Monday, November 17, 2008

poorly analyzed: the problem of cheap oil

The WSJ recently published a set of opinions about what can be done about oil prices that are too low. As the national average price of gas is about to dip under $2/gallon, there is a real chance that people will forget that more expensive fuel is a nearly inevitable aspect of our future and that these people will make poor decisions that will endanger our collective national energy security.

Most of the commentators decided to pretend that they were politicians in a debate and completely ignored the question of what to do about excessively low oil prices. Instead, they talked about energy policy generally. As much as I think that all new buildings should be required to conform to high energy efficiency standards, most buildings in the US get their energy from electricity from coal, which has very little to do with oil.

If you're talking about oil consumption in the US, you are talking almost exclusively about transport fuels. And, from what we've seen demonstrated so effectively recently, expensive fuels cause conservation.

Of the commentators, only one touched the magic button for oil consumption:

"Increase federal gasoline taxes. Sadly, the easiest way to hold the gains we have made in reducing oil demand in the U.S. would be to raise federal gasoline taxes as prices fall to lock in a floor price that will continue to stimulate conservation. Some portion of the funds could be set aside for research in alternative energy."

And none mentioned the fact that the EPA fuel efficiency policies push customers into larger, heavier "light trucks" (SUVs) by allowing higher emissions and lower fuel economy without having to pay gas guzzler taxes. This distinction between the classes of cars and trucks is an outdated and perverse one that helped put average americans into insecure energy positions.

So, if the WSJ had asked me what to do to address the dangers of excessively low oil prices, these would be my answers:

1) Phase in a federal gas tax of about $1 adjusted annually for inflation. Use the money to fund personal transportation efficiency research, development, & commercialization. At current prices, this would represent a 50% tax. We'd still have the cheapest gas in the industrialized world, especially when expressed as a fraction of median incomes.

2) Eliminate any regulatory distinction between on-road passenger vehicles types - a car is a truck is an SUV is a motorcycle (obviously, motorcycles would be excused from safety regulations). All of them drive down the freeway with one person inside most of the time, why should their fuel efficiency and emissions be regulated differently?

3) Bring back the the national speed limit. I hate this idea from a personal perspective, but the laws of physics are immutable. Energy spent pushing air out of the way increases with a square of speed, so fuel efficiency rapidly falls. Plus, higher speed limits justify big engines and big engines are less efficient at any speed. I think 55 mph is unjistifiably low, but 65 may be a reasonable national limit.

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