Jerry Taylor over at the Cato Institute chimed in on Cliff’s piece earlier today here, expressing his concern over the message that flex-fuel mandates will send to the market.
Energy Victory author Robert Zubrin writes in to note that we don’t have a free market in oil; OPEC is manipulating that market, and the U.S. should manipulate it right back:
The issue is not ethanol vs. gasoline – the issue is fuel choice vs. OPEC control of the world energy supply.
Right now there is no constraint on the price of oil, because gasoline is the only game in town. They’ve raised the price of oil to $100/bbl. Unless there is fuel choice, they can raise it to $200/bbl, and are already talking about doing so.
By mandating flex-fuel vehicles, we make the fuel market competitive. This will put a permanent constraint on the price of oil. We need to do that to defend our economy and that of our allies.
Methanol and ethanol are both competitive against oil at the $50/bbl range. Breaking the OPEC monopoly with an open fuel market would force fuel prices down to that level. It is true that oil can be produced for less than that. In a free market, oil producers would be forced to do so. They are not being forced to do so now.
Now, if we wanted to hurt them even more than that, we could violate the free market and introduce tax and tariff policies that favor alcohols over oil. There are pros and cons to doing that, but that is a different debate.
But certainly it is in the vital interest of Americans that we don’t have a closed fuel market controlled by our enemies. We need to open the fuel market, and making flex fuel the required vehicle standard is the only way to do that on a time scale relevant to dealing with the current crisis.