Cheap Oil Pops the Green Policy Bubble

big-bubble

Holman W. Jenkins, Jr. writes: Tesla, an electric-car company on which the political class has showered subsidies, rolled out its newest model last week, complete with high-tech safety features like lane-departure warning, blindspot monitoring, collision avoidance and self-parking. Tesla’s stock promptly dropped 8%, though probably not because these mundane features long have been available in other luxury models.

At $2.99, the price to which gasoline had fallen at some California stations last week, electric cars becoming a mass-market taste and not just an item for wealthy hobbyists recedes from probability. If Democrats especially start to find it politically no longer saleable to subsidize a toy for the rich, the company may be in real trouble.

Since World War I, the retail price of gasoline has fluctuated in a band between $2 and $4 (using 2006 dollars as a benchmark). Since the 1970s, though, politicians have repeatedly wedded themselves to policies premised on the idea that oil prices can only go up, up, up, in prelude to oil running out altogether.

In fact, Tesla illustrates a theme from a column here back in 2008, when everyone from President George Bush to Nancy Pelosi to freshman Sen. Barack Obamawas in a fever to simulate a deeper understanding of our Middle East entanglements by calling for new auto gas-mileage mandates.

These mandates, we pointed out at the time, would only divert tens of billions of auto-industry investment dollars to relatively mingy and uneconomic improvements in fuel mileage that car buyers don’t highly value. The real opportunity, meanwhile, was for revolutionary safety technologies like those Tesla is now belatedly introducing, which would necessarily be delayed by Washington’s misallocation of industry resources.

All through the 2000s this column applauded rising oil prices to ration existing supplies and stimulate new supplies to accommodate the growth of China and India. What goes up, though, must come down when investment produces a glut, when demand can’t keep pace with supply—and when major producers keep goosing production even at a falling price in order to keep producing revenues for domestic governments.

That’s what’s happening now. Saudi Arabia and Iran are slashing prices in pursuit of market share in suddenly slower-growing Asian markets. Vladimir Putin , whose budget goes red at an oil price below $110…(read more)

WSJ


One Comment on “Cheap Oil Pops the Green Policy Bubble”

  1. […] The Butcher Holman W. Jenkins, Jr. writes: Tesla, an electric-car company on which the political class has […]


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