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Posted at 6:13 PM ET, 01/11/2011

Drill, baby, drill? Spill, baby, spill? How about tax, baby, tax?

By Stephen Stromberg

Why did five million barrels of oil spill into the Gulf of Mexico last summer? "Complex systems almost always fail in complex ways," the report out today from the National Oil Spill Commission argues. And the blame in this case is exceptionally dispersed.

Why was a corporation drilling for oil in mile-deep water 49 miles off the Louisiana coast? To begin, Americans today consume vast amounts of petroleum products -- some 18.7 million barrels per day -- to fuel our economy.

You can't even get past the preface before having to confront this essential truth, which ridicules anyone who claims there's a simple solution to America's energy quandary.

Advocating that we drill nowhere, or heavily curtail offshore exploration, ignores the fact that we have built an economy on petroleum, and if we don't source that domestically, we'll get it from rigs in Nigeria, Azerbaijan and other countries that are, particularly now, more likely to have safety problems than America. Why not just stop using oil, and fast? Even under some of the most aggressive anti-petroleum policies, a Harvard study last year reported, America will demand massive amounts for decades. Kicking addiction isn't easy.

But addiction isn't cheap, either. "Drill, baby, drill" ignores the fact that there are huge, hidden costs associated with our reliance on crude. We are so desperate for it that we sink drilling bits under 5,000 feet of water and dig another 13,000 feet under the ocean floor to reach it, as BP did at the Macondo well. Some of the costs -- exploration, transportation, etc. -- are more or less reflected in the price of gasoline that we see at gas stations. Others -- dependence on unsavory regimes, climate change, air pollution, massive accidents such as the BP blowout -- essentially aren't. This distorts Americans' preferences and disguises how dangerous America's habit really is -- to our environment, health, security and national wealth.

The efficient -- and obvious -- solution is to keep drilling with better oversight, but to make some of those hidden costs more explicit in the price of oil. That is, a gas tax. The money derived can improve our roads, rails, bridges, ports and alternative fuel research. Or pay down the debt. Or even simply be rebated back to households. As the Harvard study last year explained, the most important thing is that Americans start thinking more rationally about the fuel they use. Other options, such as tax credits for buying electric cars, are actually more expensive and less effective.

Cue the comments section accusing me of being part of some sort of communist conspiracy to socially engineer their rights away. (You're totally right, by the way -- the United Nations is forcing me to write this. Go.) Or members of the GOP House reminding me that there isn't the slightest chance that anything resembling an energy tax will pass with them in charge. Fine. So we're not doing the rational thing right now. But at least consider this: Smart social policies such as the gas tax doesn't have anything to do with socialism or some plot to infringe constitutional rights; they rely on the insight of the capitalist that people respond rationally to economic incentives, and that the government should work with the market instead of attempting to mandate it away. Even better -- in this case, government would simply be correcting a market distortion. Perhaps that's why Charles Krauthammer has favored a gas tax for decades.

If Republicans continue to claim immunity from such good sense, they must come up with a reasonable alternative. And, no, not just drill, baby, drill.

By Stephen Stromberg  | January 11, 2011; 6:13 PM ET
Categories:  Stromberg  | Tags:  Stephen Stromberg  
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Comments

Thanks for your excellent post. It's long since time gas and oil taxes became policy. Nothing but price changes the oil consumption patterns that are damaging us economically, politically, and environmentally. OilTaxCampaign.org is organizing support for oil taxes.

High oil taxes work in Europe. Rather than tell people where to live or what to drive, oil taxes move the economy as a whole to a sounder foundation without making people's decisions for them. Just because they're not politically feasible here today doesn't mean they won't be tomorrow, and the first step is to introduce the issue into the national dialogue, as you are doing.

Posted by: Flux | January 11, 2011 7:58 PM | Report abuse

I don't think it is a bad idea to generate tax revenue from higher taxes on petrol. But I am sure that it is not only Rep in Congress who would not support this but also the Dem since this type of tax would be seen as a regressive tax. This is an issue that Obama needs to spearhead and not leave it up to either party to decide. Not sure he has the ba**s to do it however.

Posted by: mmourges | January 12, 2011 7:52 AM | Report abuse

Stromberg forgot to mention the impact of forcing oil companies to drill in a mile deep of bay as contributing to the problem. Perhaps it would be a little wiser to drill a little closer to shore where problems can be dealt with much more easily.

The need for crude oil isn't going away and raising taxes ain't the answer.

Posted by: bryanmcoleman | January 12, 2011 8:27 AM | Report abuse

based on your infinite wisdom, we should just come out with a total ban on petroleum products. That will surely clean up the worlds environment in a hurry. Makes no difference no other human on this planet in other countries will follow our idiots off the cliff.

Of course before you do ban any petroleum and the by products from petroleum, you best research what all is developed and made from petroleum. Then like our wise elected folks in congress we can come out with a twenty thousand page document attempting to explain which items are excluded from this ban.

Get a life liberals/environmentalists. The worlds air will clean up in a hurry if we just ban you folks.

Posted by: frankn1 | January 12, 2011 8:36 AM | Report abuse

This guy wants to heavily tax a proven (and vital) source of energy to allow more research into pixie dust as fuel? Seems like he's been sniffing gasoline rather than pumping it.

Posted by: rop2 | January 12, 2011 9:05 AM | Report abuse

I agree that a gas tax is the answer. The market price for gasoline and other petroleum products does not reflect the external costs - the costs of damage caused by global warming, for example. I recognize that calling for a tax on gas is something only a privileged person can do. If I were barely scraping by, I wouldn't want any additional hits to my family budget. It may encourage me to use less gas, but how far can I change my lifestyle with no money to move closer to my work, for example. However, we have no choice but to change our lifestyle if we want to prevent continued mass extinctions, flooding, and food insecurity caused by climate change due in part to fossil fuel consumption.

Posted by: WorldCup | January 12, 2011 11:56 AM | Report abuse

I agree that a gas tax is the answer. The market price for gasoline and other petroleum products does not reflect the external costs - the costs of damage caused by global warming, for example. I recognize that calling for a tax on gas is something only a privileged person can do. If I were barely scraping by, I wouldn't want any additional hits to my family budget. It may encourage me to use less gas, but how far can I change my lifestyle with no money to move closer to my work, for example. However, we have no choice but to change our lifestyle if we want to prevent continued mass extinctions, flooding, and food insecurity caused by climate change due in part to fossil fuel consumption.

Posted by: WorldCup | January 12, 2011 12:16 PM | Report abuse

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