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Wednesday, September 28, 2005

Back to the 70's

While lamenting one day over the ever increasing dollar amount that shows up on the gas pump as I fill my Saturn, I came across a web article on the Tech Central Station site titled Bell Bottom Blues. Since we'd discussed in class that the current oil 'crisis' had finally brought the price of gas to the 'real' price level we saw during the 1970's oil crisis (during which I was a young college student trying to make ends meet) I found it rather interesting the way some comparisons were made. It points out how, on Capital Hill, the same types of political issues are being raised now as was back in the 70's; anti-war protests, women's abortion rights, and even the mention of a Star Wars movie, but the idea that price controls and corrective taxes could possibly bring economic releif seem to be the biggest similarity to those greasy, golden days. The author, Nick Schulz, found this move to be a major backslide, a move back into the disco days as he puts it. He tells of the economic stagnation that occured for a decade after the price controls and taxes were put into place, and how some states (Mass. and Utah) are thinking about implementing these types of programs again today. Schulz also points out how the price of firewood (and lumber in general) is skyrocketing in response to the likelihood of high home heating costs this winter. He also brings to light some of the political shenanigans that are going on with the intent of stalling certain region's abilities to move beyond oil dependence by blocking the move of natural gas into the area. This, along with the talk of tax increases that benefit oil producers, shows how strongly the oil industry has entwined itself with politics.

I agree with most of what the author has to say, even if my opinion is of less intensity. I agree that we need to let the energy market play itself out regardless of how painful it may be to many of our pocketbooks. I also think that price controls and corrective taxes aren't necessarily the answer to our current problem. I do see a potential positive externality here though - not something that could truly be called an externality based on our models, but the idea that research and technology in the area of alternative energy sources may benefit from this current crisis (like it did during the 70s) is starting to sound pretty good right now to a lot of people. Not just the move to smaller, more fuel efficient cars, like we saw in the 70's, but real changes in how we perceive energy, how we obtain it, and how we use it. This, when viewed in the context of the economic normative model we've been utilizing, makes a lot of sense - IF it can bring about a level of effeciency that allows the market to thrive, and individual ethics are not compromised for too many people.

". . . .along with the talk of tax increases that benefit oil producers, shows how strongly the oil industry has entwined itself with politics."

How can a tax increase can be a benefit to oil producers? It seems to me that a tax increase harms buyers and sellers in general.
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