BP Spill the Doorway to $7 Gasoline?

Jim Brown
 
Printer Friendly Version

What does the BP spill have to do with $7 gasoline? Everything if you believe the position being pushed by the current administration.

President Obama has taken the BP disaster as an opportunity to pass another piece of legislation that nobody wants. I am talking about the cap and trade, carbon tax bill. This is commonly called the cap and tax bill since it would push all energy prices significantly higher, cause significantly higher unemployment and kill the economic rebound for years to come.

The Waxman/Markey cap and tax bill was thought to be dead after the political capital that was extended last year to pass Obamacare. There was no way the administration could cram another unpopular bill down the throat of the American public or so politicians thought.

The administration spent several months rebranding it from a global warming bill into a jobs bill, green jobs of course. They were trying to spin the new bill as a way to get back at OPEC by taxing energy. Senator Kerry and Lieberman wanted to reintroduce the bill as the "American Power Act" a plan that creates jobs and sets us on a course toward energy independence and economic resurgence. Sounds great on paper and I can see the billboards now. Unfortunately in politics what you see is not what you get.

Unfortunately the strategy was not working. Green jobs are hard to find and hard to create out of thin air. In Spain they found it took a government subsidy on average of $774,000 to create one green job. The general public is simply not up to speed on the global warming concept and until they buy green products in volume there are not going to be many green jobs. Secondly, nobody can really explain why taxing gas, coal and oil will get us to cut back on oil imports. Why punish American coal and gas producers in order to cut demand for oil. Why is that related?

Harvard University said last week that the "new" cap and tax bill as an answer to the oil spill would push the price of gasoline to $7 per gallon. Just exactly how would $7 gasoline fix the oil spill?

The president's agenda is to pass the cap and tax bill as way to wean the country off our fossil fuel addiction. If demand for oil declines as a result of the high prices when the demand for drilling would decline and the risk of another blowout in the future. Unfortunately that logic does not fly.

Oil is the most concentrated fuel available for transportation. You can't fly airplanes on solar power or natural gas. You can't drive solar powered cars and we could be 20 years away from having enough infrastructure for natural gas cars. Electric cars have not yet been proven for the general consumer and it will take a complete rework of the electric grid in order to charge millions of cars every night.

Using the oil spill as the "crisis" that enables the administration to pass economically dumb and socially crippling legislation is the wrong idea. Instead of trying to continually remake the American way of life it would make more sense to create those alternative means of transportation and make them cheap and reliable enough and the American consumer will move in that direction. Instead of raising gasoline prices to $7-$8 per gallon in order to force unpopular change, give us a better alternative and we will jump at the change. Take one look at the iPhone if you need an example. Better technology promotes rapid acceptance.

Forcing a change before the technology is ready just for the sake of political change is not the right way to go. Taxing businesses and consumers with 200% to 300% increases in utility rates and $7 gasoline is a job killing economic disaster a hundred times worse than the BP disaster.

Jim Brown

This newsletter is only one of the newsletters produced by OilSlick each day. The investment newsletter is also produced daily and contains the current play recommendations in the energy sector. Stocks, options and futures are featured. If you are not receiving the "Play Newsletter" please visit the subscribe link below to register.

Subscribe to Energy Picks Newsletter

Archives:200920102011201220132014201520162017