The perennial controversy over buying domestic or imported goods may be turning into an environmental debate as well - at your local supermarket.
Environmentalists have been claiming for some time that buying locally grown produce is beneficial to the environment, because goods with less distance to travel will use less fuel and produce less pollution than those transported from other regions or countries.
But this article from the Retail Bulletin reports on research showing that this isn’t actually the case. In fact, the report concludes that “there is no clear evidence in environmental terms to support locally-sourced rather than globally-sourced shopping.”
That organic tomato isn’t going to reduce your carbon footprint, and free trade is usually a good thing, especially if it means guilt-free pineapples. Let’s move on from fruit and vegetables and focus instead on reducing imports of fuel from hostile nations.
This entry was posted on Thursday, February 22nd, 2007 at 6:19 pm and is filed under Alternative Energy Technology, Climate Change . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
March 2nd, 2007 at 4:26 pm
Establishing a floor price for crude oil sold in the United States is the most effective means of moving us away from reliance on imported oil.
The purpose of the floor price for crude oil is to provide an economic environment where it is financially sensible to invest in energy alternatives. This is a fundamentally Conservative approach as its main intention is to increase supply, in contrast to decades of liberal initiatives designed to curtail demand. A floor is needed because in the current environment OPEC can increase production enough to lower the price of oil and gasoline to the point where investments in energy alternatives are bankrupted. The production cost of mideast oil is under $5, so OPEC has plenty of room to lower prices. (Even if OPEC doesn’t deliberately lower prices, the perceived risk ot this happening raises the cost of capital for energy alternatives and thus curtails such investment).
The mechanism to create the floor price for crude oil is a variable levy that makes up the difference between the world market price of crude oil and the floor price. This levy is collected as oil is delivered to petroleum
refineries. As there are only 149 refineries in the United States, it is
quite feasible to implement this collection mechanism. (Imports of gasoline would be subject to an equivalent levy and some refinery products might be exempt from the levy). This writer believes that funds collected via the levy should be reimbursed to the driving public as an income tax credit.
Others have suggested it be used to fund social security.
The levy differs from a tax in several important ways. Firstly, the levy only applies when the market price of crude is below the target floor price.
As $60 per barrel is a more than adequate floor price, and oil generally has been at or above $60 per barrel, the levy today would not even be activated.
A tax by contrast would be unecessary today, and if there’s a serious effort by OPEC to crash the price of oil and gasoline, might not be enough to save alternative energy investments. Perhaps more importantly, a tax will never be voted into law. A levy is much less visible than a tax and should be reimbursed to the people who “pay” the levy. Though as noted above, at today’s oil prices there would be no levy. The situation today is that we have the worst of all worlds. We pay excessive prices for oil, yet do not invest in any meaningful way in alternatives. (It should be kept in mind that much of the current ethanol boom is fueled by the need to replace the gasoline additive MBTE.)
In considering alternatives to oil we have three routes. Alternative fuels, better engineered cars and electric or plug in hybrids.
Better engineered cars are currently our best path to reducing use of oil.
An extensive body of cost-effective technology to achieve this already exists. The difficulty is that employing such technology requires a double investment. Firstly, automotive companies have to invest billions in retooling to produce more efficient cars. Secondly, consumers have to pay a higher upfront or lease cost for this efficiency. IF gasoline prices will not fall below $2.25-2.75 per gallon, such investments are justified. But in the current roller coaster world of oil prices, automobile companies are not likely to invest billions of dollars to find themselves two or three years down the road with cars consumers don’t want to pay for. Thus a crude oil floor price is necessary for there to be meaningful investment in better engineered cars.
Alternative fuels that cost $35 barrel and up to produce have to compete with $2-5 per barrel middle east oil, and are thus completely vulnerable to either predatory pricing or natural market forces if ever too much alternative fuel reached the market. Here too, a floor price for crude oil is necessary to sustain significant investment alternative fuels.
Perhaps one day we will have a truly effective battery but for now electric cars and plug-in hybrids face the same investment and consumer challenges as better engineered cars. With current technology, hybrids and electric cars are relatively expensive. It is important to realize that Prius’s represent nothing in terms of solving our energy problems. Cars that in their non-hybrid state get 40+ miles per gallon are not giving rise to our oil import bill, its the large SUVs, pick up trucks and the like that must be made more efficient. For electric or hybrid cars to go into the consumer mainstream they need to be competing against a sure and lasting high price of gasoline, and thus the crude oil floor is necessary.
It should be noted that the floor doesn’t choose or favor any of the three major paths or any of the alternatives within these paths. Those choices will be made by the free market.
Perhaps the most important aspect of the floor price mechanism is that it represents an official realization that the age of cheap oil is over and that the public policy of the United States will now be fully structured in accordance with that realization.