Saudis Increase Production: We've Got Them on the Run!

[Ivan Seeking]

The other day I saw a report indicating that the Saudis have now begun protecting their interests by increasing production, thus moderating the price of crude so as to keep alternative fuels out of reach. I don't recall exactly where I saw this, probably on PBS or a Sunday news show, but I did spot this article.

... OPEC has also worried that high oil prices would spur the development of alternative energy resources, such as Canada's oil sands, and alternative energy technologies such as nuclear and solar. [continued]

http://moneycentral.msn.com/content/P141076.asp

This is why I believe that crude must be taxed in order to maintain a minimum price that makes alternative fuels like biodiesel competitive. All of the taxes should go towards the development of alternative technologies. Otherwise, we likely will be caught in a game of cat and mouse, perhaps for decades.

From what I saw, three dollars a gallon was about the breaking point. At that price, biodiesel was five cents cheaper than petro diesel at a local station, and the same appeared to be true nationally.

The short version: We've got them on the run!

 

[verty]

From here:

The Chrysler plant that will close is its factory in Newark, Delaware.

With a workforce of 2,100, this makes the firm's slow-selling Dodge Durango and Chrysler Aspen sports utility vehicle (SUV) models.

Overall, Chrysler is cutting 9,000 jobs in the US and 4,000 in Canada.

The job loss announcement came as DaimlerChrysler said Chrysler made a loss of 124m euros in 2006 ($162m; £83m).

Leading US car firms have all been knocked by an over-reliance on thirsty pick-ups and SUVs, at a time when more American drivers are switching to smaller more economical cars.

We've also heard about Ford making huge losses last year, so the SUV is having a tough time, at last.

 

[ptabor]

My first reaction to your argument is that I don't think it will work in the way you want it to. Certainly it would provide income for the development of alternative fuel sources, but it will carry consequences.

It is my hunch that by taxing crude oil you are going to cause prices of pretty much everything to sky rocket. The corporations that make products, and have to make use of petrol, are not going to eat this cost, they are going to pass it on to the consumer. This will tighten the wallets of the poorest amongst us, as they will not only have to pay more at the pump but for pretty much everything they purchase.

Yes, it would probably help to speed the transition, but at what cost? Possibly crippling the economy?

I think that perhaps a better alternative would be tax breaks for corporations that market alternative fuels/products. For instance, if Ford sells a biodiesel vehicle, they could be granted some tax break per vehicle. This will encourage them to launch a marketing campaign aimed at selling alt-fuel vehicles. In addition to the corporations, we could make it more attractive for families to purchase such vehicles by providing tax breaks for driving alt-fuel vehicles (isn't this already done for hybrids?).


Again, this is only my gut reaction. I await your rebuttal.

 

[ShawnD]

This is why I believe that crude must be taxed in order to maintain a minimum price that makes alternative fuels like biodiesel competitive.

They don't need to tax crude as much as they need to not-tax alternatives. The tax on gasoline in Canada is about 33% since tax accounts for roughly 25% of the price at the pump. 25/75 x 100 = 33% tax.
http://en.wikipedia.org/wiki/Gasoline_tax

Europe has it way worse. In France, taxes account for roughly 70% of the cost. 70/30 * 100 = 233% tax

And you thought you were getted screwed at the pump. Thank god you're not french.

 

[Ivan Seeking]

They don't need to tax crude as much as they need to not-tax alternatives.

THAT is an excellent point. I think the alternatives are taxed the same as petro, or nearly so. I would have to check on that to be sure. When investigating the fuel market, the testing costs are what stand out as the major factor for suppliers, but the taxes between there and the pump are another matter altogether.

Of course, corn based ethanol is claimed to be competitive only because of government subsidies intended to save the farmers, but biodiesel is the real solution, and I don't think those suppliers receive any government assistance.