The Most Sensible Idea on Domestic Energy Policy

Oil is a $130 a barrel and everybody in the US is hoping that it will fall soon so that they won't be spending $4 a gallon to fill up their SUVs. Out government is foolishly speaking about a gas tax holiday in order to slightly reduce the price of filling up and unable some relief at the pump. This is a mistake that is reflective of the mistakes that our government has made for years in its energy policy.

Cheap oil isn't going to fix our long term problems. In many ways, the worst thing that could happen to our energy policy would be for oil prices to fall dramatically over the short term. (I personally believe that they will fall over the short term, but will move much higher in the intermediate term).

Our government's policy should be to further fuel economy through taxation and incentivization for more efficient technologies. To this end, a gas tax holiday is precisely 180 degrees from the policy that the government should be pursuing.

I know it is controversial, but our government should be sending a loud and clear message. Oil is at $4 and our government should be holding it at that level through taxation. It should make clear that if oil falls, we will tax it more heavily to make sure that the price at the pump does not. Only then, will the government be able to further efficiency through effecting a change in behavior and will it be able to guarantee developers of more efficient technologies a return on their investment.

This is the policy that our government should have adopted years ago. Our failure to do it before and our misguided politicians should not stop us from doing it today.