This is really something special. He's got one good idea, a price on carbon to support tax shifting, taking taxes off of income and investment and labor and shifting them onto pollution. Great idea.
But he is coupled that great idea with an absurd fantasy about how export economics works. How this guy has a New York Times column is a mystery of the highest order.
The total world demand for oil is one number, and the total world daily availability of oil is another number. Neither of these numbers are based in the economic fantasyland where Friedman lives.
If net supply -- The amount of oil available for export from each producing country after its uses are satisfied — doesn't move closer towards unmet demand -- then changing the allocation does nothing to the price. Only if the United States produced more oil than it consumed would we have any ability to affect the global price level. The price of a global commodity is set by the swing producer, the country or set of countries in a cartel who can take supply off the market to raise the price or increase the supply to reduce the price.
The harsh fact is that the available oil for export around the world decreases every day. The new finds -- potential supplies only -- are increasingly difficult to get and cost far more in the energy required to get them, and causing vastly more environmental damage along the way.
Add to that the fact that the oil exporting countries, as they seek to mollify their people, consume increasingly more of their own production. That's another force pushing down on the amount of oil available for export in the world.
Prior to the global oil peak, such as in the 1980s, it was possible to bankrupt the Soviet Union with a flood of oil. But now, all the games we want to play will have exactly 0 difference on the global price of oil. Indeed, if we were somehow able to nudge down the price, we would merely be making that oil available to a flood of new consumers for oil in countries such as Brazil, Russia, India, and China, people formerly priced out by the high price of oil.
Thus, the net return of energy on the energy invested in the hunt for that oil goes down every day. That is the misery Index--The relentless, ceaseless, inexorable fact that net global oil flows are declining, not increasing, and this is despite historically high levels of price that supposedly will cause a flood of new oil onto the market.
The bottom line is that the price of oil is still below level needed for profit at the cost of exploration and exploitation now. The future is grim, because we built a society entirely dependent on abundant cheap energy, which we took to be our eternal birthright rather than a one time windfall.
Those aren't chickens coming home to roost – alas, they are vultures.
The most effective leadership abroad starts with respect earned from others seeing us commit to doing great and difficult things at home that summon the energy of the whole country — and not just from our military families. That is how America inspires others to action. And the necessary impactful thing that America should do at home now is for the president and Congress to lift our self-imposed ban on U.S. oil exports, which would significantly dent the global high price of crude oil. And combine that with long overdue comprehensive tax reform that finally values our environment and security. That would be a carbon tax that is completely offset by lowering personal income, payroll and corporate taxes. Nothing would make us stronger and Putin and ISIS weaker — all at the same time.
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