Quote:
The Groom said:
Alan, the main problem is that while financial markets adjust very quickly to fundamental changes in supply and demand, the real world does not.

It takes time to develop energy-saving technologies. It takes time to develop actually usable electric cars. It takes time to develop a service/refuelling network for alternative energies. It takes time to build a large array of nuclear power plants to power those recharging stations. It takes time to build millions of apartment and office buildings downtown. It takes time to build the light rail / subway, electrical, water and sewage infrastructure to support those new buildings.




Hi Groom. It does take time, yes. I agree. But the scenario that you propose is that all of a sudden, crude oil will disappear. That is not realistic and my main point of contention. Crude oil will become more and more expensive, but it's not an overnight, on-off switch, binary movement. It is a fact that gas is cheap (relative to other sources of energy, regardless of the latest run-up in prices). What Europe has done is to regulate the usage of crude oil via tazation. What is the $3 per gallon extra that you are paying for actually going to? Have you discovered the latest, promising, alternative forms of energy as a result and are implementing that right now? Are you saying that you are investing in that R&D, but you aren't there yet? Is the money going to strengthening the Paris metro and other mass transit systems in France, the Underground in London, etc.? What is the 100% taxation on gas being used for? I agree that you have curtailed the use of crude oil by taxation. But what does it mean to use 1/2 the crude oil that you use? If crude oil increases in price ten fold, you will get hurt just like we will get hurt as a result. Your governments have to show that the extra $3 per gallon is all being used to fund the R&D that you are suggesting will take a long time to mature. But you've been doing this for a long time, I assume. So what has your 100% tax rate got to show for?

Quote:
The Groom said:
Another problem is that while the market will throw money at scientists to develop the technology to adapt to the new high prices, this alone is in no way a guarantee that the technological hurdles will be overcome. Sometimes, it takes a non-obvious workaround that nobody had thought about until a lazy grad student accidentally stumbles upon it a decade later. Sometimes, physical impossibilities remain just that: impossibilities. We can't eat money. We can't produce chemical fertilizers without oil and methane. We can't fit a nuclear power plant under the hood of a car.

Then there are political problems. You rightly mentioned political opposition to nuclear power plants, in spite of the fact that they are our only hope for the future. Likewise, people would riot if energy taxes were raised, even though it wouldn't cost them much more if they just stopped wasting energy (not making painful sacrifices, just stop wasting). The reorganization of US cities on a more compact basis might cause race riots as the current inner-city inhabitants are evicted to make room for the relocating suburbanites.




I don't know that, Groom. We are seeing more construction of high-rise residential apartments all over. At least I know that it is occuring even here in sprawling Orange Couny, of all places. We have numerous high-rises on the drawing board, in addition to the ones that have just been built and are under construction. There is a market demand for these units because of their convenience, in spite of our low price of gas, relative to Europe. It didn't take our government to impose a 100% tax rate.

Quote:
The Groom said:
All this means the real world needs a lot of time to adapt to a paradigm shift on the energy market. It means you cannot trust the market to prepare the world for the times ahead. It means it is the duty of the government to step in, fill the void, and prepare the country so as to make the transition as smooth as possible. It is the government's duty to assume the worst-case scenario is going to actually happen, because nobody else does.

If the government fails its duty, all hell breaks loose. Consider the aftermath of Hurricane Katrina. Citizens were not ready. Companies were not ready. Local, state and federal authorities were not ready. The rebuilding task is so huge that private business failed. Government failed. Six months after Katrina, NOLA is still a wasteland because of a criminal lack of foresight.
Now, consider that all major US cities are going to need a NOLA-sized rebuilding effort in 20 years. Let's see how well that works out if we don't plan at least a decade ahead.



All major cities in the U.S. have mass transit (ie., light rail and bus systems) in place right now. I can speak for California (we have BART in SF, light rail in Sacramento, San Jose, LA/Orange County, San Diego). The same exists in other US cities. We also have intercity rail to most major cities (AMTRAK). Now, we don't have high speed rail, but those ideas have been proposed for decades. High speed rail between Northern and Southern Ca, (ie., SF and LA). I know of proposals for the same in TX and I think FL.

My point is the infrastructure is in place. If the demand increases (again, oil prices go up to $100/barrel, $200/barrel), these alternate forms of transportation look better and therefore more investment to expand or add service will result.

Quote:
The Groom said:
Regarding high fuel taxes specifically now, I have no idea how long they've been around in Europe. They were there before I was even born.
Once again, the point is we're not spending more money for our energy. Gas might be twice as expensive because of taxes, but we're using half as much to achieve the same thing. We have to, because the market requires that it cost as much to make the same product in the US with cheap energy, and in Europe with expensive energy.
The money I spend in taxes instead of in wasting energy stays in the country.




The money that you would have saved could have gone to more investment that could create more jobs. More jobs means higher wages. Higher wages means more spending. More spending means more jobs. Etc., etc.

Quote:
The Groom said:
I contribute to making the era of affordable energy last longer. Our companies are enjoying newer, more productive machinery today, and are getting an edge over their US competitors for the days energy becomes really expensive. It's a win-win situation.




On the other hand, one could make an argument that you are delaying the real development of alternative forms of energy. If the 100% taxes are not spent on transportation alone, you are not being as efficient with your transportation dollar as you could be. If you were not taxed so high, gas prices would be lower (obviously) in the short term but demand for crude would rise faster. The price per gallon would overall be lower than what you are paying for, in the net. But the crude oil in the world market would rise because of Eurpoe's increase in overall demand. The world (not just Europe) would now have to meet the demands of the public because of higher prices by now throwing more money into the R&D that the world needs.

Quote:
The Groom said:
The market sees no point in energy efficiency. Whenever a new fuel-saving technology comes up, its manufacturer raises its prices as much as possible in order to capture the value created by this innovation. The result for the end user is the same: Airbus planes might be 10% more fuel-efficient, but they cost 10% more than Boeings.
But since fossile fuels are definitely in limited supply, you know which option makes more sense strategically. From that you can conclude that the market is not necessarily the best decision-maker.



Like anything new and innovative, you have to expect that it's prices will be significantly higher. Over time, those prices will come down as more competition enters the field. It's a temporary thing for hybrids to be 50% more expensive then their equivalent gas models.

Also, there is an additional plus for these new hybid vehicles. They are in high demand. This is because the public in US is aware that it is more environmentally efficient and that is one of the factors they use in purchasing the vehicle. I know of neighbors and coworkers who purchase these vehicles solely for environmental reasons.

Lastly, think of the non-economic intangible in play here. If you reduce the burden on Europeans by high taxation on fuel, they would feel more free. More free means a happier populace, in general. Economically, they could use the extra monies on other things. Increased spending means more jobs. More jobs means higher wages, etc. etc.

I hear my 20-day old baby crying.