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How Not to Deal with the Energy Crisis

May 25, 2008

Gas prices are soaring. And both Congress and the auto manufacturers are proposing solutions. The only problem is that none of them are any good.

This week, the Senate Judiciary Committee hauled CEO’s from top oil companies up to the hill to testify as crude oil hit a new high: $133 per barrel. To deal with record-setting gas prices, John McCain and Hillary Clinton have called for a “gas tax holiday,” a proposal so ludicrous I wont even rebut the idea.

And how are American auto-manufacturers responding you ask? Not by increasing fuel efficiency standards, but by subsidizing your gasoline purchases for the next three years if you buy a dodge today. That’s right, Dodge-Chrysler’s “Lets Refuel America!” sale guarantees you will never pay more than $2.99 per gallon for three years after buying a new Chrysler-Dodge or Jeep.

First, if you actually take a look at the text, there are so many loopholes that its just a bad-deal altogether. Secondly, anybody with any brains ought to realize that the age of cheap oil is over. While you may pay $3 a gallon for three years, gas will not be any cheaper by then. It will likely stay the same price or increase. If you plan on buying a new car, you would be better off just buying a hybrid or one of those electric cars that you can plug in overnight.

While we can all debate about untapped oil reserves, clearly global demand is increasing and will increase as more people are lifted out of poverty in emerging global powers like India and China.

The U.S. has got to make hard choices to reduce demand. The obvious solutions are imposing high fuel efficiency standards on auto manufacturers and investing more in energy efficient mass transit and in R & D for alternative sources of energy. The problem is that in an election year, many politicians appeal to “pocketbook politics” rather than hard truths and long-term solutions.

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