Financial Times Editorial - America's continuing addiction to cheap oil
Financial Times Editorial - America's continuing addiction to cheap oil
Published: May 24 2006 03:00 | Last updated: May 24 2006 03:00. Copyright by The Financial Times
Mark Twain once said everyone complains about the weather but nobody ever does anything about it. Much the same could be said about America's dependence on oil. Since Richard Nixon, it has become as normal for US presidents to call for energy independence as it has to bemoan declining moral values. George W. Bush, who will today speak on the subject, is no exception, having declared America "addicted to oil" in his January State of the Union address.
Since then, Mr Bush has done little to explain how he would wean America off it. Instead, lawmakers have stepped into the vacuum with an increasingly bizarre list of proposals to curb high gasoline prices. Some, such as the Republican idea of distributing $100 in relief to every taxpayer, or the Democrat plan to suspend for two months America's already low tax of 18.4 cents a gallon, have rightly been laughed out of court. Others, such as allegations that the leading oil companies indulged in price gouging after hurricanes Katrina and Rita, are unlikely to go anywhere. On Monday the Federal Trade Commission said it had found no evidence of collusion. Senators are nevertheless holding hearings on the issue.
Which leaves a number of other congressional initiatives - some of them sensible, others not - which in totality would do little to bring America closer to a coherent energy strategy. Of these, the most familiar is a plan to open up the Arctic to drilling. But the new supplies would take years to come on stream and would be too small to have an impact on global oil prices. Another would punish the oil companies for what are seen as excess profits by rescinding tax breaks for exploration in the Gulf of Mexico. This in spite of the fact that no one proposes to compensate oil majors when profit margins vanish at the opposite end of the cycle. Finally, there are a number of unobjectionable but marginal ideas to encourage investment in alternative fuels, such as cellulosic ethanol, hydrogen fuel cells and gasified coal.
What is missing is faith in market-driven solutions. While it is understandable that politicians are reluctant in an election year to tolerate gas at almost $3 a gallon, the private sector is already putting substantial research funds into other technologies. Some alternative fuels, such as corn-based ethanol, are energy-inefficient and are subsidised by Congress largely for political reasons - the corn is grown mostly in the swing states of the Mid-west. But more proved alternatives, such as sugar-based ethanol, which is produced in Brazil, are subject to steep tariffs at the behest of the US sugar lobby. Meanwhile, the list of tax breaks and subsidies for gas consumption and production grows longer every year. US gas prices might be high by past standards but they are still very low relative to Europe. Mr Bush could inject courage and realism into the debate by saying why they ought to go higher still.
Published: May 24 2006 03:00 | Last updated: May 24 2006 03:00. Copyright by The Financial Times
Mark Twain once said everyone complains about the weather but nobody ever does anything about it. Much the same could be said about America's dependence on oil. Since Richard Nixon, it has become as normal for US presidents to call for energy independence as it has to bemoan declining moral values. George W. Bush, who will today speak on the subject, is no exception, having declared America "addicted to oil" in his January State of the Union address.
Since then, Mr Bush has done little to explain how he would wean America off it. Instead, lawmakers have stepped into the vacuum with an increasingly bizarre list of proposals to curb high gasoline prices. Some, such as the Republican idea of distributing $100 in relief to every taxpayer, or the Democrat plan to suspend for two months America's already low tax of 18.4 cents a gallon, have rightly been laughed out of court. Others, such as allegations that the leading oil companies indulged in price gouging after hurricanes Katrina and Rita, are unlikely to go anywhere. On Monday the Federal Trade Commission said it had found no evidence of collusion. Senators are nevertheless holding hearings on the issue.
Which leaves a number of other congressional initiatives - some of them sensible, others not - which in totality would do little to bring America closer to a coherent energy strategy. Of these, the most familiar is a plan to open up the Arctic to drilling. But the new supplies would take years to come on stream and would be too small to have an impact on global oil prices. Another would punish the oil companies for what are seen as excess profits by rescinding tax breaks for exploration in the Gulf of Mexico. This in spite of the fact that no one proposes to compensate oil majors when profit margins vanish at the opposite end of the cycle. Finally, there are a number of unobjectionable but marginal ideas to encourage investment in alternative fuels, such as cellulosic ethanol, hydrogen fuel cells and gasified coal.
What is missing is faith in market-driven solutions. While it is understandable that politicians are reluctant in an election year to tolerate gas at almost $3 a gallon, the private sector is already putting substantial research funds into other technologies. Some alternative fuels, such as corn-based ethanol, are energy-inefficient and are subsidised by Congress largely for political reasons - the corn is grown mostly in the swing states of the Mid-west. But more proved alternatives, such as sugar-based ethanol, which is produced in Brazil, are subject to steep tariffs at the behest of the US sugar lobby. Meanwhile, the list of tax breaks and subsidies for gas consumption and production grows longer every year. US gas prices might be high by past standards but they are still very low relative to Europe. Mr Bush could inject courage and realism into the debate by saying why they ought to go higher still.
posted by Carlos T Mock at 8:55 AM
0 Comments:
Post a Comment
<< Home