Greenspan’s comments on oil

Alan Greenspan is, of course, the most recently retired Chairman of the Federal Reserve. He was appointed by Ronanld Reagan, and reappointed by George H. W. Bush, Bill Clinton, and George W. Bush. Before that he served as Chairman of the Council of Economic Advisors in the Ford administration. Previously in the private sector he was partner in his economic-consulting firm and served on the board of directors of several large corporations.

He, it should go without saying, is a fairly staunch supporter of free market capitalism.

Greenspan, in his book The Age of Turbulence, created quite a stir with “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil”.

Aside from that bombshell, though, his comments about oil and energy security, etc. are fairly conventional in economic circles. Here are snippets all taken from the chapter “The Long Term Energy Squeeze”, all emphasis added:

American oil’s historical role, however, ended in 1971, when rising world demand finally absorbed the excess crude-oil capacity of the United States. At that point, U.S. energy independence came to an end.

There can be very little doubt that global warming is real and manmade.

I have grave doubts that international agreements imposing a globalized so-called cap-and-trade system on CO2 emissions will prove feasible… The effectiveness of any cap-and-trade scheme, however, depends on the size of the cap. That is its Achilles’ heel.

There is no effective way to meaningfully reduce emissions without negatively impacting a large part of an economy. Net, it is a tax.

Spewing CO2 into the atmosphere is as much a violation of property rights as my dumping refuse into my neighbor’s yard. But protecting such right and assessing the costs of an infringement are exceptionally difficult because monitoring the cost is not feasible.

To achieve the twin goals of enhanced national security and curtailed global warming, the growth rate of U.S. petroleum consumption must flatten, and eventually consumption must decline outright. The big opportunity for displacement is on America’s highways…Another way to curb consumption would be a gasoline tax of, say, $3 or more per gallon, phased in over five or ten years with the resulting revenue used to lower income or other taxes. I come very reluctantly to taxes as an alternative way to accomplish what competitive markets could do…We need significantly higher gasoline prices to wean us off gasoline-powered motor vehicles.

I consider the argument that gasoline tax hikes are politically infeasible irrelevant. Sometimes the duty of political leadership is to convince constituencies that they are just plain wrong. Leaders who do not do that are followers.

The average number of miles driven per licensed driver has continued to drift upward… Drivers consume less gasoline [lately, due to modest price increases] only because they eventually buy more fuel-efficient cars.

The Age of Turbulence, Alan Greenspan

To summarize, Greenspan has no doubt global warming is real, and human-caused. He believes carbon emission cap-and-trade system can’t work, and that alternatively a large, revenue-neutral gasoline tax is needed to curtail consumption.