Ending the Oil monopoly through major subsidy programs

Reader comment on: The U.S. Can Be Energy Independent

Submitted by Michael Chenkin (United States), Nov 16, 2010 16:38

Because oil producers enjoy a substantial oligarchal profit, there is substantial opportunity for a "free lunch." Even a 10 or 20 % reduction in the use of gasoline will have a major impact on reducting the price of oil. This means that subsidies to support non-oil using vehicles, if provided and utilized on a significant scale, have the potential to create a benefit in the economy (as well as a national security benefit) many times their cost.

The limitation of market solutions is that they have a steep chicken and egg curve. Companies that have boomed in recent years have been digital ones. One prominant reason is that their product essentially costs nothing. Physical products have significant costs, both fixed and variable. Fixed costs require volume. In the absence of volume selling prices are high and this keeps volume down. Eventually this problem is worked through if the underlying product is desired, but it is a long process. In the case of energy, where, aside from the issue of oil, gasoline cars suit their users perfectly, the volume price barrier is especially challenging, as consumers have little direct incentive to use new and expensive solutions. Again, the need for subsidies on a large scale is evident.

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