Winnipeg Jewish Review  
Site Search:
Home  |  Archives  |  Contact Us
 
Features Local Israel Next Generation Arts/Op-Eds Editorial/Letters Links Obituary/In Memoriam

David Frum

 
GETTING OFF OIL EASILY IS A FANTASY

by David Frum, posted April 13, 2011

President Obama is right: We can take the U.S. off oil. But he omitted to mention the fine print: Doing so will be slow, will be expensive, and will involve huge dislocations in American lifestyles and business.

When politicians talk about energy, they like to talk about magic machines: cars that run on hydrogen fuel cells, electricity that flows free from solar panels on the roof.

But when change comes, it will not come through magic. It will come because changes in relative prices have induced changes in behavior.

We’ve seen such changes before.

As oil prices spiked after 2003, sales of large SUVs plunged over 50 percent. Sales of Honda Civics jumped 30 percent in the single year 2004-2005. The National Association of Realtors reported that only 9 percent of home-buyers listed “short commute” as a prime concern in 2005 — 40 percent did so in 2006.

During the previous oil price spike of the 1970s, millions of Americans converted from oil furnaces to gas. Utilities mothballed oil-burning electricity generators. In 1978, half of all the oil burned in the United States was burned for heat or power. Today, less than one-third of oil is burned for heat or power.

These changes cost money: It’s expensive to junk a workable oil furnace. People will make such changes only if they feel a strong incentive to do so: most typically, if they believe that higher oil prices have arrived for keeps.

So a politician who wished to move America away from oil would begin by saying something like: “$4 a gallon gasoline is here forever. Even if the price of oil on world markets declines, we’ll impose extra taxes here at home. Make your plans accordingly.”

But of course, such a politician would soon be an ex-politician. So nobody ever does say that. What they say instead is what President Obama said this week: It’s the oil companies’ fault for selling us too much oil too cheaply. It’s the car companies’ fault for building the cars we prefer to buy.

The remedy?

“Some have suggested raising efficiency standards in our buildings like we did in our cars and trucks. Some believe we should set standards to ensure that more of our electricity comes from wind and solar power. Others wonder why the energy industry only spends a fraction of what the high-tech industry does on research and development — and want to rapidly boost our investments in such research and development. “

What these three “suggestions,” “beliefs” and “wonderings” in the president’s speech last week have in common is that they serve to conceal the economic cost of the transition they contemplate.

Solar power costs anywhere from 5 to 10 times as much as coal. So in order to make solar electricity competitive in an open market, government would have to impose a 500 percent to 1000 percent tax on coal power. But if government just orders utilities to substitute solar for coal, that 500 percent to 1000 percent markup does not vanish. It just melts into a higher utility bill, in ways that very few consumers will ever understand.

In the same way, if oil cost more, people would change their commuting patterns. They’d buy lighter cars. Auto companies would research alternative fuels and motors. Investors would develop private bus alternatives to single-passenger commuting. All those things cost money. They don’t get any cheaper if you just order people to do them without a price signal. But without a price signal, people won’t do them at all — as Americans by and large opted not to do them between 1985 and 2005.

We want to get the country off oil? Tax it. (Politicians may not wish to say it, but their advisers can at least think it.) Then liberate people to find their own best alternative — and incentivize industry to develop alternatives that make sense at the new higher price. And be prepared to argue candidly and straightforwardly in the marketplace of ideas why this new tax is right and justified.

If not, then kindly please spare us the grand speeches about how the status quo is the thing you will not accept. It is precisely the thing you are accepting.

 

 
<<Previous Article       Next Article >>
Subscribe to the Winnipeg Jewish Review
  • Jewish Federation of Winnipeg
  • Fillmore Riley
  • Jewish Federation of Winnipeg
  • Winter's Collision Repair
  • Gray Academy
  • Jacqueline Simkin
  • Coughlin Insurance
  • Joyce Rykiss
  • CHW
  • The J Hansen HVAC Group
  • Munroe Pharmacy
  • The Lazareck Family
  • Imperial Soap
  • GTP
  • Piston Ring
  • Nick's Inn
  • Lori Shenkarow
  • Roseman Corp.
  • Tyler Bucklaschuk
  • TD Canada Trust
  • Josef Ryan
  • Sobey's
  • Daniel Friedman and Rob Dalgliesh
  • The Lipkin Family
  • Booke and Partners
  • Bruce Shefrin Interior Design
  • Fair Service
  • Daien Denture Clinic
  • Thovaldson Care
  • Laufman Reprographics
  • Amalgamated Drywall Systems Ltd.
  • Maric Homes
  • Artista Homes
  • Tradesman Mechanical
  • Accurate Lawn & Garden
  • Ronald B. Zimmerman
  • Commercial Pool
  • Lanny Silver
  • Fetching Style
  • Rudy Fidel
  • Shindico
  • Dakota Chiropractic Office
  • Myrna Driedger
  • Shirley and Bob Freedman
  • The Chisick Family
  • Carol and Barry McArton
  • The Shinewald Family
  • Dr. Ted and Harriet Lyons
  • Munroe Dental Centre
  • Ixtapa Travel
  • Hill Sokalski Walsh
  • D'arcy and Deacon
  • The Charach Family
  • Esther and Sid Halpern
  • Myers LLP
  • The Lazar Family
  • Dr. Marshall Stitz
  • Cavalier Candies
  • Cdn Visa
  • Kowall Chiropractic Centres
  • Dr. Brent Schacter
  • Doheny Securities
  • Ambassador Mechanical
  • Peerless Garments
  • Pitblado
  • Cindy Lamoureux
  • HUB International
  • Philip Kahanovtich
  • Global Philathropic Canada
  • Sorrento's
  • Taverna Rodos
  • Aziza Family
  • Western Scrap Metals
  • Cascade Financial Group Inc.
  • James Bezan
  • Larry N. Maguire
  • Malaya Marcelino
  • Candice Bergen
  • Safeway
  • John Orlikow
  • Ross Eadie
  • Orthodox Union
  • Saul Simmonds
  • Bridges for Peace
  • Chochy's
  • City Sheet Metal
  • Superlite
  • Stephen Rosenfield
  • Abe and Toni Berenhait
  • The Lofchick Famiy
  • Stringer Rentals
  • John Wishnowski
  • Ingrid Bennet
  • Winnipeg Board of Jewish Education
  • Asper Jewish Community Campus
  • Jewish Federation of Winnipeg
  • Grant Kurian Trucking
  • Shoppers Drug Mart
  • Gulay Plumbing
  • Kristina's
  • West Kildonan Auto
  • The Center for Near East Policy Research Ltd.
  • Sarel Canada
  • Santa Lucia Pizza
  • Center for Near East Policy Research
  • Roofco Winnipeg Roofing
  • Center for Near East Policy Research
  • Nachum Bedein
  • Maric Homes
Rhonda Spivak, Editor

Publisher: Spivak's Jewish Review Ltd.


Opinions expressed in letters to the editor or articles by contributing writers are not necessarily endorsed by Winnipeg Jewish Review.