Thursday, December 25, 2014

Spoiler alert: Don't think that cheap gas is a gift this holiday season.

Sorry to be a Scrooge during the holidays but don't think that cheap gas is an unmitigated gift. The media portrays low gas prices as a benefit to households and the economy (which it may be short-term), but we may be in for some volatile times.

Courtesy artur84, freedigitalphotos.net

What's wrong with cheap gas?


Undermines Renewables: Cheap oil and gas makes it harder for renewables to compete, slowing their development.

Boom and Bust: Low oil prices make it unprofitable to drill and communities are fighting back. (New York State just banned it.) So while some are rushing out to buy gas guzzling cars again, we could go from a glut to a shortage.

Geopolitical chaos: It's also destabilizing the world, sending OPEC countries including Russia reeling. Some believe OPEC is allowing oil to drop to bankrupt the US oil industry.  “OPEC’s determination to fight for market share remains a dominant bearish fundamental factor,” analyst Tim Evans at Citi Futures said. (Source)

Don't get me wrong; I'm concerned about climate change and we need to wean ourselves off fossil fuels. But this is a path to disruption. So it's even more urgent that we build a replacement infrastructure.


Dear Congress: Phase in a hefty green tax starting immediately


In 2008, right before the crash, Business Week suggested in an article called, The Real Question: Should Oil Be Cheap, the US impose a tax when oil dropped below $75 a barrel to create a floor in its price; the article recommended using that money to pay for developing renewables. Yes, that's Business Week recommending a new business tax.

Building on that idea, I think we need to add the equivalent of a $2 per gallon tax on all fossil fuels, phasing them in over perhaps 2 years. Use half the money to rebuild our failing highways/ bridges and electrical infrastructure. And the other half can fund renewables and efficiencies. If needed, a portion could be used to support the price of production while we still need it to maintain a steady but dwindling supply.

Of course, none of us think Congress could get this together unless the oil companies beg them for it. We need to act fast or we may be in for some turbulent times. Don't say I didn't warn you.

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