How to Drive Oil to $200
by: Barry Ritholtz
posted on: May 29, 2008 | about stocks: DBO / OIL / USO
On last night's Kudlow & Co., I discussed how absurd US energy policy is.
The United States is heavily dependent on fossil fuels (>80%), most of which come from places we would rather not send our money to. We consume 26% of the world's energy, with only 3% of the world’s known oil reserves.
It turns out that for the past 3 decades, we've had a George Costanza Energy policy -- every decision we have made as a country has worked to drive energy prices higher. Had we made the opposite decisions (see embedded YouTube clip above), crude oil prices would be much lower than they are today ($130.17 as I type this).
seekingalpha.com
What follows is a list of energy-related policies of the United States. On many of these, I have no opinion -- but I wanted to list as many as I could to demonstrate why oil is where it is
US Policies with an impact on Energy:
* Limit areas available for offshore drilling;
* Stopped the planned rise of CAFE standards for automobiles;
* Restricted nuclear power generation of electrical;
* Federal Reserve policies since 2001 led to a very weak US dollar (raising oil prices);
* Energy conservation policies? None;
* Provided little or no incentives for hybrid automobiles;
* No major US R&D research on energy;
* Game changing breakthroughs over the past decades in solar, battery, or energy generation technologies? None;
* Failed to raise efficiency standards for appliances for decades;
* Iraq and Afghanistan Wars contributing to Middle East tensions
* Kept CAFE standards for light trucks/SUVs much lower than autos;
* Ridiculous corn ethanol policy (driving food prices higher as Oil rises);
* Mass transit system is not a priority;
* No special capital gains treatment for VC alt.energy investment;
* Failed to aggressively promote efficiency improvements for residential energy use, transmission of power, or consumption;
* Amongst the lowest gasoline taxes in the developed world;
* Limited hydro-electric power generation;
* Created a tax incentive [ADCS] that encouraged purchases of large inefficient vehicles;
* Aggressive tax incentives for battery technology development? None;
* Exempted light trucks, SUVs, and pickups from gas-guzzler tax;
* Discouraged clean coal, including gas liquification from coal;
* Limited or non-existent state tax Incentives for building energy efficient homes;
* Failed to aggressively promote compact fluorescent light bulb;
* Allowed tax credits for residential solar power to expire;
* Americans, on average, live further from where they work than Europeans do;
* No special capital gains tax treatment for clean energy technology development;
And that's just off the top of my head.
Some of the above is being responded to by the private sector. With oil at $130+, there are significant price incentives for these technologies.
However, markets develop solutions only after the economics of it are feasible. This means we are starting R&D with oil at previously unthinkable levels. Imagine if we had some form of energy leadership 10 or 20 years ago when oil was $8.
What other policies does the US have that has led to higher Oil prices? |
