What’s Wrong with Newt Gingrich’s $2.50 per Gallon Gas Plan

I’m shocked to hear myself say this, but Newt Gingrich made several good points in his “$2.50 per Gallon Gasoline, Energy Independence and Jobs.” address recently.

He wants to “Unleash the American people.”  He wants to have “the American people develop so much new energy that we [are], in fact, no longer reliant on Saudi Arabia, Iraq, Iran.

He goes on to say, “What if that new energy program created well over a million new jobs, high‑paying jobs, jobs that put Americans back to work and kept the money here at home that we had been sending overseas, giving us a dramatic improvement in our balance of payments, strengthening the dollar and giving us a chance to live much freer and more independently?

So far this is awesome, Newt Gingrich, one of the biggest opponents of science and climate change is talking about American energy, real job creation, national security and so much more, but I knew it couldn’t last.  Newt’s plan is not about developing renewable energy, but rather to pump so much oil and natural gas from the ground and under the seas that he lowers the price of gasoline at the pump to $2.50 per gallon.  I can name so many things wrong with this plan, but I’m going to focus on just two today.

  • Oil is a Global Commodity – The price of oil, and therefore gasoline, is dictated by a global market and the US is the biggest consumer, but only accounts for 10% of global production
  • Consuming More Fossil Fuels Has Significant External Costs – Consuming more oil will accelerate climate change and numerous pollution based health conditions like asthma.

Oil is a Global Commodity

Newt Gingrich’s plan fails to recognize that we are in a global market.  US Oil consumption only accounts for 22% of the global demand (19.1 million barrels per day) as of 2010.  As of 2009, we produced only 9.1 million barrels per day, about 10% of global production.  We’d have to more than double our oil production and keep our consumption flat in order to meet all of our demands for oil with US sources.  Even if that was possible, which only Newt Gingrich and one “expert” in North Dakota seems to believe it is, oil is a commodity traded on a global market.

Department of Energy Chart Showing Decline in US Dependency on Foreign Oil under Obama
U.S. Dependence on Foreign Oil is Declining

As Bill O’Reilly pointed out, if the price of oil on the international market is higher than in the US, then US oil companies would sell their oil on the international market and make more profits and we’d be stuck importing oil again.

Also, many oil producing nations, like those in OPEC, are not maximizing their production and have in the past on numerous occasions reduced production to keep the price of oil higher so their own profits are higher in return. Why wouldn’t they do this again if the US increased production?

Now let’s talk about the other costs of increasing oil consumption.

External Costs of Increased Fossil Fuel Consumption

Besides the cost of the oil itself, there are considerable other costs that result from increased fossil fuel consumption. In order to get to $2.50/gallon, Gingrich proposes eliminating the CAFE standards (fuel economy standards), the Environmental Protection Agency (EPA) and the Department of Energy.  All of those combined with a hopefully growing economy, will lead to a major increase in the consumption of gasoline and therefore a subsequent increase in the release of carbon dioxide (CO2) and other pollutants.  Ignoring the climate change effects of the CO2 emissions, we will still be faced with huge increases of heath problems from the pollution.  Studies have shown, including a 2008 NIH study, that increased levels of air pollution increases the frequency of asthma in children. Healthcare costs have been rising faster than fuel prices over the past decade, and an increase in fossil fuels (gasoline) will result in more air pollution and an increase in respiratory illnesses in the US and around the world, resulting in still higher healthcare costs.  According to Brian Merchant at TreeHugger, The True Cost of a Gallon of Gasoline is Closer to $15.  You can read more about the 5 Things That Actually Determine the Price of Gasoline in another article by Brian Merchant.

Updated 3/6/2012
MIT Professor of Energy Economics, Christopher Knittel’s research shows that a $1 tax on gasoline would have an immediate local health benefit. 

According to Knittel and Sandler, 70 percent of the costs of a gas tax of $1 per gallon could be recouped by immediate health benefits from reduced pollution. Other possible benefits from the tax — reductions in climate change, traffic congestion and accidents — could make it a net winner for people in economic terms alone.
MITnews Fuel for Thought 3/5/2012

A Better Approach than Gingrich’s $2.50/gallon

In the movie Cars,  Lightning McQueen only gets gas in the pit stop and doesn’t change his tires and the announcer says: “That’s usually a short term gain and long term loss.”  That is exactly what we would see with really cheap gasoline prices.  In the short term, we could see a dip in oil prices if production is increased, but as the price goes down, our demand would increase, and our production would be insufficient to meet the new demand, leaving us even more dependent on the foreign markets.

What we need is a long term solution that leverages America’s strengths in innovation and capitalism.  We need to let the consumers decide what car they are going to buy and drive, but fuel should take into account the broader costs to society like healthcare, climate change, pollution and infrastructure.

We can meet our demands for affordable energy domestically with today’s technologies and tomorrow’s innovations.  We can do it with clean, renewable and safe energy sources like solar, wind, wave, tidal power and others.  In the process we will create millions of local jobs installing renewable energy, managing a modern infrastructure including a smart grid, and break our dependence on foreign oil. We will do it in a way that reduces our air pollution, keeps our children healthy and does not increase our health care costs.

To achieve this goal, we need to position our innovative forces with the right motivations. We should do this with a consumption tax on energy while we simultaneously move away from an income tax. This tax should be based on the carbon emissions of the energy.

For these reasons, I started my Pennies Per Pound Petition to Congress.  Please read on to understand how paying a few pennies for each pound of CO2 emissions will lead to a brighter and healthier future than “Drill Baby, Drill.”

Burning a gallon of gasoline emits 19 pounds of CO2

Pennies Per Pound is an easy to understand tax on energy consumption based on carbon dioxide emissions coupled with an energy stamp program, like food stamps, to assist those in need. This federal tax on energy would begin at 1¢ per pound of CO2 emissions and ramp up to 10 pennies per pound of C02 emissions over 10 years.

Pennies Per Pound would help by:

  • Unleashing market forces to find the best solutions to saving energy
  • Generating demand for Green Jobs, Green Technology and Green Businesses in the United States.
  • Reducing our nation’s dependence on foreign energy sources, therefore also reducing our national debt.
  • Raising revenues by $126 billion in the first year.
  • Creating a healthier planet through reduced emissions leading to lower future healthcare costs.

Do it now, sign the petition and let us begin down a new path to a stronger and more successful United States of America, not one that is killing the world in the name of cheap gas.

Thank you!
Jon



Comments

  1. Given that Americans are notoriously opposed to taxation your proposal, as bold and useful as it is, risks to be discarded as wishful thinking by the powers that be i.e. the oil and drilling lobby. However, as Occupy Wall Street shows, if enough of us have had it with wasting gas and polluting the environment, taxation based on energy consumption might just become an idea whose time has come.

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