Again this post is part of a somewhat longer train of thought. See the previous two posts if it does not quite make sense.

Wonks Anonymous believes that fossil fuels are running out and that the only way we can lay the foundations for continued growth is to adapt our lifestyles and technologies to use less of them. This will require a rise in the price of these fuels and that will impose significant economic costs.

As prices rise in the short run, our methods of production and our way of life will change very little. We will, however, be able to consume less and whoever reaps the benefits of price rises - like Chevron, Exxon, the Russians, Alaska and Iran during our recent spell of increasing oil prices - will be able to consume more. It probably will not produce greater oil output.

Rises in the price of fossil fuels will transfer income from consumers to whoever raises the prices. If we allow the market to take its course we will eventually see steep rises in price as producers take advantage of economic recovery. We can also create gradual rises in the prices of fossil fuels by imposing some kind of tax. For example the tariff on oil imports proposed by Anonymous in a comment to the previous post.

The tax need not be high right now. It could start out low and increase as time passed. Anticipated tax increases would promote change as well.

As Anonymous points out in his or her comment to the previous post, unless something is done to compensate for the loss of consumer income our current slump will be extended. Wonks Anonymous would add that the transfer of income will also increase general dissatisfaction. Whoever gets blamed for this will have a hard time.

We cannot expect that the Russians, the Alaskans or the shareholders of Exxon to come forward with compensation so it seems obvious to Wonks Anonymous that the ideal price rise would be imposed by the government as a tax on fossil fuels. The income from this tax would be used to sustain demand in the slump and create jobs.  Investment in public transportation - to be entirely parochial the construction of reliable suburban rail lines between Modesto and San Francisco -  or alternative power generating facilities would have the further benefit of easing the change in technology.

But really we could use the revenue to pay off the deficit or give everyone a dividend check from the revenue or pay for expanded health care  . . . Whatever we did technology would change and we would gradually adapt as people responded to the increase in the relative price of fossil fuels.

Now Anonymous proposes a tariff on imported oil and Wonks Anonymous agrees that this is a fine idea. Wonks Anonymous, however has another ax to grind here as well. He worries about global warming and its impact on polar bears, tropical mountain ecosystems and small, low lying coastal towns like his own. He would prefer a carbon tax that would reduce the impact of global warming and change technology at the same time. More on this in the post on the carbon tax.