Biden trip to Saudi Arabia shows fossil fuel dependence is a recipe for misery
Petrostates reap the benefits of high oil prices, putting our American values and morals at risk.
As American consumers feel the pain from soaring gasoline prices, politicians are running for cover. Democrats blame Vladimir Putin’s war in Ukraine, Republicans blame Democrats and voters generally blame whoever’s in office. But the real problem isn’t the price at the pump – it’s who is getting the money.
This week, the average nationwide price for regular gas hit a historic high of $5 a gallon. Sky-high gas prices are bringing sky-high profits to oil companies, whose production costs have changed little since a year ago when regular sold for about $3.
American consumers buy more than 350 million gallons a day, translating into extra profits of more than $20 billion a month. This windfall is shared between oil companies and petrostates. Notably missing a share in the bonanza are the American people. Yet without them – without us – the superprofits would not exist.
Bowing to Saudi crown prince
A windfall profit tax, with the proceeds returned directly to the public like recent stimulus checks, would dramatically change the picture. The British government has announced such a tax. In the U.S. Senate, Rhode Island Democrat Sheldon Whitehouse has introduced a bill to do the same, but its odds of passage are remote to put it mildly.
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Instead we have the sorry spectacle of President Joe Biden preparing to shuttle to Saudi Arabia next month to plead for more oil from Mohammed bin Salman, the Saudi crown prince responsible for the murder of journalist Jamal Khashoggi – as well as for thousands of civilian bombing deaths in neighboring Yemen and for the torture of women’s rights activists and political detainees at home.
It will be an awkward moment for Biden, who vowed on the presidential campaign trail to make the Saudi regime "pay the price" for Khashoggi’s murder; hence the White House’s insistence that the visit is really not about oil. No doubt the Saudis will claim, if they increase output, that this has nothing to do with Biden’s visit.
Diplomatic niceties aside, it is clear that continued dependence on fossil fuels is a recipe for continued misery not only at home but also abroad. In petrostates like Saudi Arabia and Russia, the tribute coughed up by consumers in America and Europe is the lifeblood for repression and war. Complicity in these horrors should be awkward not only for presidents, but for us all. If the Biden administration does manage to bring down gas prices, with or without a knowing wink from the Saudi crown prince, whatever temporary relief it brings will come at the price of renewed vulnerability to moral and financial blackmail.
America's addiction benefits oil pushers
Meanwhile, Republicans blame Biden for not doing enough to ramp up domestic oil production. In Georgia, a political action committee backing the Republican Senate candidate Herschel Walker recently handed out $25 fuel vouchers while trying to put the blame for gas high prices on Democratic incumbent Sen. Raphael Warnock. These responses to the crisis are like drug pushers touting increased supply and free samples as remedies for opioid addiction.
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Proposals for a windfall profit tax hint at a more permanent cure for the nation’s gasoline addiction. Instead of remaining at the mercy of the oil pushers and pleading for relief whenever they tighten the screws – the game we’ve played since the OPEC oil price hikes of the 1970s, forever losing in the end – we ourselves should act preemptively to curtail the amount of oil and other fossil fuel we allow into the nation’s economy.
The government should auction permits to fuel suppliers up to this limit, just as carbon permits are auctioned today to power plants in the Regional Greenhouse Gas Initiative of the northeastern states. The auction revenue should then be returned directly to the public as individual dividends, just as Alaska does today with oil royalties in the Alaska Permanent Fund Corp.
Voluntarily curbing supply would trigger higher fuel prices, as the permits become part of the suppliers’ cost of business that is passed onto consumers. But in this case, unlike the situation today, the money would come straight back to consumers.
With carbon dividends, those who consume average amounts of fossil fuels break even: Their dividends cover what they pay in higher prices. Those who consume less than the average, which includes most low-income households, come out ahead: They receive more from the dividend pie than they pay into it. Those who consume above-average quantities, which includes most upper-income households, pay more than they get back, although they, too, are better off than when the money goes instead to fuel corporations and petrostates.
And because the average is pulled up by outsized fuel consumption by the rich (think mega mansions and rocket trips to outer space), most American families would come out ahead financially.
'Feebate' not a mere pipe dream
This is an example of what economists call a “feebate”: Each person pays the fee according to their use of the scarce resource, and all receive the same equal-per-person rebate.
This alternative reality for gas prices is not a mere pipe dream. The Healthy Climate and Family Security Act of 2019 proposed by Sen. Chris Van Hollen, D-Md., would do exactly this. Canada recently implemented such a system in four provinces, including Ontario, the country’s most populous. Recognizing that rural residents must spend more for transportation fuel, the Canadian policy provides them an additional supplement.
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Putting control of fossil fuel supplies in our own hands in this way would solve the gasoline crunch once and for all – not by lowering the price but by changing who gets the money. As a side benefit, this would help make a dent in the income disparities now threatening to tear the nation apart.
Last, but not least, it would help protect people here and elsewhere from further climate destabilization. If this sounds like a good idea to you, tell your neighbor and send a message to Washington.