People filling their cars lately have seen the price of gasoline drop dramatically. Americans with big-car lust might be thinking, “Woo-hoo! Time to buy that Chevy Suburban.”
Think again.
We’ve been down this bumpy road before. In the early 2000s, with gas hovering around $1.50 a gallon, Americans fell in love with gas-guzzling SUVs. By 2008, however, Hummer owners found themselves dropping Benjamins left and right when gas hit $4 a gallon.
Our memories are short, though, and with the siren song of cheap gas beckoning, sales of big vehicles are on the upswing. November sales of the Cadillac Escalade SUV were up 91.5 per cent over November 2013, and sales of Ford’s Navigator rose 88 percent.
Our gas is cheap now because of the glut of oil on the world market, resulting primarily from new and harder-to-extract sources like the tar sands in Alberta and shale formations in the U.S. These sources – more costly to extract and process than conventional oil – became profitable when oil shot above $80 a barrel. When oil breached $100 a barrel, the gold rush was on, producing the current glut.
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.
