A Sensible Energy Policy: Pay the Right Price
ANOTHER deficient policy initiative is being negotiated in Congress. The energy bill recently sent to congressional conference provides huge subsidies to the oil industry at taxpayers' expense, while it lacks a crucial measure for long-term economic and environmental security: an increase in the federal gas tax. The bill will encourage Americans to continue to overconsume, overpollute, and be overdependent on petroleum.Skip to next paragraph
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Americans have not yet understood the impact on society of our gasoline overconsumption, even though many of us have grimaced at urban pollution and have lived through two oil price shocks and a war spurred by its oil supply implications. We continue to overconsume this commodity because we have never had to pay the actual costs of consuming it. In fact, when we consume oil-derived gasoline, we consume much more than just gasoline.
First, there are the environmental goods and services we consume when we drive that are not included in the price of gasoline. We take clean air from the environment, mix it with gasoline in a carburetor, transport ourselves by means of a contained explosion, and emit dirty air back into the environment through a tailpipe. We have consumed clean air, yet have not paid for it.
These environmental goods and services are in no way cheap. When gasoline is burned in our car engines, high levels of carbon dioxide (a major greenhouse gas), toxic pollutants (such as benzene and gasoline fumes), and unhealthy ozone-forming gases (smog) are emitted. This imposes debilitating costs on society, whether health costs that show up on hospital bills, or environmental degradation costs that may not be revealed for years. If unchecked, they will cripple our economy at the expense of our childr en's quality of life.
Another cost we have disregarded is the economic and political independence we "consume" when driving. Over 50 percent of the gasoline we use every day is derived from imported oil. Dependence on foreign petroleum siphons off an enormous amount of badly needed import dollars and puts our government in economic and political handcuffs.
THE 1973 oil embargo, the 1979 oil price shock, and the Gulf war are clear examples that this dependence carries a large price tag. Even though some amount of national independence is "consumed" when a tank is filled with imported oil-derived gasoline, we, as drivers, never see the bill.
The free market finds it difficult to incorporate the costs of environmental goods and services and economic and political independence into product prices. It is therefore the responsibility of Congress to apply adjustments so that the "right" price is achieved for a gallon of gas. Although difficult to pinpoint exactly, this is certainly much higher than the current pump price of about $1.15 per gallon. The Europeans may be more on target at around $3 per gallon.
While the energy bill lacks the necessary price modifications to gasoline, it provides new tax breaks to the oil industry that make domestic drilling cheaper than ever. The argument goes that if we are going to be dependent on oil, we should be dependent on domestic oil; hence, domestic producers need subsidies to compete against foreign rivals.
This argument misses the point. We should be weaning ourselves off the oil bottle totally and looking for alternative sources of energy to guide our economy in the 21st century. A subsidy to the oil industry, at taxpayers' expense, merely exaggerates the mispricing of the fuel, creating even more dependence on a nonrenewable, polluting, volatile resource. Such subsidies also block the emergence of cleaner burning alternatives.
Nevertheless, the political suicide associated with a congressperson's suggestion to increase gas prices toward the "right" price, even if thoroughly justified on economic grounds, leaves most of Congress weak and timid on this issue. Everyone is aware of the political leverage the oil industry has on incumbents hungry for campaign funds. Both effects have combined to put America at one of its most perilous positions in modern history.
Now that our environment is threatening our economic and physical health, and our oil dependence is putting a choke hold on our economy, it is time we begin to pay for these real inputs to production and develop a level playing field for all energy sources. We shouldn't let an unwillingness to pay the right price continue to destroy our environment and our economy.