20 October 2010

A Change in the Winds?

Is a bipartisan discussion of energy policy possible?  Maybe.

Governor Mitch Daniels (R-IN) and the Center for American Progress -- champion of cap-and-trade, home of scorched-earth blogger Joe Romm and DC think tank with close ties to the Obama Administration -- show some signs of openness to new thinking on energy policy, as reported by CAP (emphasis added):
In Daniels’s speech honoring Hudson Institute founder Herman Kahn, Daniels differentiated himself from most national Republican leaders by endorsing a tax on imported oil. This idea contradicts two major GOP orthodoxies: opposition to any tax hikes and devotion to big oil. Politico’s report on the speech:

Daniels also suggested support for increasing gasoline taxes. Kahn wrote, in a passage Daniels read from Thursday, “One fully justifiable tax would be on imported oil. Any large importation of oil by the U.S. raises security problems. There are, in effect, external costs associated with importing oil that a tariff would internalize.

“Now, maybe that transgresses some philosophical viewpoint of yours,” Daniels told the well-heeled crowd of 250. “But to me, that’s an interesting point today, just as valid as the day he wrote it.

The need to reduce foreign oil consumption is more imperative now than when Kahn proposed the oil import fee in 1982. The United States imported less than one-third of its oil in 1982. Imports in 2009 totaled nearly two-thirds of oil consumption. And one in five barrels of oil consumed in the United States now comes from nations that the U.S. State Department classifies as “dangerous or unstable.” A fee on imported oil would help internalize some of the economic costs of this dependence, as Daniels noted in citing the Kahn quote from 30 years ago.

An oil import fee could raise revenue to reduce foreign oil consumption by investing in oil demand reduction programs. Such funds could also reduce the budget deficit—a top priority of congressional Republicans. A temporary, extremely modest $5 per barrel fee could raise $22 billion annually. This small levy would raise gasoline prices by just an estimated 5 cents per gallon—less than the gasoline price increase between the week of October 4 and October 10.

This miniscule increase in gasoline prices is too small to create much of an incentive to reduce driving. It would, however, make domestic oil slightly more price competitive with foreign oil. More importantly, the revenue could fund programs to replace some oil with public transportation, natural gas and electric vehicles, and other alternative fuels. These funds could also help reduce the deficit, and/or provide rebates to middle- and low-income families.
The proposal for a small fee on oil with proceeds invested into energy innovation is consistent with the proposals that I advance in The Climate Fix. But more importantly, Governor Daniels forward thinking (a trial balloon to be sure) and the CAP's willingness to respectfully discuss his ideas suggests that a sensible bipartisan discussion of energy policy is still possible in these hyper-politicized times.  And that is good news whatever your politics happen to be.


  1. wouldn't a tax/fee on imported oil really just be a tariff and likely an illegal, contra WTO tariff?

    How would the tariffed nations, the oil exporters respond? Counter tariffs on Boeing aircraft or Apple compute products? Pick your poison

    Freer trade is ALWAYS better than slapping artificial taxes/fees/tariffs/call it what you want in pursuit of domestic political agendas.

  2. I'm sure the Tea Party will have noted Governor Mitch Daniels words.

  3. I'm always surprised when people talk about solving our energy problems as if the subject is actually about energy. Energy is a proxy in a larger battle between competing ideological value systems. Beliefs systems are not open to compromise allowing Presidents from Carter to Reagan and now Obama to give the same speech on reducing our reliance on imported oil. If it were really about energy we would have solved this quite some time ago.

  4. Mitch Daniels is an exceptional politician. He takes a long-term view when making decisions. I'm afraid that most others will be loathe to change their positions to this sensible middle ground.

  5. 1) Malcom is right. I listened to a Tea Party guy on NPR t'other day dump on the gas tax that was raised by an AEI operative and a guy from Brookings. They're more interested in invading Kenya to get at Obama's birth certificate.

    2) If Roger thinks any kind of tax is going to fly with the new gang of Republicans, well, frankly, he's smoking something. And if he thinks any Democrats are going to get on board a gas tax after C&T, which tried so desperately NOT to be a tax and nevertheless got trashed so thoroughly as one, he's smoking something. C&T passed The House; this breakthrough baloney wouldn't have a single vote in either chamber.

  6. As Malcolm above suggests, Daniels has just lost any chance for the 2012 prez nomination if he had been interested (his name did come up occasionally) and the conservatives will now target him as a RINO once they get past these elections. Bipartisanship at the state level is a good starting place and Daniels might help in that way, but these are national issues, and seeing that type of attitude in Congress is what we need to think this has any chance.

  7. Nice way to hide an import tariff!

  8. Post Nov 2nd, the balance of powers on numerous Senate and House Committees is going to shift and the Democrats will no longer be able to protect the various university professor warmistas and EPA political appointees from spending time in the hot seat being grilled about their global warming beliefs and their intentions to implement massive and costly changes to the US economy

    The EPA in particular is going to be neutered - it is way past time some sanity was imposed on their rogue activities.

    US voters are well past the point of taking heed of hysterical global warming, we're-all-gonna-die soon screamers. That gig has run its course and environmentalists are about to realize the problems they have created for their credibility by hitching themselves to such a tawdry, simplistic theory.

    When the choice is between a job or "feeling good" about saving the planet, between higher energy prices or lower taxes, Americans will prove to be the pragmatists they have historically always been.

    For the international environmentalist industry, its going to all about fighting battles of retreat back to some marginalized talk show segments on MSNBC or CNN.

  9. I agree with a tax on imported oil. I'm tired of sending my money to those damn Canadians! What drives me crazy is that they just take my hard-earned money and use it to... buy American products!

    Nice - play the xenophobia card to raise money for energy research. Maybe next we could fine every illegal immigrant we catch and use the money to pay for cancer research.

  10. This only makes sense if we actually drill more here. But instead we will have the usual clueless suspects claiming that this will change the way we produce electricity.
    That $22 billion is modified by 'only' is a rather sad comment, btw.
    I think the Governor is likely talking in good faith, but he needs to actually look azt the issue.
    The alternative to an economy that is needing much less liquid transport fuels and is not wrecked is to go electric. For that, we need lots of electricity. For that, if we want to preserve our environment we need nuclear power.

  11. from my perspective, it's not a bad idea to tax imports.

    I think that there would be problems with NAFTA to try it with Canuck or Mexican crude, but not for OPEC crude.

    It would be extremely hard for OPEC to complain about tariffs, when they indulge in full out market manipulation and price fixing.

    A small tax on imports would be a win/win/win for the US.

    1. More revenue, and a lower balance of payments, when it is needed most.

    2. Neglecting more onerous environmental rules, it would encourage more US production. US production has gone up the last few years, due to high prices. A tarrif would push more in this direction.

    3. There should be a small reduction in use. But, it would not be a punitive price raise, and hurt low income/middle income to any great degree.

  12. It will never happen for reasons already put forward. It would also be bad for the oil companies and no legislation will ever penalise them. I would guess that over 99% of the political pressure to decarbonise comes from the carbon trading lobby (oil companies and banks leading the way)

  13. What about our dependence on imports of rare earth minerals?



  14. Now this is an Obama Administration initiative that will receive bipartisan support regardless if Americans decide to tax/tariff the imports.

    "U.S. Secretary of State Hillary Clinton has sent the first signals to Alberta's oil sands producers that the Obama administration is set to green-light a pipeline delivering more of its crude, saying that Canada's “dirty oil” is a better alternative for the United States than the Persian Gulf's."


    Vast quantities of oil, reserves greater the Saudi Arabia, from a reliable, friendly ally, shipped by eco friendly pipeline into the American heartland - and the best part it is morally good oil, not that blood oil from the multiple human rights tragedy know as the Arab world.

    Just think, America removed from under the grinding jackboot of Arab imperialism and islamic terrorism. One pipeline done, how many more to go to handle the Oil Sands output.

    Gotta love free trade.

  15. "A temporary, extremely modest $5 per barrel fee could raise $22 billion annually. This small levy would raise gasoline prices by just an estimated 5 cents per gallon"

    Leaving aside the curious belief in a "temporary" tax, what's left out of that argument is that $0.12/gallon tax on crude oil would lead to a $0.05/gallon increase in the price of gasoline, AND a $0.07/gallon tax on the other 55% of the products that are made from oil, like diesel fuel, kerosene, jet fuel, fuel oil, etc.

    I know, spread it out so no one will notice.

  16. As an aside, here in the UK, we pay round about £1.20 a litre for petrol. Now converted into American that means..
    "Over in our British Colony, they pay nearly 7 1/2 bucks for a gallon of gas!"
    (That's your short-measure gallons too!)
    Of that, nearly 60p a litre is fuel duty, then there's VAT (Sales Tax), currently 17.5%, going up to 20% in January.
    So over 70% of our pump price is in tax of one sort or another.
    Good job my car does about 40mpg!

  17. madadadam:

    Well, you're completely surrounded by water and about the size of one of our (50) mid-sized states. So where do you need to drive to anyway? :)

  18. Need to revise my comment above. When I first saw that 5 cents/gal number for gasoline, my gut instinct was "that's gotta be wrong". Being a charitable fellow though, I convinced myself that maybe it made sense.

    Wrong. I should of stuck with gut instinct.

    Here's the math:

    ~0.4 gallons of gasoline/gallon of crude
    $5/barrell = $5/42 gallons = ~$0.12/gallon of crude

    While it's true that about 5 cents of that 12 cents is borne by the gasoline, it's 5 cents on 0.4 gallons, not a full gallon.

    So it works out to 5/0.4 or about 12 cents/gallon (at least). (Funny how that works, 12 x 0.4 =~ 5; 5/0.4 = ~12.;))

    That of course assumes not waste.

    OMG, It's worse than we thought!