Friday, May 9, 2008

energy crisis

The United States is suffering from an energy crisis of our own making. No. I’m not talking about $4 a gallon gasoline or $126 a barrel of oil. These little annoyances are petty by comparison to the larger issues. What is the issue, you may ask, if driving to a neighborhood restaurant is more expensive than the prime rib? I never thought you’d ask.

Before I talk about the issues, let me take a quick tangent. With today’s technology, it is time we understand that all energy is interchangeable. Whether our energy comes from the sun or dinosaurs, whether is comes in liquid, gas or from an outlet, all energy is interchangeable. I’m not suggesting you put an extension cord into your gas tank. While I’m not certain, I can guess the results would be not pleasant. In discussing energy, we need to look beyond how much it is going to cost us to drive to grandma’s this summer. We need to think five, ten, even twenty years out. Over five years, we can adjust the percent of our energy coming from any source. Over twenty, we have the power to dictate our future. That said, having a twenty year goal and moving lackadaisically toward it starting five years from now (conveniently after the next presidency) is just plain foolish.

Now the main energy handicap: bipartisanship. The democrats are set to kill any bill the republicans put forward and the republicans are set to do the same against the democrats. Neither side seems willing to look toward common ground. Their positions reflect an adherence to process over outcome. Means over ends. Ideals over results. Not that I wish to mock or disparage either of their so-called ideals, but come on. Get a life.

Democrats whine make the oil companies pay for it. They made unseemly billions. They can afford it. By the way, don’t let them drill in anywhere new. The Republicans are ready to defend the oil companies over the good of the American people. They also seem to be honestly allergic to solar power. I swear every time I hear a Sean Hannity mention solar power, he sneezes and breaks out in little hives. The T.V. make covers the worst of the breakout but you can see it a little around the neckline where the makeup is thinnest.

Why panic? Yeah the U.S. supplies oil some of its own oil but too much of it comes from outside the states. I’m a big proponent of trade but I have a few issues with this. The way we currently use oil, a drop in supply will bring our nation to a stop. We have no backup plan. We have no way of responding to an immediate crisis. Our reserves may buy us days or weeks but not the months and years we would need to respond to an oil crisis. An oil crisis is a remote possibility, you say. Balderdash! Imagine, Syria and Iran attack Israel. Israel responds the way Israel does, by destroying their enemies and their enemies’ ability to launch another attack any time soon. Say, by taking out Iran’s oil production. Middle east producers turn off the pumps to force western countries to side against Israel and anybody who doesn’t have their own well stock piles every bit of oil they can get their hands on incase bad does to apocalyptic. Oil would cost hundreds of dollars a barrel.

OK. Maybe that is a remote possibility, but we know Russia, Iran and Venezuela are using dinosaur revenues to build up their military forces. They don’t like us much. It hurts me emotionally not to be liked but it hurts me more to not be liked by someone with missiles.

Still to much doom and gloom? My specialty. How about something a little lighter? Our economy has a big leak. Billions of dollars everyday leave the U.S. just for energy. It doesn’t matter what else we do, this leak is big enough for water to gather at the bottom of our boat. As oil prices rise, that leak gets bigger.

Did you notice that I haven’t mentioned the gloomiest of scenarios yet? Global warming. Many of us north of Washington D.C. wouldn’t complain if things got say five to ten degrees warmer in the winter. I wouldn’t complain at all. The problem with global warming isn’t what the scientists are predicting. The problem is that we don’t know what is going to happen. There is a chance that all of the scientists are wrong and Gore is a big fat liar. There is also a chance that I will be struck by lightening causing large lumps of gold to shoot out of my butt like a slot machine jackpot. I am not going to bet big on either of those outcomes. There is also a chance global warming will lead to longer growing cycles, creating a bountiful harvest, allowing the world to grow enough food to feed the poor, put an end to all wars and, somehow, cause lumps of gold to shoot out of my butt like a slot machine jackpot. Again, I’m not betting the ranch on bountiful harvests. Basically, we don’t know. Maybe there will be more storms, maybe less. Some places will have bountiful harvest while others go hungry. So with global warming uncertainty, I’m going to bet conservative.

So what do we do? Everything. We need to reduce overall energy use, make the energy we do use more efficient, diversify our sources of energy and make as much as possible of it domestically. How?

First, we dramatically reduce or eliminate income and capital gains tax and replace it with a series of excise taxes (excise taxes are specific taxes on products levied before the consumer even sees the product). Tax products based on whether it contributes to anti-American regimes (oil), whether it contributes to pollution and/or global warming (coal), whether it damages the environment (virgin wood and fertilizers) or whether it is damaging to American health (tobacco and high fructose corn syrup).

Look at the simplest example; assume we raise the price of gas through taxes enough that you are paying $1,000 more a year on gas but your income tax bill is lowered by $1,000. If you don’t change your life a bit, your economic position is essentially unchanged. What taxes would have normally come out of your pay check now you pay every time you fuel up. It is up to you to reduce your tax burden by being more fuel-efficient. My bet it Americans will suddenly embrace a conservative lifestyle when gas costs $8 a gallon.

Next, raise CAFÉ standards and their related standards on all electronic and other products (e.g. lawn mowers, refrigerators, etc.). No wimpy 5% over five years. Raise it 10% a year for the next five years and than 2% a year forever more. My guess is it won’t be an issue because the excise taxes will cause everyone to be more efficiency aware, but I don’t like to take chances. On the CAFÉ calculation, give a 10% reward for vehicles that are either flex-fuel or plug-in hybrids. I love this idea because it puts power into the consumers’ hands. If gas is more expensive than ethanol, the consumers will buy ethanol. The same is true for the plug-in capable cars. Every week, the consumer can decide whether it is best for them to utilize grid power or gasoline. It introduces competition to oil and true market forces will dictate the balance between oil and ethanol.

Open drilling in ANWAR and encourage in North Dakota and offshore. Use strict environmental considerations, force everyone drilling to fund an environmental cleanup agency and index leases on drilling so we all share in the risks and rewards of fluctuation in oil prices. Allow construction of nuclear and clean coal power plants. Have the military continue to invest and purchase coal to liquid fuel products for a portion of their vehicles.

Here’s a fun one. Take $50 billion out of the farm fund and encourage investment in secondary income for farms. Most of that $50 billion is used on foolishly wasteful programs to balance the price of cheese anyway. Share investment in building farmer related sources of domestic energy. For example, putting windmills up on farms, building plants that burn farm waste, building plants that turn cellulose into ethanol. Assuming $1 dollar of public funds is enough to encourage $4 dollars of private investment, it would contribute $1 trillion dollars under one four-year president in environmentally logical domestically sourced energy with an added benefit of providing farmers an additional source of long term revenue.
Within five years, our energy crisis will be no more than a toothache. If we do nothing or fart along like both parties are currently doing, today’s crisis will truly cripple us, harm our way of life and threaten the United States very future. Ok. Maybe I’m a little dramatic but acting is better than betting on lumps of gold shooting out of my butt like a slot machine jackpot.

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