Tuesday, January 23, 2007

"Twenty in Ten"

The White House has released an advance look at the president's energy proposals. Oh dear. Oh dear. Oh dear. Subsidies, regulations, grants: all in order to drive gasoline consumption down by 20% over the next ten years.

Here's a thought: Why not rely on markets to get the job done? America's use of gasoline plunged by 15% in just two years after the oil shocks of 1979. (See this chart for historical perspective.) In 1978, Americans used 7.412 million barrels of gasoline per day; by 1980, that usage had collapsed to 6.579 million barrels. The US did not return to the 1978 level of usage until 1993. 

 The cheap prices of the mid-1990s drove demand up; the high prices since 2003 have constrained demand. Total US petroleum demand actually declined between 2005 and 2006. 

Lower prices and strong economic growth are now expected to revive demand. If that's a problem, let's just tax the stuff and let consumers and suppliers figure out for themselves the most efficient way to substitute and economize. This is Ronald Reagan's party. Why is it proposing Jimmy Carter's energy policy?

01/23 03:09 PM