Dollar replaced in oil trading?

The Independent (UK) reports on secret talks aimed at replacing dollar-denominated oil with a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency.

It seems reasonable to consider an oil import tariff.

A tiered, temporary tariff could help wean the United States off of foreign oil.

• Tier 1, no tariff: oil sourced from Canada, Mexico
• Tier 2, light tariff: oil sourced from democracies with a free press
• Tier 3, full tariff: oil sourced from other nations
• Tier 4, punative tariff: Oil whose origin is undeclared or undetermined

This tariff would address the same goals as a carbon tax, help shift us away from foreign sources of oil, encourage energy efficiency and technology gains, and be a measured, quantifiable response to this latest move by oil producers.

This tariff is compatible with our NAFTA obligations. Also, market disruption is reduced because Canada and Mexico are two major sources of foreign oil — which continues unhindered under this tariff.

Oil diplomacy would roil world affairs, but that's nothing new. Probably difficult if we want any amount of Arab help with Iran, an issue rapidly heating up. At home, oil prices would likely increase a bit, serving to decrease demand.

Risky? Sure. But some new thinking is needed, and cap-n-trade is not it.

Western oil giants lose influence

The NYT describes the current state of Western oil production: falling.

I created a handy graph using the NYT's numbers. Stark, simple graphs really drive home the reality of the situation. "Western oil companies" below includes not only US companies but also European energy giants such as BP and Total. The graph represents the percentage of world assets under Western control.

Windfall profits tax?

Please tell me... in what universe will a windfall profits tax on the oil industry actually lower gas prices? (ref LA Times editorial, "economy puts heat on pols") Congressional Democrats are proposing this, and Obama is running ads here in North Carolina proposing same.

Looming over everything else is rising global demand, particularly from societies that are industrializing at light speed.

The law of supply and demand is like the law of gravity: it's fundamental.

If oil supply remains flat while demand rises, the price will go up. You cannot wish or tax that away.

McCain and some Congressional Repubs proposed reducing various gas taxes during the summer months. But even if we assume zero state and federal taxes for the sake of argument, this cannot change the underlying fundamentals of the commodity, thus not affect gas prices more than a dime or quarter or so.

Reducing US consumption of fossil fuels will help mitigate prices -- but with rising global demand elsewhere, any reduction in US consumption will easily be matched and exceeded by demand elsewhere.

Perversely, some environmental weenies like this situation, because economics forces use to consider alternatives. Alt-energy research is quite active, true, but we shouldn't hope for high prices to force events in that direction. Any increase in oil prices has a ripple effect that hurts the poor most of all. Gas and personal transportation costs go up. Food prices go up (getting it to market costs more). Wal-Mart prices go up (like it or not, the poor shop there, prices are cheap). Those that are the neediest, hurt the most when gas and food prices go up.