The Oil Drum | Vinod Khosla - Give Him Your Ideas

333 comments on Vinod Khosla - Give Him Your Ideas

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LevinK on July 27, 2006 - 9:12pm

Ethanol from corn may be not so good idea, but ethanol/propanol directly from coal and/or natural gas may be put to work. We may even capture CO2 from the air and use nuclear and/or renewable energy to produce ethanol.

Otherwise - there is one "single bullet" for US, namely a higher gas tax. The rest will happen naturaly.

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Glenn on July 27, 2006 - 9:19pm

Yes, a steadily rising gas tax is the single best thing we could do.

I would love for that money to be dedicated to providing alternate transportation options to local areas heavily dependent on automobiles...

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Prof. Goose on July 27, 2006 - 9:25pm

yeah, I would suggest pointing to our various discussions on increasing the gas tax, as well as the discussion as to whether or not the gas tax is regressive as well.

I still don't see the political will for that to happen...but a few voices screaming at the trees are better than none.

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Robert Rapier on July 27, 2006 - 9:32pm

Is there a essay of some sort on this? I have seen mention of it here and there, but didn't know if an entire essay had been devoted to it.

Cheers,

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Prof. Goose on July 27, 2006 - 9:41pm

there's a few. a couple of mine, one by Yankee (re: the regressive gas tax), etc. I'm on my way out the door to pick someone up at the airport, but I'll try to put them in here when I get back.

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Glenn on July 27, 2006 - 9:51pm

Here's a quick search on the key word gas tax here on TOD. More coming

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Halfin on July 27, 2006 - 10:14pm

I'm sorry to be negative, but a gas tax is last year's idea. You don't need a gas tax when gas is getting more expensive all the time on its own. Maybe if gas falls back to $1.50 or $2.00 it is time to reconsider the gas tax. But not if gas is $3 and $4 and $5.

The commodities markets seem to have woken up to the reality of future oil shortages. Even with a relative glut of supply today, prices are high on the assumption of shortages in the future. That's exactly how markets are supposed to work and it is one reason we have them. The result is that even if the geopolitical situation improves, oil prices are likely to stay high, making gas high, and continuing to encourage conservation and development of alternative resources.

In short, we are on a good track right now. We have the effect of the gas tax but it is coming from market mechanisms, making it much more efficient and economically rational.

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Glenn on July 27, 2006 - 10:19pm

I disagree. Simply put, a gas tax helps us stay ahead of the game and provides a cushion for society to use the money collected to offset the negative effects.

Alternately, if we were to remove all the current subsidies to oil and gas, that would be an even better first step.

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markincalgary on July 28, 2006 - 5:52pm

I somewhat agree with Halfin and peakguy, which makes me feel both clean and dirty at the same time.

We should be advocating removal of subsidies to oil and gas companies long before we push for an increased gas tax. I suspect that if all the direct subsidies were removed, and some of the (many many many) indirect subsidies the market would be much more likely to take care of itself.

In the current political climate, this is an easier sell than making gas prices even more expensive through taxation.

Only with that log burning in the fire would I throw in the much bigger and greener increased gas tax log.

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Joseph Palmer on July 27, 2006 - 10:41pm

I agree, a gas tax now is probably too little, too late.

Hitting the average Escalade driver in the well-padded wallet with an extra buck (or two, or three) will have little effect on their consumption

A real supply shortage* -- with gas lines, ten gallon limits and odd-even fill-up rules -- will hurt them where it really, really, hurts, in the pocket watch.

A month of waiting in a gas lines is a great inducement to consumption adjustment.

I wonder how long it will be before the "Will wait in gas lines for food" signs appear.

*Say if Saudi Arabia or Iran decide to apply pressure to force an Israeli cease fire by cutting oil exports.

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LevinK on July 27, 2006 - 11:17pm

Hm, I don't really think so. In US gasoline is still a relatively minor item in the total cost of owning a car - far behind the initial cost, and in most cases quite behind maintainance&insurance.

The rationale behind higher gas tax would be primarily to cover the externalities associated with oil consumption - military expenses, pollution, traffic, suburban sprawl and associated waste of resources for land, roads etc. Secondary we have high level of uncertanty within the oil market about the true state of reserves and prospective production which makes the market quite inefficient in pricing in future scarcity.

In all cases gas tax will buy us time for the mitigation response and will make it smoother. Maybe it is true that politically it is too late to impose it, but this is a different problem.

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Sterling on July 27, 2006 - 11:52pm

I think the gas tax is politically impossible with the Bush administration in office for another 2½ years and especially before the dire nature of the current crisis is really apparent. It is very unlikely that a venture capitalist would want to take that bitter pill to the current powers that be.

I think he would want to champion some technical fix, something for which people will think he has some credibility. Something like Robert's biodiesel from algae or wind power. He might be willing to champion a new generation of nuclear power plants that will inevitably be a big part of our mitigation but which is still pretty politically radioactive. Or possibly put money into developing new battery or fuel cell technology.

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LevinK on July 28, 2006 - 9:38am

I agree. To wait for a enterprise person to advocate for whatever tax there is, is not very productive idea.

A possible exception would be if the capitalist was not advocating it from a point of view of a seeking for a successful enterprise, but because he is concerned about the long-term stability of the system as a whole. A rich, successful VC like Khoshla may very well fit the latter category if he wants to, but his support for ethanol (the limitations of which I'm sure he is aware of) makes me think that he doesn't.

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haggisbasher on July 28, 2006 - 12:52am

A gas tax is needed which is engineered to ensure that regardless of the underlying cost of crude, the price to the consumer will steadily increase. This would provide the predictability required to spur investment in alternatives, and a permanent change in attitudes to consumption. Revenue raised can be used to mitigate the effects of rising prices on vurnable sections of the community.

How to make it politically acceptable - that is the real challenge.

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WinterIsComing on July 28, 2006 - 4:56am

A better way to frame the debate would be to relentlessly pursue the huge disproportion between government support for fossil fuel industries vs. alternative energy industries. Have you seen the chart of newly installed wind power capacity in the US (somewhere at awea.org)? It looks like a roller-coaster because there is a tax credit for wind power which has to be renewed by Congress every 2 years. Consequently, no-one installs new capacity in the "renewal years" since they don't know if they'll get the tax credit. That's insane! The tax credit should be extended to at least 5 years so that the environment becomes a bit stable - the Spanish model of a minimum rate at which utilities must buy renewable power might also work. It sure does work for Spain.

In short, the general public is starting to realize that renewables will be crucial in energy independence. This realization can and should be leveraged to adress the imbalances in government support for various energy industries. Shifting support from Big Oil to renewables can be presented as a revenue-neutral and labor-market-neutral policy that is very hard to refute. Another angle is that it's a fitting "punishment" for Big Oil's "excess profits".

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MUDLOGGER on July 28, 2006 - 9:30am

Do you have anything like the UK Annual 'road fund licence'? Basically a tax on the vehicle itself.

This could be linked to engine capacity / mpg / carbon emissions. The bigger the engine etc , the higher the tax.

This has started to happen in the UK , but with minimal effect yet as the difference is not that great in tax rates and if you can afford a large 4wd, you can afford the tax difference.

One side effect however is that it bites impoverished hill farmers who need land rovers more than it bites a 'Chelsea Tractor' driver.

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Fernando on July 28, 2006 - 9:33am

I can talk from my experience here in Argentina (and I know that's like comparing pigs to bicycles).

Gas has always had an important tax here, in fact every fossil fuel.

Today, %60 of what you pay for filling up your tank is gas tax. I think this follows the general pattern in Europe.

We "achieved energy independence" more than 15 years ago and today Argentina is a mild oil exporter and our cars are small just like the Europeans.
That's a different pattern of what you could see in México or Venezuela (comparing apples to apples this time) where, as far as I know, gas taxes are not so high and cars are bigger and not so efficient.

Of course, timing issues regarding the USA case can not be ignored.

Regarding the "efficiency and rationality" of markets, the idea of having your A/C on while you're not at home, driving thousands of miles each month to get to your work, using SUVs to get to the grocery store around the corner, are IMHO very wasteful behaviors. This has been known for years in Europe, where energy taxes have played an important role.

Best

Fernando

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tom deplume on July 28, 2006 - 4:05pm

Forget taxes. If the tripling of gas prices in the last 5 years hasn't lead to significant redutions then a piddly little tax will do nothing but put an extra burden on the working poor. Only rationing of petroleum products is gauranteed to reduce consumption. The credit card readers on gas pumps can be used to ration sales. The Internet can be used for the trading of rations.
If you favor having the government support conservation efforts and production of alternative fuels then it should come from returning to the income tax rates of the 90s. Bring the troops home would free up hundreds of billions of dollars for healthier uses.

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sofistek on July 29, 2006 - 7:11am

Yeah, rationing is a good idea. If every person (regardless of whether they had a car or not) had a ration, it would be fair. Rations could be pooled, for car sharers or families, for example. Rations can be traded in whole or part. Rations can be trimmed each year, to ensure a lower consumption over time, perhaps in line with production decreases, and leaving a surplus for sustainability projects to prepare for the future.

Tony

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cacciato69 on July 30, 2006 - 3:06pm

you speak my mind, except that the priority should be ending military drain on oil/gas and then ration the public ..

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jim burke on July 28, 2006 - 4:05pm

Mexico and Venezuela produce their own oil and have enough for export; Argentina does not.

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Fernando on July 29, 2006 - 8:19am

OIL
Overview
With around 2.7 billion barrels of proven oil reserves, Argentina is a significant player in the Latin American oil market. After peaking in 1998 at 916,000 barrels per day (bbl/d), Argentine oil production has steadily declined; nevertheless, in 2004, the country was still the third-largest oil producer in South America at 692,600 bbl/d. Argentina consumed 397,000 bbl/d of oil in 2004, with net exports of 295,600 bbl/d; Argentina's oil exports go primarily to Chile and Brazil.

http://www.eia.doe.gov/emeu/cabs/argentna.html

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Gunga2006 on July 28, 2006 - 8:27am

President Bush said America needs to break it's addiction to foreign oil and he is being criticized for not putting his words into action. A gas tax with the revenues directed to tax rebates for individuals that install solar, alternative energy and rainwater harvesting systems is a logical next step.
The tax would give people incentive to reduce gasoline consumption and the rebate would give people incentive to install alternative energy systems on their homes, further reducing our dependence on foreign oil...
or even take a penney from current gas taxes to give out as tax rebates for alternative energy.
Surely, they can do something to get us moving down the best path.
something? please? save us from ourselves? a little?

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step back on July 28, 2006 - 3:49pm

Surely, they can do something to get us moving down the best path. something? please? save us from ourselves

Actually, no they can't agree to governement intervention in what they consider to be an area where "The Markets shall provide".

It is against their religion.

They believe that the government should not pick the winners and losers. Only the Free Market (and the Invisible Hand) is allowed to pick the winners and losers.

What they don't understand is that Mother Nature has ultimate pick of the winners and losers.

Right now, because of our unwavering worship of the Adam Smitian religion, Mother Nature has the human species in the "soon to be de-populated" column.

We need to get the radical fundamentalists expelled from the Smithian churches. Only then do we have a chance.

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cacciato69 on July 30, 2006 - 2:36pm

Amen.. the question is when do we take this ideology seriously and respond in a way that they can still hear us and god (the invisible market hand) only knows what that might be

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Engineer-Poet on July 28, 2006 - 9:09pm

would love for that money to be dedicated to....

NO. Don't you remember what happened when we "dedicated" money to biofuels? We got billions in profits for ADM and no improvements to speak of. That's part of the problem.

My impression of sentiment over gas taxes is that people see it as another government ripoff that will increase their burdens instead of reducing them. The only way to rebut that idea is to dedicate every cent of that money right back to the taxpayer's pocket. If they see it as rewarding the virtuous and penalizing the wasteful, they might get behind it.

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Kevembuangga on July 29, 2006 - 1:57am

The only way to rebut that idea is to dedicate every cent of that money right back to the taxpayer's pocket.

This should work but it WON'T, see my reply to one of your previous comments.

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Engineer-Poet on July 29, 2006 - 12:31pm

You make a empty claim.

Taxing oil, or carbon, and putting that tax right back in people's pockets gives a "price signal". It "disadvantages" oil and carbon. It creates a relative advantage for anything which uses less, or none.

It directly rewards conservation measures.
It also directly rewards all replacement measures.
The only way the system can be gamed is if there are exemptions, and those would be relatively transparent.
Giving the money back to the people eliminates the "unaffordable cost of living" claim; the only people paying more than they got would be those who used more than average.

It's strange that Smithians claim on the one hand that luxury taxes destroy the market for e.g. yachts by discouraging consumption, but turn around and say that taxes on gasoline won't discourage consumption. I smell hypocrisy.

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Kevembuangga on July 29, 2006 - 1:35pm

Sorry, total misunderstanding on either side or both!
I am not arguing that a tax won't work (I actually don't know) but that NO governement will pass such a tax at a significant level, the ones which seemingly have have done so just to get the dough.
I am no Smithian.
Did you read the links I gave?

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A Siegel on August 7, 2006 - 8:19pm

Agree with need for gas tax ...

But I am uncertain about its efficacy ...

Gas at the tank has tripled in the past seven years, yet fuel use has gone up ... Thus, uncertain about the the elasticity of demand against price. Traveling in Europe, it is impressive to see the slow but steady introduction of larger vehicles (even SUVs) on European roads over the past 10+ years. 4x4s are not "rare" in France, for example, as they were just a few years ago.

Now, the benefit of a gas tax would be the certainty of the increase -- no expectation it would fall. And, a gas tax that came in to start at, perhaps, 30 cents/gallon with a guaranteed step increase (2 cents / month) would create a clear signal to the entire market space that there would be continued incentives for fuel efficiency, alternative fuels, and changed usage patterns (including better urban planning).

And, the best would be if that money were (mainly) targeted to moving toward a more sustainable and prosperous energy future.

By the way, I think that gas tax is not "it" -- carbon tax, with the same sort of explicitly stated growth. Not great to move people off oil and onto coal-based fuels ...

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