Pricing energy rationally

Perhaps the starkest failure to include social costs in the price of energy appears in the financing by the USA of the war with Iraq. The National Energy Strategy strongly rejected any security tax on oil on the grounds that it would increase inflation and reduce economic growth. With no fee on oil, American consumers will continue to regard oil as a cheap commodity rather than one safeguarded at the considerable cost of human life.

Internalizing social costs of energy does not lead to weakening of international competitiveness. The opposite may well be true: that artificially low prices do not encourage energy frugality.

Higher fuel prices would spur changes in travel habits, greater use of public transportation, and, ultimately, non-fossil transportation technologies such as electric or hydrogen vehicles.