The Oil Drum: Europe

With Consumer Prices Index (CPI) rising to 3.3% (year on year to May-08), the fastest rate of increase in over a decade, the Governor of the Bank of England has written to the Chancellor to explain.

Open letter from Mervyn King governor of the Bank of England to Alistair Darling, Chancellor of the Exchequer. Click for full letter.

Apropos of yesterday's gas tax report and discussion, today we bring you Alan Drake's ideas on post-peak mitigation. Alan is an engineer, former accountant, and professional researcher based in New Orleans with best hopes for many. Alan would also like to thank the lovely and talented Wendi Berman for her editing skills and assistance.

Many proponents for public spending on Post-Peak Oil mitigation are attracted to gasoline and diesel taxes or more generic oil and/or carbon taxes. In an era of rapidly increasing oil (and all other energy) prices, passing such taxes will be politically difficult and take precious time.

I would like to propose an alternative tax for Phase I of Peak Oil mitigation that adheres to Sen. Russell Long’s famous dictum “Don’t tax you, don’t tax me, let’s tax that fellow behind the tree!”

World Trade Organization (WTO) rules allow for a specific exemption that will allow the United States of America to impose a non-discriminatory tariff (it applies to all goods and taxable services, with a specific exemption for essential goods) if the funds raised are used to reduce our structural trade deficit, i.e. our oil consumption.

Specifically, the WTO allows nations with a structural balance of trade deficit (which the USA certainly has) to apply a non-discriminatory tariff if the funds from that tariff are used to reduce the structural trade deficit (which reducing oil use certainly would do). A separate section of the WTO treaty allows the importing nation to exempt “essential” goods.

In 2006, the USA imported $1.861 trillion in goods (and exported $1.023 trillion). This allows for significant revenues from a small percent tariff.

In 2006, 92% of the primary energy consumed in the UK was derived from fossil solar fuels - oil, natural gas and coal.

Not so long ago the UK was self sufficient in these energy resources but now we are importing increasing amounts of all three.

Dependency upon imported energy undermines UK national security and will have potentially dire consequences for the balance of trade.

In 2006, 92% of the primary energy consumed in the UK was derived from fossil solar fuels - oil, natural gas and coal.

Not so long ago the UK was self sufficient in these energy resources but now we are importing increasing amounts of all three.

Dependency upon imported energy undermines UK national security and will have potentially dire consequences for the balance of trade.

On February 16th, the Eurostat released its first assessment of external trade balances for 2006 (pdf), making clear that energy is imposing an important burden on the Union’s economy. They key figures:

During 2006, euro area trade recorded a deficit of 8.2 bn¹ euro, compared to a surplus of 16.2 bn in 2005. The EU25 recorded a deficit of 172.6 bn in 2006, compared with -111.8 bn in 2005.