MAKING OIL COST ENOUGH TO FORCE INNOVATION IS EASY:

High prices will fix what politicians cannot (Trevor Houser, August 1 2010, Financial Times)

Mr Obama’s post-BP address is strikingly similar to a speech given by President Jimmy Carter in the late 1970s, attempting in vain to use the last oil crisis to change US energy policy. Mr Obama acknowledged the parallels, but promised a different outcome. But while Washington’s resolve faltered again, the industry’s economics are not following the old script.

Ultimately, it was this drop in prices, rather than poor speechmaking, that hobbled Mr Carter’s attempts to reduce America’s oil consumption. US clean-energy research might have hit record levels between 1979 and 1981, but as oil prices fell, funding for clean-energy innovation fell in step. By the late 1990s, spending on clean-energy research was down by more than 75 per cent from its peak. The spectre of the 1980s oil price crash seemed to inhibit investment, even when oil prices rose again in 2003.

Just use taxes to create an artificial floor under oil prices and keep lifting it.

Posted by Orrin Judd at August 2, 2010 1:22 PM