A price floor would help wean America off oil.
Remember last summer, when gas prices broke new records every day and the era of "energy independence" was on the horizon? Gas is half what it was then, but not for long. When OPEC's planned production cuts hit, tightening the global supply of oil just when economies are poised to resume growth, the world may well face the worst oil crunch in history.
The way to avert the brunt of that? It might not be pretty at first, but a price floor – a government-mandated minimum – on retail gas will buy us the time we need to wean us off the oil.
Oil's prognosis is grim for one reason: When prices are low, oil companies do not invest in new projects. That means we are draining global reserves without replacing spare capacity. From North Dakota to Kuwait, new projects that looked lucrative when every barrel fetched $147 got shelved when prices plunged. Many of these developments will resume when prices rebound but, because it takes years before oil from a new field reaches the market, it will be too late.
Cheap oil has been the engine driving US economic growth for decades; its evil twin is pricey oil and, given time, it will drive our economy over a cliff.
The effects of oil scarcity are by now well understood: soaring food prices, social unrest, geopolitical conflict – euphemisms for hunger, food riots, and war.
Last spring, hungry masses in Haiti, Bangladesh, Egypt, and other countries took to the streets, burning cars and looting stores over skyrocketing food prices. Consider it a preview of what's to come – abroad and here at home – if we do not leave oil before it leaves us.