January 2001 | Commentary | Checking In

The Lights Are On But No One's Home

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We have a saying in the big city, "the lights are on but no one's home." By the time you read this, in California at least, everyone may be home but the lights may be off. Chalk another one up to federal and state energy policy pooh-bah's polymorphic foul-ups. They hit the off switch.

Few beltway types seem to truly realize that oil prices are a basic component of America's economic health. We in the transportation industry deal with it every day. The price of oil impacts every product conceived, planned, designed, sourced, built, delivered, returned, disposed of—at every one of these stages. When energy prices go up, so do prices on everything. Why transfer all the economic gains we have achieved through SCM, good management and great technology to the oil producing nations, power intermediaries and the oil companies just because we have no policy or no will to implement one? It will grind this economy to a halt.

The previous administration's lack of energy leadership is primarily responsible for getting us in this situation. Second is the oil producing nations' idea that the dot.com explosion and run-up in the stock market had the United States rolling in dough. They wanted a piece of it. Drop production to boost the price. The severe loss of face the United States suffered thanks to the Lewinsky and other scandals convinced the oil producing nations that the Clinton administration would/could do little about their gambit.

Other factors: environmental regulations that are being phased in too quickly, causing production slowdowns at refineries. Some energy intermediaries have been gouging. Oil, fuel, and energy taxes are too high. And then there are state regulations.

Unlike the Clinton crew, the incoming Bush team has some experience with this issue. Did anyone notice the price of oil quickly and magically came down when Bush was declared winner in the waning days of 2000? The media apparently missed the correlation.

The question is will Bush act in our interests or is he one of them?
Here are just a few ideas on crafting an effective energy policy. Perhaps Bush the elder could act as an emissary to the oil producing nations to encourage them not to be greedy. Their payments and investments are mostly in dollars. So it is folly to stall the U.S. economy, because their own treasure will be depleted with ours. Better to bleed us slowly—"pump more and prosper."

Or perhaps a Nixonesque China move: repair our relationship with Iran and other outcast oil producing nations. They need cash, we need oil. The Bush administration would be partially immune to criticism given perceived hawkish foreign policy and the experience of Cheney and Powell.

Want another short-term idea for immediate real and psychological impact on fuel prices? Suspend collection of federal excise taxes and duties on gas, natural gas, heating oil, and fuel oil. In one stroke, Bush can have politically correct tax relief. How egalitarian. Every user of heat and light, every driver, everyone running trucks, every mass transit system and every consumer would benefit as those billions are redirected from government coffers back into the private sector.

Oil companies and intermediaries would be watched carefully by those who know the tricks, to ensure that savings would be passed along to the consumer. TV economists would have to stop spinning the "tax relief is no good because by the time it kicks in any recession would be long gone" theory. This tax cut would have immediate effect and it would not go to the "wealthiest one percent in America."

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