| Instability in the price of a barrel of oil is making the solution to our energy problems unsolvable by the free market. Who will be willing to drill for oil when the price is so low and falling, yet knowbody wants it? Tankers-full are parked in the ocean. Ironically, by summer oil production cuts together with a falling dollar could spike oil to $300 per barrel for a few months only to collapse again because our credit cards are already maxed out. A few months ago it was drill-baby-drill and now its why-bother. A few months ago it was a desperate call for windmills and solar, now its why bother, oil is cheaper. Long range investment is impossible amid such instability so big oil just speculates in the mean time waiting for some stability. Long range investment in clean alternatives is also impossible because of this instability. Who will step in to solve this? Well, only the US can, but will they? And if they try, will they do it right? The US could tax gasoline to push it up to $4 but this would punish the poor and middle class who must drive to work. And it would weaken the rest of the economy which uses gasoline to manufacture and distribute products. And this would feedback on the poor and middle class further harming them. Remember the debate this last summer about whether the Bush administration should moderate oil prices downward by releasing some oil from the stategic petroleum reserve? It could have succeeded but Bush refused, perhaps rightly, because that reserve should be used only in time of war or some other complete national disaster. So why not plan ahead by drastically increasing the size of petroleum reserves now by buying up enough of the cheap oil to moderate the price up just a bit, targeting the price of gasoline to around $3/gal and keeping it there indefinitely? Not so high it would harm consumers and the economy, and not so low that it destroys energy investment incentives. What we need is a two sided oil reserve system, one side for war and national disaster readiness, and the other side, likely a much larger reserve, for maintaining price stability in the United States. The US could then promise price stability to consumers and businesses so they could make long term investment plans. For example, what car to buy for your family, hybrid or guzzler? Oil companies could then plan how to invest: speculative buyouts or drilling? Alternative energy businesses could plan their business models knowing the price of gasoline will hold steady. GM and Ford would know ahead of time that the market for fuel efficient cars would not collapse right after retooling to produce them. |
