Set the Oil Price Floor, Now

This is an American moment – one in which ingenuity and talent could change the world for the better. All we need is a Congress with the courage of its convictions. Uh-oh.

With oil at $90+/bbl, practically all of the interesting alternative fuels are economically viable, as is additional drilling in and around the United States. But most producers and consumers are still betting the price will fall to manageable levels. No one wants to build facilities and distribution networks, or modify their homes, cars and offices, only to find gasoline and heating oil becoming competitive again.

This is an American moment – one in which ingenuity and talent could change the world for the better. All we need is a Congress with the courage of its convictions. Uh-oh.

With oil at $90+/bbl, practically all of the interesting alternative fuels are economically viable, as is additional drilling in and around the United States. But most producers and consumers are still betting the price will fall to manageable levels. No one wants to build facilities and distribution networks, or modify their homes, cars and offices, only to find gasoline and heating oil becoming competitive again.

Now is the time for Congress to set a floor under the price of a barrel of oil – anything lower would trigger a tax for the difference. Pick a price that makes alternatives marginally profitable and that’s the price, regardless of market fluctuations.

It is a very American moment because America, acting alone, has the power to positively impact every major Western foreign policy priority. High-priced oil from the Middle East, Russia and Venezuela has put billions of dollars into the hands of people whose policies are inimical to ours. Radical Islamist ideology is propagated by Shi’ite Iran and Sunni Saudi Arabia – both support terrorism against Americans and our allies. Chavez’s anti-American populism thrives only where he can spend his oil windfall buying time and quiet as he undermines democracy and rule of law in our back yard, while arming with Chinese and Russian weapons. Putin has used Russia’s windfall to upgrade his military, even as he strangles his country’s nascent free press and democratic institutions.

The Saudi Foreign Minister recently stressed the importance to his country of good relations with Teheran, even suggesting a regional consortium to provide plutonium to the mullahs. He suggested America is to blame for regional tension. “To have further conflict would be very dangerous in an area which has such important strategic assets, such as oil,” said Prince Saud. “You can’t solve this like a bull in a china shop. We already have many bulls in the region, but only one china shop.”

Iran threatens Saudi interests directly and indirectly, but they share an overriding interest in maintaining oil sales and revenue. As the Saudis distance themselves from us, it is in our interest to be distanced from them; to take away the billions from the mullahs, imams and authoritarian rulers and restore them to their former inconsequential status. China and India will pick up some of the slack, but the price will fall as supply increases as we move to cellulosic biofuels, nuclear power, domestic drilling, ethanol, oil sands and “oil shale.”

So here is the challenge for Congress – forget about “tweaking” the system or, heaven forbid, subsidizing gasoline or heating oil for New England. Take a stand for American interests and pass an oil floor price that encourages long-term investment in alternatives.

If not for the security implications, then think of the impact on global warming and your own re-election chances as Americans take back their energy independence and enjoy watching the Saudis, the Russians, Ahmadinejad and Hugo Chavez try to find something else to do with their oil.