Should Petroleum Products Have Controlled Pricing Or Higher Taxes To Curb Consumption

While there are some latest developments that suggest that price of crude may again begin to rise upwards after a long downturn, it is still unlikely that they will reach anywhere close to their previous heights any time soon. This means that high price is not as much an issue as is the debate about allowing the market to determine its prices. Do we want freedom from control or greater Government control? Is the rhetoric about freedom overdone?
Should Petroleum Products have Controlled Pricing or Higher Taxes to Curb Consumption
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" O' Lord! Give us freedom from political rhetoric
Let our souls be free from the corrupting greed
and let us save ourselves from the destruction
that we are about to cause ourselves and our children

O'Lord! Give us the wisdom to understand
the true meaning of freedom!"

Abusing the Word 'Freedom'

'Freedom' is a highly abused word, especially for those who want to have everything without any responsibility. 'Freedom from market forces' is not very different from 'freedom from responsibility' in the case of petroleum product prices, and anyone asking for freedom to consume and destroy without responsibility is advocating destruction, not


If anyone tries to sensibly understand why consumption of petroleum products need to be reduced, it would not take more than a minute to recall that fossil fuels are fuelling the worst environmental threat faced by mankind in a long time. This will become worse as millions of human beings, so far deprived due to their poverty, now aspire to enjoy the fruits of fossil fuel energy as part of growth and development. As they adopt the 'developed' lifestyle, and add to the consumption of gas in Asia and Africa, a literal doom would be imposed on the future of the human race.

If there is a truth that will 'free' us from this debate, it is the fact that we need to reduce the use of petroleum products at all cost, and we have no other alternative to resort if we wish to avoid and mitigate the impending disaster!

Role of Market Forces

Market forces ensure that when a commodity is scarce, it is used only by those who are ready to pay (read sacrifice) the maximum for its use. Thus, scarcity leads to price rise, which in turn leads to reduction of consumption, and so the balance is maintained. It is this very price rise that can actually induce the people to cut down its consumption and try to find alternate fuels, and make suitable adjustments in our life style NOW, instead of consuming more of it and in the process, threaten the future of humanity further.

It is not that there are no alternative fuels available. In fact our planet receives enough sunlight to sustain all our needs for eternity. But making use of that energy requires a lot of effort in the form of innovations in technology, and development of infrastructure. Till now, nobody considered it worthwhile, because two decades ago, crude was being sold at US $ 10 per barrel, and solar energy would have cost twenty to fifty times that amount. Today, crude is costing more, while cost of solar energy is falling seven percent every year. To let petroleum be substituted by alternative energy, it makes a lot more sense to invest in solar energy.

I am not talking about heroic sacrifices here. I am just reminding how market forces have the potential to find a solution to the problem of not just energy but also rising environmental temperature, the cost of which to humanity as a whole will probably be much higher compared to whatever we may have to pay for gas and petrol today and tomorrow. Their rising price, even with inherent speculation thrown in, is a panacea that we all need. We need it to force the energies available in our society to work for finding long term solutions to our problems of falling gas reserves and rising environmental temperatures. Without it, we will all continue to live in our selfish fool's paradise till one day when we

will realize that we are in the midst of an irreversible disaster.

Scenario of Controlled Gas Prices

Take the scenario where petroleum product prices are controlled. Let us presume that the world forces come together to break the monopoly of oil producers and put a cap on speculation of gas prices. Imagine that the gas prices fall further. What next? What happens to their consumption? It will continue to rise, and presuming prices continue to keep low, nobody will be willing to invest in alternate fuels either. One does not require a sophisticated computation to see what the result will be. In such scenario, climate changes will continue unabated. That it will be almost fatal is not difficult to say, even at this stage.

Alternative Course of Action: Universal Carbon Tax

Instead of controlling prices of petroleum products to reduce their consumption, a better option is to fix a specified tax on their consumption. To make it more acceptable, it can begin with a somewhat smaller than target rate, and then gradually increased by a one or two percent till we are able to achieve our objective of bringing major changes in consumption behavior patterns, and promoting alternative clean fuels, especially solar energy, which actually has the potential to save the humanity from the vagaries of climate.

To make this effective, an even better course of action would be to get a universal political commitment by every country for imposing such tax within its territory. In fact, a universal pact, backed by popular backing and a global understanding will enable the politicians to take this bold step, and the fact that stand to keep the much needed and so precious tax revenue for the priorities of their governments means that they are more likely to love it than hate it.

With this one step, we can possibly change the course of climate warming.

An Opportunity that We must not Let Slip

Freedom is essential. However, what we require is not unabated and irresponsible freedom to consume in the market, but freedom of the market from irresponsible consumers that consume without a thought or concern about the social costs, and in particular future costs on humanity, which are being imposed by their consumption. We need to ask for freedom to ensure that this failure of the market forces do not become a threat to whole of the humanity. We need freedom to let it bring about the necessary changes in our life-styles, to let it push the technology for using alternative fuels and to let us save our planet from ourselves!

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Prey to god that lawmakers do not let this opportunity for correction of our greed slip by, because if that happens once, we may never get another chance.

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