Energy independence is the catch phrase of the millennium. The prospect of it is so tantalizing that virtually no American opposes it.
Political leaders are unanimous in their support. They all hold that in order to achieve energy independence we need more nuclear plants, more wind, more solar. There’s just one problem: Nuclear, wind, and solar energy only produce electricity. And America is already electricity independent!
Alternative sources of electricity are welcome for a variety of reasons, but what America really needs is freedom from our dependence on oil.
America is utterly dependent on other nations for transportation fuel. This poses a grave threat to our national security and to our national future. Oil is the lifeblood of our economy. Currently, virtually no truck, bus, train, car, plane, or ship—including all military vehicles—can move without gasoline, diesel, or other oil-derived fuel.
America now depends on other nations for fully 65 percent of this vital commodity. To add insult to injury, much of the money that we (and our allies) spend on oil ends up in the hands of those committed to the destruction of Western civilization.
In doing so, we are not only transferring our wealth, but also compromising our morality and losing our foreign policy independence to the most evil and ruthless dictatorships on earth.
We have created this terrible dilemma by accepting the short-term benefits of cheap oil and gas without appreciating the dire long-term consequences of our dependency on tyrants. That’s the epitome of an addiction—pursuing a short-lived “high” regardless of the possible long-lasting damage.
One answer may lie in our tax policy. Taxes are used not only to fund government projects, but also to encourage beneficial activity and discourage harmful activity. This explains why tobacco is taxed at increasingly high rates; high taxes discourage the use of a harmful product. Yet, when it comes to activities our society seeks to promote—home ownership and charitable giving, for example—tax breaks are granted.
But what about gasoline and diesel fuel? Washington taxes them at rates far below those of virtually every other industrial country. Meanwhile, we place heavy taxes on income, investment, payrolls, and other productive and nation-strengthening activities.
The clear result of this backward policy is greater and greater oil dependency, and practically no investment in gasoline and diesel substitutes.
The reason for the lack of investment is obvious. Any transportation fuel substitute that begins to displace gasoline and diesel fuel would automatically cause the price of gasoline and diesel fuel to drop. The price of gas would quickly fall below the cost of producing the alternative, which would, in turn, put the alternative out of business. This would happen even without OPEC manipulation.
In short, developing alternative fuel is an investment where winning equals losing. This would not draw many investors.
The solution is simple. America should tax gasoline and diesel fuel at a much higher rate, while lowering or eliminating taxes on personal and corporate income.
This will ensure that the price of these dangerous commodities remains high enough to attract meaningful investments in substitutes. The demand for fuel-efficient vehicles will increase without the need for new CAFE standards, while public pressure for better and more available mass transit would build rapidly.
Furthermore, our economy will be greatly and permanently stimulated as individuals and corporations keep more of their income to spend here in America, instead of sending our money to those who want to destroy us.
With this policy approach, and no other government intrusion, American innovation, driven by our profit-seeking free market, will solve this problem and find fuel substitutes.
It is not difficult to imagine a day when America and the rest of the world will be able to say to Iran, Saudi Arabia, Venezuela, and other dangerous regimes, “We no longer need your oil. Now, what would you like to discuss?”