actually be useful include renewable energy, electrical
infrastructure for plug-in hybrids, and mass transit. Northwest Arkansas could certainly use commuter rail,
supported by a network of bus routes.
The nation could certainly use a high-speed rail network, and Detroit
has the transportation expertise, physical plant, and economic need, to build
it. Detroit switched from cars to
tanks in 1941; they can switch from cars to trains today.
Rather
than fearing high oil prices and recession, Americans need to accept these
challenges as opportunities to achieve a healthier happier society.