Lock in the Gains

With the price of oil now well over $100/barrel, the time has come for the U.S. economy to lock in its gains. (Tom Noddy does magic with bubbles.)

What do I mean by that?

There are a lot of energy saving, and energy producing ideas, which make no sense at $30/barrel but which make great sense at $80/barrel. But we can't make them so long as there is substantial risk that the price will go back to $30/barrel.

We were at a moment similar to this almost three decades ago. People were talking them about wind farms and wood stoves and all sorts of things, with oil at around $50/barrel. Instead of locking in those gains and letting innovation create a market, we decided on a strategy of killing the bastards standing between us and cheap oil. It worked. All those ideas disappeared.

Now we have that opportunity again. A lot of these ideas sound loopy at any price:

• Solar and wind energy collection on home rooftops.
• Exercise machines which drive electrical generation.
• Doubling insulation levels in southern homes.
• Geothermal plants east of the Rockies.
• Solar powered laptops.
• Hydrogen creation and collection infrastructure.
• Electrical utilities which can buy as well as sell power from consumers.

And many more.

We need to lock in our current gains and not let the price of oil go below, say, $80/barrel ever again. That's the only way ideas like these, and so many others, can get the long-term time horizon they need to win investment, and seek their market.  There are too many ideas sitting on drawing boards because investors are worried about energy prices falling.

Every bubble bursts. Even an oil price bubble. We have a choice between locking in those gains now or letting it pop and going back to business as usual, waiting for the next one.

Let's decide at what energy price we can sustain economic growth, then set that as a floor and tax anything which comes in below the floor. Later we'll just tax oil which comes in below the floor, and after that hydrocarbons which come in below the floor. For now, anything.

Once a floor price for energy is set, producers will have a stable platform on which to invest. Fail to do this and they won't be able to get the money from the market.