it made me reflect on the thought that from a orthodox economist's point of view, there's no environmental policy that can match correct prices. yammer about conservation til you're blue in the face. move prices enough, and keep them there, and if people believe that the change is permanent, they will move.
part of the story about lack of investment in alternatives to oil has been that the price of oil was so low, that the alternatives weren't profitable. and even when the price of oil reached the theoretical tipping point, investors were still skittish, because these are long-term investments, and if the price of oil falls again you're going to take a bath.
so what if the government could guarantee these investors that the price of oil in the united states will never fall below a certain level?
suppose the government were to announce today: from now until forever, a gallon of gas will never sell in the united states for less than two dollars, and a barrel of oil will never sell for less than fifty dollars, in 2008 dollars. if the market price falls below that, we will push it up through taxation and stockpiling.
it wouldn't do anything to help consumers today. but it wouldn't hurt them either. now people are groaning about $4. if it were $2 they'd have a big party.
but it would assure investors that any investment that's profitable at $50 a barrel will always be profitable.
folks have adjusted to the idea that gas is more than $2 a gallon. why not put that change in behavior in the bank for all time?