Today's green headlines talk a lot about new aggressive mileage standards for vehicles in the US, and California.
We have had mileage standards for many years yet we are far behind the rest of the world on this front. In addition:
Our car makers are on life support.
We import a huge amount of oil.
The city of Dallas regularly exceeds its air pollution standards.
The question is...are all those things caused by the vagaries of the market or is it in fact the problem with government rule making? Is the government able to implement and manage complex market changing regulation when large scale business is involved?
The answer is no.
Our car makers are a huge industry with a lot of political clout. They are union labor which has huge political clout. The foreign car makers doing business in our markets have clout. The oil companies who depend on the car business have huge clout. All the tertiary businesses connected to cars represent a large amount of voters.
With all of that monetary and voter pressure to "do whats right " for the auto industry, what politician could do anything different than be highly sensitive to their wishes?
We now have a 650 page initial document on new vehicle mileage standards and it will surely grow as it goes through the public comment stage. Why 650 pages? Its all the "considerations" of the industry as described.
We all know that the SUV craze was caused by the government exempting this group from the lower car mileage standards. The regulation caused Detroit to focus on big cars and trucks and make more money with them because they had little foreign competition. They became dependent on that revenue stream that dried up with the $4.00 gas price. This crippled the US Auto industry.
So looking back now, what should we have done? In my view it's simple. Let the market work.
When we had an energy crisis in the Carter era we should have responded with real change...many countries did. But instead we worked really hard to get OPEC in line and get things back to "normal". We sold our independence and stability for cheap foreign oil. Why, because we could. We were huge customers that could bomb them off the map. We have been meddling in Middle East affairs ever since.
So we have artificially supported cheap oil. We spend a huge amount of money (and lives) making sure we get our cheap oil. This is a government distortion of the market...they enact the diplomacy and the wars.
Oil comes from risky places, is an environmental mess, is price volatile, pollution generating and politically and religiously charged. But does $2.00 a gallon gas reflect that? Of course not, it's an artificially low price matched only by the big oil producing countries themselves.
So a $5.00 a gallon price might be more accurate and you could throw away that 650 page document. American consumers have already shown they will eschew big cars and trucks at $4.00 a gallon and so has the rest of the world.
A pollution fee for the air we foul and a military fee on gasoline would do the trick, and be a lot less pages. Or we could just make an amendment to the constitution that we would never use military might to secure goods and services outside our borders.
Bottom Line - Cheap oil is bad because it's artificially cheap. To enact laws and complex regulations to artificially make us all use less of an artificially cheap product is silly. To spend more money bailing out Detroit because of our own artificial market distortions is sillier yet.
There is some new sabre rattling about reducing the huge incentives and supports for the oil industry. Can you imagine? We artificially support our oil companies? Just like our farmers and our auto industry? Does any of this artificial support work in the long run?
We have to artificially support renewable energy so it can compete with the artificially supported oil and coal industries?
I get the feeling that good lobbyists are way more valuable than a good product aimed at a healthy market.