Rather than have threads hijacked by this topic, I will begin this thread devoted to energy policy, and not just US energy policy, I invite all posters from around the world to join in, since this is a world wide issue.

We have seen wars in the Mideast, huge environmental disasters, and major economic dislocations all related to energy and how it's produced.

Let me start the thread by stating what I think energy policy should address, and how it should address it.

I believe that markets, when they are free markets, with many buyers, many sellers, low barriers to entry and exit, can produce rational allocation of resources. When a market is lacking the properties of a free market, when it is distorted by monopoly or oligopoly, then its the proper function of government to correct it with regulation.

Petroleum is a commodity that has almost none of the properties required for a free market to work. 90% of the petroleum in the world is owned by governments, whose political goals distort the pricing mechanism, there are only a small number of firms that control most of the business, so market mechanisms cannot be expected to produce rational pricing, or a reasonable allocation of resources.

The US was once a petroleum exporting nation, producing enough oil for all domestic needs and a surplus that could be exported, but those days are long gone, today we are a petroleum importing nation, but so much of our economic infrastructure, and our laws and our policies are relics of the past when we promoted and encouraged the use of petroleum.
These policies hurt the nation today, they sap our economic strength, lower our standard of living, and threaten our security.
We need to change our mindset, to adopt the policies that make sense for a country that will never produce enough oil domestically to meet our needs.

The simplest, most direct way to accomplish this is to correct the pricing mechanisms that keep petroleum cheap, and to address the market distortions that this artificially cheap petroleum produces.
Petroleum pricing should reflect the full social cost of petroleum use.

This can be done by taxing petroleum until the consumer price reflects the true social cost of petroleum use. The shift should be gradual, and it should be announced far in advance, the basic assumption is that markets make better decisions about the allocation of resources when producers and consumers have good information to work with.

A policy that states that taxes on petroleum will rise at a predictable rate for a ten year period allows consumers to make rational decisions today with some certainty about future pricing. The biggest decision a consumer makes about petroleum use is the selection of a vehicle, this is a decision that pretty much determines how much gasoline that consumer will use over the next decade. If the only information the consumer has is the pump price, they will make their decision based on the current pump price. With a policy that predicts gradual but consistent price increases, the tendency for consumers will be to opt for more fuel efficiency in their vehicles, for the selection of housing that produces shorter commutes, or even for the selection of housing that enables the use of alternate transportation systems that even further reduce gasoline use.

Increased revenues from gasoline taxes can be used to reduce other taxes, so that the increase in taxes won't necessarily be a drain on the economy, but rather a more efficient allocation of resources by the economy.

The big upside of this is that it would create economic incentive to promote activities and allocate resources to producing a more energy efficient infrastructure, and generate large numbers of jobs in this area.

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

Hmm....

So... what are you going to do about energy?

__________________
January 21, 2013: The End of an ERROR.

"Only a virtuous people are capable of freedom. As nations become more corrupt and vicious, they have more need of masters."
"When the people find that they can vote themselves money, that will herald the end of the republic."
"The Constitution only gives people the right to pursue happiness. You have to catch it yourself."
---Benjamin Franklin

I was going to let the market address that, with proper pricing.

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

So how do you decide what "proper pricing" is Hammurabi?

__________________
... ..................
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

for starters.
I look at the mechanism that produces the price.
If it has many buyers, many sellers, with good information about market conditions freely available, I assume it will produce a good price.

If there are only a few sellers, I assume the market will produce a pricing policy that will produce monopoly profits. If there are many sellers and only a few buyers I assume there will be monopsonistic pricing.

I also look to see if there is a potential "tragedy of the commons" in the making, because the mechanism fails to include all the real social costs in the price. I look for subsidies direct and indirect that distort cost.

And I look at the results.

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

The market exists as it does ,in part, because of the interference of governments and regulation.


By what calculations will that "true social cost of petroleum use" be determined?


Which are collapsing under huge financial burdens.

Do you sincerely believe this? For price controls to be effective in manipulating behavior and markets they have to remove money from the wallets and savings of people or they will have no effect similar to what you are purposing. If a person has their behavior changed by paying $1000.00 more a year in fuel taxes there is no gain or loss to the overall system if they are somehow paying $1000.00 less in other taxes. There is no incentive to reduce fuel use and no benefit to tax revenues if people do if costs are leveled out in reductions to other taxation.

Too true, 90% of the world's petroleum is government owned, the pricing mechanism is hopelessly shattered, cartels control huge portions of the supply, whatever this produces, it will not be a real market price.

By adding up what we spend mitigating the effects of using petroleum.
Petroleum pollution is an obvious cost, the huge military required to secure the flow of oil from distant foreign ports is an indirect cost, the disease caused by petroleum pollution. We are spending money which can be tallied up and will provide us with a number to use.
The important thing to remember, is that the cost of petroleum is currently subsidized, so we know it is far higher than the pump price, getting the pump price closer to the true social cost of petroleum use will make the market produce something closer to a "best allocation" of resources.

Alternative transportation systems are faced with a challenge, their primary competition is heavily subsidized, taxing petroleum to reflect it's true social cost removes the subsidy from automobiles, raises ridership on alternative transportation and makes alternative transportation self funding.

Removing the subsidy also readjusts real estate values, inner city residential areas are more valuable, suburban and exurban areas less valuable, this will draw people back into the cities, and mitigate a lot of the problems cities faced when huge government subsidies drew the middle class out to the suburbs.


The effect of the incentive is increased. If the average persons energy was increased $2000/year, and their payroll tax decreased $2000/year, the person who takes the bus or the train to work gets the $2000 tax cut, but is spared the extra tax. The person who decides that they need a Hummer to do their 100 mile daily commute pays 4 or 5 thousand more in tax, against the smaller cut in payroll tax.

Just because the average person is revenue neutral, doesn't mean that the incentives this system provides do not have rather pronounced differences on different people based on their choices.

And here is the part that I like the best. There is no need to legislate fleet mileage standards, or reach some meaningful definition of whether a vehicle is an automobile or a light truck, the process is market driven, in that segment of the economy where there actually is something like a free market.

Increasing fuel costs for the transportation of goods, raises the cost of those goods, but not equally. Locally produced goods would be better able to compete with products with a cheap labor component but a higher transportation cost. A more rational allocation of resources.

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

yes, the market is over correcting itself on energy,
drinks

__________________
to live is to suffer-Fritz lang

Not everyone lives in an urban termite mound, where they can walk or ride a bus to everything.

This is simply a way to tax those who live a different lifestyle, and must therefore be punished.

Conveniently for Goober, many of these people happen to be of a different political view, so the tax serves to punish in a partisan manner as well.

Matt

Don't cartels traditionally drive prices up? Your main complaint here is our petrol is too cheap in the U.S., so what harm are cartels having on the pricing mechanism as we enjoy it here in the U.S. ?

You demonstrate a political bias in how you would determine the true social cost of petroleum use to such an extent one would argue you are showing very clearly how we could not in our general political environment establish anything resembling a true social cost of petroleum use.

It wouldn't be self funded it'd be funded by the population seeking tariff relief.

How are you going to get people to buy or rent in cities with increasing real estate values? Who is going to develop affordable housing for a population influx?

How would the bus or train operate without taking the bulk of that $2000.00 tax cut out of the commuters pocket? Currently it costs $480.00 to $3000.00 a year to ride the MBTA if one buys monthly passes.

If the incentives are eaten up by other choices the incentives are meaningless.

Certainly not equally, dairy and fresh produce will climb in cost out of scale with longer keeping processed foods.

Most metropolitan regions do not produce enough "local goods" to maintain the populations they do now. You can't feed New York city, clothe it's residents or provide supplies for home maintenance by depending on local goods.

Oil prices are actually artificially high not low, kept that way by OPEC, who can move prices up or down by decreasing or increasing production.
The major player in OPEC is Saudi Arabia which is protected by the US military.
So the argument that the US military is used to keep oil prices artificially low is bogus.

Also, the US only imports about 15% of its oil from Persian Gulf states. So the degree to which the US military secures the supply of US oil is minimal.

There is no need to tax petrol to the point where people are forced on to buses and trains, and forced to live in high density areas. Its not desirable and unnecessary.
If the object is to lessen dependency on imported oil the answer is obvious. Natural gas. The US and Canada - which have a common energy market - have abundant supplies of NG, and more is being found all the time. Its clean, abundant, and cheap.

The moment you added "social costs" into the price, you failed.

The cost is the cost, the need of the useless to have it provided for them at no effort of theirs is no reason to consider them and every reason to let them sit cold in the dark.

__________________
A is A

Yup, he doesn't want energy policy and says so repeatedly. He wants social engineering to enslave people to his misguided ideals.

__________________
A is A

I'm not saying you still can't live out in the boondocks, where the town library consists of 10 years worth of Archie Comix. And the big social event is the annual pig wrestling contest. What I am saying is given the reality of the petroleum situation, we shouldn't be building an infrastructure that requires burning huge amounts of petroleum to operate.

If we didn't have a huge interest in keeping oil flowing from the Middle East, we wouldn't be the target of Islamic extremists, the cost of Homeland Security is a direct result of our need to import huge amounts of oil.
Oil which is increasingly hard to get, oil which will rise in price over time, why promote dependence on a commodity which we cannot supply ourselves?

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

Cartels that are profit oriented drive up price, but national governments have political considerations that go ahead of economic considerations, if all oil was privately owned, the price would be much higher. Governments tend to make profligate use of resources for short term political gain.
I'm using that as a starting point, petroleum is underpriced, the cost of petroleum use should be higher, and the higher it goes, not as a sudden shock, but as a steady predictable price level, the better the decisions made by individual consumers.
Because people will experience a better lifestyle in a city than they will in suburb, they can spend more on housing because of what they save on gas.
You save a lot of money now riding the T. If I drive downtown, forget gas, I pay a $3 tunnel toll, $28 to park. The train to North Station is $5.75, and the Orange Line to Downtown is like another $1.75. And I'm relaxing in a big comfortable seat, with wifi for my laptop, not fighting traffic.
I save money now, and the experience is superior, yet I know idiots who drive, and whine about the traffic, and how much it costs to park.


The incentives are on top of what you already save

You should pay more for food. Locally produced fresh food is better for you than processed garbage shipped halfway across the country.

They used to produce a lot more, but the jobs moved, because the cost of transport was artificially low.

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address