Prodromus

The majority of Americans are now supportive of the concept of US Energy Independence. It is one of the few topics that all of the candidates are in general agreement. The various methods and strategies to achieve that independence differ, but everyone realizes that we have to stop the massive transfer of wealth from our country to that of countries that are run by non-democratic dictatorships.

What is the current biggest risk in our ability to reach that goal in the next ten years? Falling oil prices. Seriously, that is our biggest risk. If oil prices fall, consumers will quickly forget the pain, investors will stop pouring money into alternative energy, car companies will crank up the SUV assembly lines, and politicians will start talking about the next new “crisis”. You say that can’t happen? Check your history books, as that is exactly what happened after the late 70’s oil crisis. The oil cartels felt the reduction in oil demand; they saw the new investment into solar and got scared. OPEC’s back was broken, new supplies came online in the North Sea and Alaska, and cheap oil returned.

We cannot allow that to happen again. With oil prices dipping to close to $100 a barrel, Congress should immediately call for a price floor on foreign imported oil. Any oil purchased over-seas at less than $100 a barrel would receive a tariff that made up the difference. Any oil that was produced in the US would remain tariff free, enabling US oil companies to invest in new fields, knowing that their oil could always be sold for a stable price. That price would never be undercut if OPEC and other oil-exporting companies suddenly increased supply.

The government could announce that, as part of a comprehensive energy strategy, it will henceforth not allow the price of foreign purchased oil to fall below $100 per barrel. If high oil prices continue, the proposal would have little impact and cost nothing, either politically or financially. If prices fell below that level, the added tariff would be sent to Washington to help fund alternative energy investment, tax refunds for hybrids, etc.

If consumers and industry knew that the price of a barrel of oil would never again fall below $100 a barrel, they could make long-term investment and consumption decisions with the knowledge that vastly lower oil cost will not under-cut those decisions. Americans will not buy fuel-efficient automobiles, create distribution networks for alternative fuels, or invest in technologies such as hydrogen fuel cells, flex-fuel vehicles or wind power unless they know that a future sharp fall in oil prices will not undercut them.

Would you support a price floor? If not, why?