Nonetheless, I decided to recklessly ask the question..."What would happen if our national gasoline taxing strategies looked liked everyone else's? (i.e. they were much higher) If they did and this impacted consumption...what might the impact be? To answer these questions...several calculations were required. These calculations looked at (i) regional gasoline taxes relative to raw gasoline prices in those regions ("Tax Ratios"), and (ii) total gasoline consumption across the total population of "cars" (within those same regions - Source EIA). I was looking for correlation between Tax Ratios and gasoline usage per car (let's call this relationship "Tax Impacted Consumption" "TIC")). There is no doubt that there is a relationship.
I then looked at this relationship and interpolated what US oil consumption by "cars" might be if we experienced TIC similar to these other regions. The following graphic reflects the decrease in total daily US oil consumption based on these interpolations. As an example, if the US experienced TIC similar to that in Italy, US oil consumption per car would decline and total US consumption would thus decline about 13.4% or 2.7 million barrels/day. WOW - THIS IS KIND OF A BIG NUMBER.
Now this is just rough math here and there are any number of caveats, qualifications, and exceptions. BUT.....it feels right. And it shows the significance of what a change in price could have on our daily consumption. As a side commentary I believe it reflects an overall American behavior pattern of excess more than a reflection of our geographic expanse.
Human behavior takes years and years to change. The data above narrowly suggests that an immediate federal tax increase would have the impact of curtailing usage substantially- but would probably include a mob setting fire to the District of Columbia so this is not going to happen. So if we can't really change behavior through taxation what should we be advocating as a solution and thus - what do we do as investors ---where is the money? --- If you need the investment return to occur in the next 10 years...the opportunity is NOT in the wildly popular notion of alternative energy.
Realistically...it is in things that allow consumers to not have to reduce consumption of current sources. This implies investment opportunity on the supply end of the equation (getting more out of the ground faster or to market on a less costly basis) and on the consumption end of the equation (better car engines, lightbulbs, etc.).
I believe the current investment frenzy around alternative energy is a kneejerk reaction to high prices at the pump and thermostat. Alternative energy is popularized as an alternative to a perceived "supply" problem that will not be willingly offset by a revised national federal taxing strategy. If the logistics problems are solved, current strategies using alternative energy will become less necessary and alternative energies will not have investment importance within the lives of their financial backers.
We have plenty of raw energy sources (coal, oil, natural gas) right now...PLENTY. Converting these sources to usable forms and moving them to end-users is the problem. I am not saying demand vs. supply is not a developing issue but rather logistics is more responsible for current "beltway" politics.
We (SMHPEG) are investing in (i) finding efficiencies that get current forms of raw energy from its source point to its use point at a lower cost, (ii) lowering the cost of converting raw energy into applicable power, and (iii) dealing with all the associated risks of points (i) and (ii).
What will happen when we all learn that we have much more of a distribution and conversion problem...than a supply problem per se?
Move to Italy (which would not be so bad).
