To: G. Richard Wagoner, Jr., Chairman & CEO, General Motors; Samuel W. Bodman, Secretary of Energy; Senator Mark Dayton; Senator Norm Coleman:
When the oil-man son of an oil man from Texas laments our addiction to oil, even a dunce should recognize that we have a problem. I started driving a car when $5 filled up the gas tank and lasted a week. Now it looks like we’re headed for $5 a gallon. (My friend had a Mercury Marauder, the gas gauge of which would move down as he floored the beast, achieving four miles per gallon. I’m sure he drives a Humvee today.)
First, let’s dispense with election-year gimmicks. In 1974, President Nixon pledged that energy producers would not make an “unconscionable profit” out of the oil crisis (gas had gone up to $0.60 a gallon). Presidents Ford ($0.75), Carter ($1.00), Bush ($1.40), and Bush ($2.96) have all pledged to crack down on market manipulation. Attorneys general too numerous to count investigate price gouging at the pump whenever gas prices go up quickly. Predictably, each summer’s price spike sets off another round of speechifying and finger pointing. Nothing ever comes of these investigations, so perhaps they are harmless. But they are also nonsense.
Legislators, too, grandstand against “excess profits.” In a country that has championed and benefited from free-market principles of supply and demand, this is indeed bizarre behavior. Furthermore, we have tried price regulation, both with natural gas and “old oil.” Both experiments were abysmal failures that led to greater shortages, higher prices, and under-the-table political machinations.
A recent gimmick has been to suggest that the federal government should rebate $100 to each driver (read “voter”). Rush Limbaugh accurately characterized this as treating voters like prostitutes. But all of these election-year gambits are shameless. We deserve better.
Clearly, ethanol helps us gain energy independence. Re-fining ethanol keeps money in this country and represents a renewable resource available here. General Motors and other American car makers are producing hundreds of thousands of flex-fuel vehicles and gaining an advantage over foreign competitors.
However, only 600 gas stations in the United States sell fuel made with ethanol; 190 are in Minnesota. And Warren Staley, chief executive of Cargill, has observed that even if 100 percent of the U.S. corn crop were devoted to ethanol, it would replace only about 20 percent of the motor fuel we now consume. So, while ethanol can be a large part of solving our energy problems, it cannot be the only palliative.
Shifting our energy nexus out of the Gulf Coast region is a good idea we are reminded of each time a major hurricane approaches.
Constraints on demand are also clearly required. The most efficient way to encourage conservation is by imposing a higher gas tax. The Congressional Budget Office estimated in 2004 that increasing the federal gas tax by $0.46 per gallon would achieve a 10 percent reduction in gas consumption. Only a gas-tax increase will affect each gallon of gasoline consumed and change our culture of wasteful hydrocarbon use. Taxing gasoline more highly than ethanol might steer more stations, more cars, and more consumers to the use of ethanol. Gasoline at $4.00 a gallon might start to drive meaningful savings.
This writer would rather send a dollar to Washington than to people who are planning to blow us up. It’s time for blunt speech, realistic assessment, and the end of gimmicks. Let’s roll.