Question: Shouldn't We Keep Government Out of This and Let Market Forces Determine What Happens?

Monday, May 23, 2011

The mandate question is a big one, and for good reason. I don't like mandates either. But mandates could justifiably be used under some circumstances, and this is one of those. Our government has a responsibility to break up monopolies that are harmful to our citizens. Certainly OPEC qualifies as such. They use their cartel to unfairly control the price of oil in a way that profoundly harms the American economy (here's how they do it).

But we cannot sue them. We need their oil. Why do we need it? Because 97 percent of all transportation relies on oil. So our entire economy rests on oil. We can't risk distrupting our fuel supply, and they would certainly retaliate with another oil embargo.

However, the government can break up this monopoly in another way — with the Open Fuel Standard. Right now most of us, when we want to drive, have only one choice: gasoline. It is a monopoly. And the only reason we have no choice is that our cars can only burn one fuel.

Automakers are slowly shifting over to flex fuel vehicles already, but going too slow. By the time they get around to it, OPEC will have bled us dry. Taxpayers bailed out American automakers. They owe us. And this is a very small thing for them to do. In fact, Ford and GM already make plenty of flex fuel cars which they sell to China and Brazil. Brazil had a flex fuel mandate awhile ago. It has been good for their economy and made them much less vulnerable to recessions caused by OPEC's destructive manipulaton of oil prices. And Brazil went from an oil importing country to an oil exporting country.

Right now, the United States is in a Catch-22. Automakers don't want to make cars for which there are no fuel stations. And fuel stations do not want to add pumps for a fuel few cars can use. The Open Fuel Standard gets around this impass, and makes it happen quickly. If we're going to do it, let's get it over with and get on with it. As soon as the bill passes, the whole industry will begin shifting over, confident that there will be a growing market for their fuel.

The following is an excerpt from Anne Korin's testimony before the House Committee on Foreign Affairs which addresses the mandate issue:

In a perfect world government would not need to intervene in the energy market, but in a time of war, the United States is taking an unacceptable risk by leaving the problem to be solved by the invisible hand. This is especially true since the energy market is anything but free. It is manipulated by a cartel, heavily rigged in favor of the status quo, and, as the case of the ethanol tariff shows, riddled with protectionism.

Every year that passes without Congressional action to ensure that new cars sold in America are flex fuel vehicles is another year in which 17 million gasoline-only cars start their 17-year life on U.S. roads, further binding us to foreign oil. On the grounds of national security and in the interest of stemming the hemorrhaging of our economy, Congress should take swift action to require that new vehicles sold in the United States are flexible fuel vehicles. Such an Open Fuel Standard would level the playing field and promote free competition among diverse energy suppliers. Choosing not to embrace an Open Fuel Standard, is choosing to preserve oil’s monopoly in the transportation sector, and with it OPEC’s growing stranglehold over the global economy.

Read more:

Breaking Monopolies is One of Government's Most Important Responsibilities

Why You Should Support the Open Fuel Standard Even if You Are Against Mandates in Principle.

Does a Federal Open Fuel Standard Violate Free Market Principles?

2 comments:

Anonymous,  June 27, 2011 at 8:02 AM  

No, I don't agree this is the best way to accomplish the goal. The best way is an import tarif on Muslim oil.

Abe Shackleton June 27, 2011 at 1:13 PM  

Interesting idea. But wouldn't an import tariff make gasoline sold in America MORE expensive? One of our goals here is to make it LESS expensive.

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