"A procedural showdown is set for Tuesday, and Democrats are likely to run into opposition from Republicans who have resisted any effort to increase taxes on oil companies despite record profits. But with gas now averaging $4 per gallon, Democrats say they can make it tougher on Republicans who stand by the oil industry." -- New York Times
I admit outright that I have no problem with ending special tax breaks for oil companies in light of healthy profits. This is not the same as saying I want to "increase taxes on oil companies," because of a semantic difference in the two phrases. I want oil companies to be on par with other comparably sized companies if their profits are stable and sustainable (which in the current market they are). I don't want special benefits or special punishments.
But for the Democrats to find $4 a gallon gas as a rallying point for eliminating these tax subsidies is baffling to me. The demand for gasoline has been shown to be rather inelastic - an increase in the price by about 100% has only cut demand by less than 5%. This means as price goes up, most people will continue to buy. This means that price increases can more easily be passed on to consumers, because it won't cause a huge drop in demand.
When demand is inelastic, taxes on the suppliers get passed straight through to consumers. The all-but-inevitable result of ending the oil tax subsidies will not be to reduce the profits the oil companies make. It will be to make oil, gas, etc more expensive.
The rallying cry "gas is expensive, so let's tax the people that make it" is silly. I'm in favor of eliminating special benefits the oil companies may receive for the same reason that I'm in favor of slashing and burning agricultural subsidies - I consider it a wasteful use of limited government funds, and bad policy in a time of record deficits.
Concerning the related "we have to invest more money in renewable energy!" suggestions: no, we don't. The beauty of higher, rising prices for oil is that if there is a more economical alternative, there's a lot of profit waiting for the person or company that can develop it. The "but big energy companies will just sit on their ideas to draw higher profit from oil" argument ignores the principle that if company A sits on the idea, it leaves room for company B to jump in.
As soon as a plug-in vehicle - like the upcoming Chevy Volt - can be sold for a price that makes it more efficient than buying a gasoline-powered car, the shift will be on in full force. The novel idea in the Volt is that it has only a 40-mile range on an overnight charge... but it has a gasoline engine which is tied straight to the battery to extend that range. Unlike current dual-drive hybrids, which use a gasoline engine to move the car and an electric engine to move the car (much more complex), the Volt uses the gas engine - running at a constant speed - to charge the battery, driving the electric motor. This eliminates the two-engine design, and achieves great fuel efficiency with the gas, just like driving at a stable speed (instead of constantly accelerating and decelerating) will increase your efficiency.
2 comments:
Agreed on most parts except the more money for research bit. Almost all significant technological advances in the past 60 or so years were made possible by research dollars from the government. Industry can develop and market new technologies once they're at the point of viability, but government and academia (which gets its funding from government for the most part) is necessary to create the scientific climate and body of literature out of which new technology may emerge...
Or government money is crowding out private investment in research. After all, we had a fair number of scientific and technical breakthroughs in the years before the past 60.
I can agree on a case for broad, general research into science in general as a way of making us all more informed about everything, but I think that increasingly focused investment in pet projects by government officials (as in grants directed at developing cellulostic ethanol) distorts research into less-favored alternatives, without regard to the actual merits of such alternatives.
Competitive projects like the X Prize are a much more cost-effective way of generating scientific inquiry. You set out the goal you want to achieve, and the broad parameters that must be met, and let people come up with the best way to meet those requirements.
Concerning the issue at hand: as a broad scientific understanding of many types of alternative fuel and energy is already in place (the principles for solar, geothermal, nuclear, biological, physical and chemical energy sources are well-established), the question is how to make it efficient and cost-efficient. When it comes to alternative energy, then, I'd argue that any broad work that needs government funding is past... and that turning established scientific work into competitive product is best handled with private, not public, funds.
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