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The American Politics Behind Rising Gas Prices

By: Don Cayo
Vancouver Sun
September 6, 2008

Original link to column

There is a really big elephant in the room at the Beyond Oil transportation conference here.

It is one that Canadians - at least, those of us who go through life without our eyes screwed shut - will recognize, although it seems even larger here than on our side of the border.

It's this: When will somebody have a serious chat with the American people about the price of gas? The price in the oil-poor U.S. is, as I noted in Friday's column, only about four-fifths of what we pay in oil-rich Canada. And even our price - Gordon Campbell's carbon tax and all - falls well short of what our driving habit costs our governments and our society if you factor in the externalities like pollution and health issues, loss of life and property damage from accidents, the countless hours of lost productivity caused by traffic tie-ups, etc.

They talk endlessly at this conference - usually with a note of supplication or an edge of alarm in their voices - about the need for government "incentives," which, I suppose, means taxpayers will pony up.

But, I keep thinking, how much faster would consumers rush to alternatives if those who drive the most - or drive the least efficiently - were required to pay their full freight at the pump?

The politics of driving gas prices still higher is tough enough in Canada, and from everything I hear it would be even tougher there.

But the economic impact might not be that bad - at least in the medium term and beyond, after what would be an unquestionably difficult transition - if Americans could actually shake what President George W. Bush labelled their addiction to oil. Because the cost of doing what they're doing new is truly staggering.

James Woolsey, a former director of the CIA and now heavily involved in alternative transportation issues, shocked me - perhaps most others in the room already knew - when he noted that the U.S. borrows $2 billion a day to buy foreign oil. That's well over $700 billion a year, and it will be a $1 trillion a year if oil goes back up to $150 a barrel any time soon. (See my most recent blog post for an observation of the huge unintended consequence this has far, far from North American shores.)

"A trillion here, a trillion there - pretty soon it adds up," he said.

How true. And, to be fair to the pro-incentive crowd, it makes their requests for $100 billion here and a $100 billion there sound a good deal more manageable.

Over the last two days, the conference organizers, the Cascadia Centre of the Discovery Institute, pulled together more than 50 experts and policy-makers - they are sometimes, but not always, one and the same. Some were a bit dry and technical, but many offered sound, even startling insights. So let me, between here and the bottom of the page, briefly recap a couple that left me with a lot to chew on.

Rob Bernard, the chief environmental strategist at Microsoft, dazzled me with his ideas on the myriad ways that software can micro-manage everything from our driving habits to mix-and-match car pools for people who work variable hours. But he reassured me that I shouldn't worry too much about the aspects of the many ideas discussed here that are too technical for me to fully grasp.

"The problem isn't technology," he said, oozing confidence that whiz-bang solutions can be developed pretty well as fast as they're needed. "The problem is policy. It's behaviour."

And those are issues I feel more confident I can get my head around.

Bernard also provided the most intriguing insight of the conference into the potential strength of the business case for taking this stuff seriously.

He noted both the recent performance of the American solar industry - 40-plus-per-cent growth for each of the past two years - and the skeptics' reaction that it can't last. And then - and bear in mind this was a Microsoft man speaking in the heart of the Redmond-based Microsoft empire - he mentioned that he knew of another industry that had grown at 40 per cent a year for 20 years straight. Hmmm.

Finally, Shai Agassi, the whiz-kid who quit a fast-tracked executive position at SAP, the world's largest maker of enterprise software, to found his own enterprise, Better Place, which bills itself as the world's first electric-car grid operator.

The absence - he's sure it is temporary - of any electric cars on the road does not dampen his evangelical/entrepreneurial zeal in the least.

The economics are sound enough, he says, that he can make a go of it with current gas prices. It'll cost consumers $12,000, he says, for the batteries needed to power a plug-in car. But those batteries can last for 250,000 miles - a cost of five cents per mile. Add two cents a mile for recharging with energy produced from renewable sources, or one cent if the source is non-renewable, and plug-in electric cars are cheap at the price.

Of course, Agassi also wants the federal government in Washington to pony up $100 billion to help American automakers tool-up to provide the electric cars and batteries for his grid to recharge.

(Ed. - see also this Don Cayo blog post from the conference titled, "Former CIA Boss Says Americans Are Funding The Bad Guys").

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