Reducing Oil Consumption

I think this is the biggest challenge we face now.  From 2000 to 2010, gas prices increased from around 1.30 per gallon to around $3 per gallon.  This has been a pretty steady overall trend (with some pretty radical swings over the last few years).  If the price trend of the last 8-10 years continues, gas will cost between $4.50 and $5.50 in 2015 and between $7.50 and $9.00 per gallon with likely swings up to $12-15 per gallon.  And that's just assuming things are going to stay pretty much the same as they were over the last 10 years.  They probably aren't going to.  If you look at 1990 to 2010, gas prices increased at a little over 5% per year.  From 2000 to 2010, the rate becomes more like 9% and from 2002 to 2010 the rate is almost 11%.  There is a fundamental change at work here:  The Russian, Chinese and Indian economies are becoming more affluent and they are buying cars.  The Chinese highway system is the second largest in the World, now!  This means there are a lot more people contending for a more or less fixed resource.  This will wreak havoc on the economy if we don't get very serious about alternatives. 

We need to reduce our oil consumption considerably in the next 10 years, not 20 or 30.  This will have to be an "all hands on deck" effort similar to the mobilization for World War II.  The government cannot do this on its own.  This will have to be a mobilization of private industry encouraged and aided by the government.  The good news is that the technology is starting to fall in place.  For example, there are several startup companies that have figured out how to "print" solar cells with technology that is something like a rotary printing press.  Fully electric cars will probably be practical in less than 3 years.  Plug-in hybrid vehicles are on the market, now.  Wind power is another technology that is already being deployed.  And those are just some examples.  New energy technology companies run the gamut from exotic solar generation of fuel to high efficiency air conditioning.

The government roles should be:

  1. Waive all long term capital gains tax on stock purchased at IPO for American renewable energy companies.  If administratively practical, this would include capital gains for the initial purchaser at IPO and the purchaser who buys it from the initial purchaser.
  2. To the extent we can afford it, continue to provide tax incentives to purchasers of renewable energy production products such as solar cells and wind generators:  Perhaps tax rebates of 50% of the purchase price spread out over several years.  Right now, we seen an American producer of solar cells selling all of their production to Germany and building manufacturing plants in Europe because the German government is providing more support.  We need to fix that situation.  It is also important that these incentives be applied for a long enough period of time to create stable growth and apply only to American manufactured content and labor.
  3. Continue to provide tax incentives for energy appliances that are substantially more efficient than those that are currently in the field.  This includes rechargeable electric cars, rechargeable hybrid electric cars, more efficient air conditioners, and even more efficient gasoline engines  The tax breaks should be reserved for "game changers" -- that is appliances that are at least  twice as efficient that current technology.  Again, it is important that these incentives be applied for a long enough period of time to create stable growth and apply only to American manufactured content and labor.
  4. Expand the existing energy department research programs.
  5. Redeploy the DOD research arm to work on renewable energy instead of weapons.
  6. Identify infrastructure projects which cannot be achieved by motivating private industry with grants and tax cuts.  Expanding capacity of the electrical grid, for example.  These will need to be Federal construction projects.

The benefits to this plan are:

  • A stable long term economy.
  • Less dependence on foreign oil.
  • Less pollution -- in particular, this will be an effective response to global warming.
  • Job creation from the incentives will give a large boost to the economy.