The instability of the oil market has always been a problem in setting a business model.
I'm not sure about things like setting a market floor on oil, with a tax penalty (which is in effect a negative subsidy) or any other type of subsidy. I guess I'm not sure there is a 'solid reason' for a subsidy, barring only maintaining an essential industrial capability which is not normally needed. I think - if the government got out of the game - that the oil market would be a lot more stable unless there were some special case like a Katrina that interfered with normal oil production. And in that case, prices are going to go up so a floor is not relevant.
posted on 04/21/2006 12:33:56 PM PDT
OPEC. If it didn't exist, you would have a free market in oil, but OPEC is a solid reason for consuming countries to either act collectively (think how well it works with the UN) or to take unilateral action to protect their own industries for a foreign monopoly.
I would support the tax penalty concept on the grounds that it provides long term stability for alternative fuels, when OPEC decides to wipe out Western investments in alternative fuels (and what good is a monopoly if you don't attack the competition).
It would not raise energy costs on the consumer, unless oil were to drop substantially. Nor would it hurt domestic oil production.
All you are doing is protecting your domestic market from a large and active foreign monopoly.
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