most of these proposals would do very little for inflation in the short run and perhaps not even in the long run. so we are back to monetary policy as a blunt instrument.

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1. Except for the price floor, you haven't mentioned the policies that would increase the domestic oil supply. Also, no mention of the policies that reduced the oil supply and caused the price hike before the war. There is a conflicting political goal of wanting less fossil energy. There were other conflicting political goals as well. Something has to give, and it did.

2. What makes you think that increasing taxes on oil profits wouldn't simply mean further price hikes to compensate for the extra tax cost?

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I love your posts and almost always agree but I have a small point of contention:

Do not send gas rebate checks to the top 20%? I'm surprised you say this. Universal programs are always more efficient both at helping those who need it most and getting buy in. The burden for receiving a benefit always falls on the recipient who must prove their income and this is never a good idea.

I agree gas cards are gimmicky and make for lousy policy, but if given out, we don't need to develop byzantine distribution schemes and means testing results that will only make it harder for people who need them most. It's not like we don't have decades of experience with social benefit programs to know exactly how this would turn out.

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I highly respect your insights into macroeconomic issues and I know this isn't a foreign policy blog, but the point about not dealing with bad actors feels tone-deaf given the US' own abysmal track record on promoting human rights and democracy. What's more, shunning constructive engagement with countries like Iran can be read as tacit support for the continued suffering of their civilian populations via economic sanctions.

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The mess Germany is on now with Russian natural gas shows that making a deal with the devil is extremely risky.

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I agree, but highlighting the practical dangers of relying on a single country for energy is different from your original appeal to American exceptionalism.

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Increasing demand further is not going to help prices.

Increasing supply should be the #1 priority. Making people ever dependent will not help anyone.

This is a terrible idea.

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Hi Claudia!

"It would be a direct benefit for, often, higher-income workers who can work from home."

The switch that should happen here is to drop the gas tax and replace it with a VMT that applies to all vehicles. Then the VMT pays for road maintenance and the like, with maybe the first 5000 miles per year free. (Some R lege types envisioned it as a frankly punitive tax on electric vehicles, but that's not what I am doing here.) Have a car but have it in storage? There's only the registration tax. Drive a monster truck 20k miles per year? Oh, buddy, here's your bill.

That's exactly what would help encourage people to work from home. (That said, the drive to get workers into offices (not food/retail) is all about social status and asserting social control on the part of CEO types - the perk of the job is ordering people around.)

" DO NOT MAKE IT WORSE by reducing the U.S. oil and gas supply on global markets."

Tariff Russian oil, and honestly, if Saudi keeps demonstrating that they are firmly committed to the Russia-China alliance, then tariff them as well. Iran and Venezuela are different issues - if we could flip Iran and let them pump oil, we could neutralize Saudi's ability to screw us over. Venezuela is in the this hemisphere and I am not seeing much of our punitive actions doing us or them any good. (Put another way: as it stand our worst enemy outside of Russia and China is the one we are selling war planes to and subsidizing them with our protection services. If we could flip Iran and Venezuela without extending them the same level of subsidisation as we bestow on Saudi, combined with withdrawing support from Saudi we'd just be equalizing the levels of our punitive actions.)

"Olivier Blanchard, while disagreeing with the standard framing of price gouging, agrees that the taxes could be appropriate."

I absolutely believe lots of companies are making hay while the sun shines. That's to be expected. What makes me unhappy is the markets pushing oil companies not to drill. They have a point about getting screwed during the last crash (and the oil price crash before that), I am pretty sure there's a political motivation.

Straightforward fix: tax windfall profits of oil companies and pad the equalisation fund - set up said fund to buy oil (for the oil reserve) whenever the price falls below maybe 40-50-60$? Add in that any profits redirected to drilling new wells isn't taxed.

Further, add a fund for taking over wells that are going to abandoned. (Basically the government pays part or all of the cost of continuing pumping and then the oil gets sold anyway. The reason is is that a marginal oil well (when the rate of extraction is falling and it is no longer a gusher) is still pumping oil, and if the well is capped because the cost of extraction is too high for the market then the oil remaining in the well is lost and can't be gotten back. It's very wasteful of oil over the long term - if we're paying the cost of extracting the oil, inclusive of the environmental cost, then we should be getting every drop of oil that we can extract from it.

The point is is that oil in the US is a finite resource, so we want it all. If we're going to reduce the amount of oil going forward, then we want as much as possible of the reduction to occur in terms of the amount of imported oil. (Which, incidentally, avoids using oil tankers (they wreck) and oil from really awful countries.)


to answer your question from several weeks ago, if it was five dollars i'd sub up, but i am subscribing to a lot of substacks, so...

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