When oil price rises from the high base of $128 by around $11 in one single day along with dire predictions of $5 per gallon at the gas station; it will be foolish not to characterize this as ‘Oil Crisis’. If Israeli minster’s comment about inevitability of an attack on Iranian nuclear installation is the reason for this oil price spike, may be the USA presidential election should be all about how to deal with Iran. Unfortunately, instead of addressing this grave situation we have America’s newly minted political rock star – Barack Obama – making way too presumptuous statements about possible 2016 Chicago Olympics. Our Congress is no better too – all hot air about global warming, but total inaction for gas prices. The problem with the Congress is it is always preoccupied with issues quite late and in essence at wrong time. Besides, the Congress relegates both prudence and future maneuverability to revert a policy gone hay wire (e.g. ethanol for fuel!) while crafting any policy responses to emerging challenges. But the Congress and the incoming president (oh yes, Americans have given up long back to count the incumbent president to help them in any practical ways) can ill afford the neglect of high gas prices. Already it is looking like another Katrina – rulers are at sleep when a challenge is developing making common people to suffer due to the inaction of these rulers. There is enormous disconnect between ‘reality of people’s daily life’ and highly dramatized politics of VP stakes which is unfolding in American Media. The polity which is supposed to represent ‘people’s will’ should not be so insensitive to grave consequences of high oil prices and concomitant inflation. So the question is what can Congress and incoming president do? It turns out it can do quite a lot:
1. First and foremost we need clarity regarding what all these Congressional investigations about speculation in oil prices find. We hear lot about these hearings and usual show of hauling CEOs of oil companies on Capitol Hill; but then what is the policy response? How about President or top leadership of Congress ‘certify’ the Congressional investigation report that categorically says that indeed there is no ‘oil price manipulation and speculation’ by participants of oil futures markets? Such investigation and certification should be continued as long as oil prices are detrimental to our economy (till either oil dependency is removed or the actual price is quite low). It is imperative and extremely important to know what action, if any is applicable, Congress has taken to the Congressional hearings by Mike Masters of Masters Capital and issues raised by Daniel Dicker in TheStreet.com. The essential point of these investigations is - indeed the way oil trade goes, structurally it has a great scope for speculation. What is needed is accountability in this regard by our rulers. We want to know whether Congress is doing all that is possible by way regulations via CFTC and is not engaged in the gimmicks of passing bills against OPEC. There is a strong suspicion that Congress is not doing what it can but farcically going after things which it has no business to venture. Oh, by the way why not have a ‘web site’ where Congress and White House congregate all of their responses and their investigations together so that citizenry has one single point to know how our rulers are responding to ‘hostage to oil price’ situation?
2. Next, what is the rationale for continuing any kind of tax breaks for oil companies when these companies are part of the coalition (other partners are crude oil producing countries) which is holding the entire economy at ransom? Not only should these tax breaks need to go immediately, oil companies be subjected to ‘windfall taxes’ too. Democrats and progressives must overcome the oilman – President Bush and pro oil cartel GOP.
3. What things can be done ‘now’ to address price pressure faced by common people? Wherever possible, employers should be required to allow employees to work from home for at least one day in a week. That will reduce commuting for employed ones. Federal dollars could be applied to ‘donate’ gas saving buses to public transport organizations all over the country, in proportion to population in a designated area. At $200K for a top of the line green bus, a Billion dollars can buy 5,000 such buses; around 15+ per 1 million population. If Congress intends, it can solicit hundreds of such suggestions from people all over the country. The goal should be to address needs of common Joe on day to day basis NOW. Spending around $50 to $100 Billion to address high oil prices in meaningful manners will go a long way rather than bribes of ‘tax refunds’.
4. Beyond short term measures, we need Federal Government to increase the budgetary outlay for public transport infrastructure all over the country. It was ‘war bonds’ in past, now it could be ‘oil freedom bonds’ to raise necessary cash to augment public transport infrastructure in coming five years.
5. Finally, as a long term measure; we need the Federal Government to pump money into alternative energy sources and distribution. America’s portion of the sum of $45 Trillion (as estimated by IEA to half green house gases by 2050) is too high even for the $13 Trillion Economy over decades. Hence the need for a multi decade spanning concrete plan to move from fossil based economy (civilization?) to renewable energy based economy.