Here’s an idea.

Although the high price of oil is creating a much more attractive market for investment in the development of alternative energy sources and energy conservation, our historical experience has shown that this increase in investment will likely decrease if the price of oil goes down. As a result, current investment levels in alternative energy are likely less than they would be if there was more certainty in the market that oil prices would not dip below an established minimum price.

While the costs of America’s over-dependence on oil are well known — supporting dictatorships, indirectly funding terrorism, harming US economy and global environment, etc. – the political costs of promoting a gas tax provide additional market certainty that oil prices will not dip so low as alternative energy sources begin to emerge so as to undermine the growth of alternative energies (as happened in the 1980s) have thus far proven insurmountable.

One way of creating this level of market certainty and therefore of further promoting investment in alternative energy sources and efficiency would be for the United States government to pass a gas tax at a level per gallon to be determined, that would only go into effect if oil prices fell below a certain value per barrel. All tax increases gained from this tax method would be offset by decreases in the payroll tax (a more progressive tax outcome).

If, for example, a gas tax were passed that would not go into effect until the price of oil per barrel dropped below sixty dollars a barrel (assuming that as the agreed minimum cost), no tax would be imposed under current conditions. If prices were to below this level, the tax would kick in and be updated quarterly to increase the price of oil per gallon to the equivalent of sixty dollars per barrel. Payroll taxes would be reduced by a fractional percentage to make sure that the overall cost to American consumers would be zero, although the wealthiest Americans would end up paying slightly more because many people in this group do not pay significant amounts of payroll tax relative to their incomes. Investors would know for certain that oil prices would never drop below $60 a barrel and could therefore plan, and act, accordingly.

Passing such a law would give a strong push to investors to more strongly promote the development of alternative energy sources and would make clear that the American government is serious about reducing our reliance on oil and imported oil. Taking this step would also itself have the potential to reduce oil prices.

What do readers think?

No related posts.