Low Cost Energy Should Be Our Aim
by David Reavill
The nation went on one of its periodic campaigns against sin a generation ago. These sins were venal but considered to be unhealthful. The government targeted alcohol, tobacco, and gambling in these indulgences, which all fell under government approbation and taxation.
However, unlike the Prohibition of the 1920s, which was a total failure, governments used a different method to curb people’s appetites this time. They would tax cigarettes, beer, wine, and even your winnings at the blackjack table. These were called sin taxes, and the objective was to raise the cost, thereby reducing the demand for all of these “transgressions.”
As Bill Clinton said of Abortion, to make these activities “rare” but still legal.
The economics behind the “sin tax” was sound, increase the cost of virtually anything, and you will reduce people’s demand for those items. It’s a simple supply and demand equation that works every time.
And that’s why today’s action by tiny Finland is so puzzling. The Finish Government joins a long line of European Governments in taxing traditional carbon-based energy. From price caps, a tax by another name, to carbon-based taxes, and now windfall profits taxes, it’s clear that Europe can’t get enough of taxing traditional energy.
It is estimated that tiny Finland’s new windfall profits tax may bring up to $1.3 billion into their government’s coffers. Where do you suppose that money comes from? You are correct: higher prices are passed along to the consumer.
As the New Year dawns, energy taxes throughout Europe are scheduled to increase. And Europe is far from alone. The Biden Administration also has a raft of new energy taxes slated, to begin with, the New Year. Front and center for all these taxes are any types of carbon-based energy. During the campaign, Joe Biden focused on any power that derives from a carbon derivative, from oil and gas to coal. Fossil fuels are enemy number one in the Biden White House.
And so they’ll get more expensive in 2023. Much more expensive. We need to prepare ourselves for those higher prices at the gas pump, as well as in our heating bills, as well as any other means that we use the dreaded traditional energy sources.
It is a singleness of purpose that I find astonishing.
Of course, Finland, the European Union, and the Biden Administration know that these new energy taxes will increase the cost of those products. That’s their purpose.
Each of these politicians is marching to the drum of the Green New Deal. Although that program may have been shelved, its goals and objectives remain. And to a large extent, we will see those goals implemented this year.
Unfortunately, eliminating carbon-based energy is not an option for most of us. Especially this winter. Instead of raising the cost of natural gas, heating oil, or other fossil fuels, shouldn’t our objective be low-cost energy?
As it stands, these new taxes, and their associated higher costs, will cause us to cut back on other expenses. Our discretionary spending will be cut to the bone. Eating out, watching a movie, and shopping at the Mall, will give way to paying these higher energy costs. That’s already started.
Just as during the economic lockdown a couple of years ago, the “non-essentials” will again be on the chopping block. With the very survival of many “mom and pop” shops and stores in question. And inevitably, those non-essential businesses will feel the pinch.
Reduced discretionary spending will impact the overall economy, and this is why about one-quarter of the big Wall Street Banks are now calling for a recession by Q3 of 2023.
You see, there is another economic principle at work here. There are certain items, items that we need to survive, that are not subject to price. We will buy these items no matter what because our very survival depends on those items. Food is like that. No matter the price, we will continue to purchase the food we need.
Our energy demand is inelastic, to use the economic term. This year, politicians throughout the West will learn that energy falls into that category. No matter how high these various taxes drive the price, we will still purchase the energy needed for survival. For those who live in the cold northern latitudes, the power to heat our homes is not an option. It’s a necessity.
So as this winter unfolds, when we take out the checkbook to pay those energy bills. Remember, this current energy policy is designed to limit additional low-cost supply.
Less energy supply is the opposite of what should be our aim. Low-cost energy for people to heat their homes and drive their automobiles is the real goal we should pursue.