The Saudis, of course, would like to see higher oil prices, but the oil glut ensuing from North American sources has sent prices plummeting. In times past, the Saudis and other OPEC nations would cut back on production to stabilize and boost the price. But they have other ideas this time: Squeeze out the competition.
By keeping the spigots wide open, the Saudis are pushing the price of oil below levels that are profitable for unconventional producers. Their strategy appears to be working. The Houston Chronicle reports 550 oil rigs in shale formations are shutting down because of falling prices.
It’s time for us to get off the oil market roller coaster, and the only way to do that is with a significant and predictable price on carbon.
The point that many Americans overlook is that cheap gas really isn’t all that cheap when you factor in the damage being done to our environment and the impact of global warming – droughts, floods, food shortages, wildfires, property damage from extreme weather and rising sea levels.
The good news, though, is that the same market forces pushing sales of gas guzzlers can be used to reverse the trend toward smarter, cleaner purchases. Toyota Prius sales spiked when gas hit $3 a gallon for the first time, and again when it reached $4 a gallon.
The trick is to avoid peaks and valleys in the market that lead to erratic consumer behavior. A steadily rising fee on the carbon dioxide content of fossil fuels would smooth out peaks and valleys and motivate consumers to make choices that are economically wise for them and ecologically smart for our warming world.
But wait. Won’t a price on carbon raise fuel and energy costs and be bad for our economy? Not if it’s done the right way.
A study from Regional Economic Models Inc. looked at a carbon fee starting at $10 per ton of CO2 and rising $10 per ton each year. Revenue from the fee was divided equally among households and refunded as monthly dividends, offsetting higher energy costs and then some for most Americans.
Under this approach, the study found that after 20 years, CO2 emissions went down 50 percent and 2.8 million jobs were added, primarily because of the economic stimulus of recycling carbon fee revenue into the pockets of people.
We have two choices: Continue to dance to the tune being called by Saudi oil merchants, or get off the roller coaster and move away from our dependency on all oil by putting a revenue-neutral price on carbon.
My advice: If you’re buying a Chevy, go with the Volt instead of the Suburban.
Mark Reynolds is executive director of the Citizens’ Climate Lobby.