Bush and Alternative Energy: More Gravitas Required

Any publicity for alternative energy is good news. Global warming and energy conservation is a non-partisan issue. President Bush helps raise awareness and news coverage that is hard to match. To see and hear the Prez talk about alternative energy, one still doesn't sense that he is truly passionate about it. For all we know, he just reads and says a few items that aides and speech writers pass along. I am not talking about the known problems with the administration's energy policy:

"Democrats and some Republicans criticize the Bush energy plan as failing to sufficiently address a leading cause of U.S. dependence on imported oil: the fuel efficiency of cars, trucks and sport-utility vehicles. Under pressure from struggling U.S. automakers, which are losing ground to foreign competitors and shedding jobs at plants throughout this region, Bush has not proposed large increases in the gasoline mileage that U.S. automakers are required to achieve, known as corporate average fuel economy (CAFE) standards. Bush has supported slight increases for some light trucks and SUVs but stopped short of across-the-board changes advocated by many lawmakers and environmentalists that could significantly reduce oil consumption."

What we need is for the President to sound enthusiastic and excited about these things. How about an announcement along the lines that the President has decided to use solar panels or wind energy to generate electricity for his ranch? How about urging the federal goverment to start replacing its own fleet with hybrid or other more fuel efficient vehicles? It may be too much to ask from someone who came from the oil industry, and who has yet to acknowledge global warming is taking place. Imagine if Al Gore were President?

But we do need the Prez to keep talking up alternative energy. Maybe he can invite some environmentalists into the White House for private tutorials. Once you hear from those who are passionate about this issue, you get infected with their enthusiasm. We need the Prez to develop some gravitas, and fast.

The Prez needs to start listening to respected Economists, like Menzie Chinn, who believe a rise in the gas tax can do wonders:

"This reliance on subsidies and command-and-control remains true despite the fact that if the President really wished to reduce our "addiction" to imported oil, the most effective way of accomplishing this aim would be an energy tax. That is because on the supply side, production is unlikely to rise strongly given the depletion of onshore reserves, even with the most generous subsidies. In addition, production takes years to put into operation. Moreover, a tax acts immediately, while standards would take longer to have an impact on consumption (since it would have to work through an alteration of the capital stock embodied in trucks and cars). Furthermore, a tax has a further advantage that it reduces the price foreigners -- including Saudi Arabia and Iran -- would receive for their oil exports. In this sense, it has a similar effect as an oil tariff, although it is WTO-consistent, while a tariff would not be.

A back-of-the-envelope calculation can be useful in defining the potential impact of a gasoline tax. In 2004, the United States imported about $180 billion worth of petroleum and petroleum-related products, equal to about one-third of the trade deficit. Ignoring interaction effects, a $1 per gallon tax on gasoline would reduce annual petroleum imports by $10 to $25 billion, or about 1.6 percent to 4 percent of the trade deficit. The calculation relies upon estimates of the gasoline demand elasticity of 0.3 percent to 1.0 percent. Specifically, each barrel of oil yields approximately 19.5 gallons, and U.S. consumption was 19.4 billion gallons. "