New Approaches on Energy and the Environment

CHAPTER

4

Slaking Our Thirst for Oil

by Ian Parry and Joel Darmstadter

Mr. President, in response to the dependency of the U.S. economy on a volatile and uncertain world oil market, we urge that you support phasing in a modest tax on all oil consumption. In addition, we believe that you should plan to expand the Strategic Petroleum Reserve (SPR) and actively draw it down in the event of severe and prolonged oil supply disruptions. The oil tax would encourage energy conservation measures throughout the economy, promote R&D on alternative fuels, and help gradually reduce our vulnerability to price volatility over the long term. More active use of the SPR would help cushion the effects of short-term upheavals in the oil market. These two measures ...