President Bush is trying to ease the pressure on gas prices by halting the purchase of oil for the strategic petroleum reserve. This has been done by his predecessors with almost no effect. The problem right at this moment is not the amount of oil inventory, which is at a 6 year high, but is the production of gasoline not meeting the demand of consumers. The investigation of price gouging is not likely to be fruitful because the oil company can legitimely make huge profits by just letting the law of supply and demand work. The only fault I see of the oil companies is that they have been negligent in increasing the number of refineries which would increase production. This is like OPEC which controls the supply to drum up higer prices. The only way you can fight that would be to decrease demand ourselves.

Yes, we are to blame for our energy problem. In the short term the Bush administration is partly responsible for this run up. The disastrous policy of invading Iraq and the fighting stance we take against Iran (more on that in another blog), have cause a big rise in the futures market for oil and gas which affect the current prices. In the long term it is the poor energy policy of our government, including previous democratic administration, and our own appetite as consumers for fossil fuel that bring about unstable energy prices. Sure, India and China are increasing their comsumption at record paces. But we still use way more energy per capita than anyone else. We drive Hummers that get maybe 5 miles per gallon when park on the 405 "freeway". We heat swimming pools and jacuzzis in warm southern California. We live in 5000 square feet houses that we need to heat and air condition even though there may be 2 people in the house. I always say: don't blame the Colombians for our drug problems. Now I say: don't blame the Saudis for our energy problems.

What is the energy policy of the Bush administration consists of? Drilling the Alaska Wildlife Refuge is their first priority. I am no card carrying liberal environmentalist. Nobody reading this or anyone I know has ever gone to the Alaska Artic area. So if nobody ever goes there, what difference does it make how pristine it is? The only thing is, drilling this whole area is not an energy policy. Even if every drop of oil is taken out of there, it will only be enough for couple of years of usage by us. It will benefit the oil companies more than anyone of us. The Bush administration, as everyone else, advocates alternative fuels. But advocating doesn't mean help bring it about and the government is doing very little to bring it about.

What are my suggestions? I don't pretend that my solutions will work perfectly nor that anyone will vote me into political office if they see what I am suggesting. They are more likely to assassinate me first. But here it is: First I would increase the price of gasoline to level of what the Europeans and Japanesed pay. That means increase the tax so that the total cost is over $5 per gallon! Everybody says that alternate energy is important but unless there is an extreme urgency such that buying gas may actually be more expensive than buying an alternate fuel, nobody will be serious about it. Our greatest successes in science as a nation were beating the Germans to the atomic bomb and beating the Russians to the moon. If the challenges of the Germans and the Russians were not there, we would not have accomplished these goals in such a short time. We need a real shock and awe to our country to get this done.

After we see what happens with $5 dollar per gallon prices for maybe 6 months, I would cut the tax so that the price would go back to market value. The reason is that a high price of gas hurt the poor people much more than rich people. Some people would not make it to work because of the price of gas. High energy price leads to inflation which will hurt low-income people much more. So then I would put in a flat income tax with no loopholes. There would be a decrease in capital gain tax. There would be no deduction for mortgage interests nor for home property tax paid. There would be a luxury tax on cars with low mileage and high price tags. There will be taxes on heated swimming pools, jacuzzis, private planes and boats. What I am saying is that if you make lots of money, you can save some income tax, and the money you earn by investing in the businesses of this country will be taxed at a lower rate. You have the freedom to buy anything you want but anything frivolous and high energy costing will set you back a l0t more.

I would use the money from all these taxes to subsidize energy research. We can't count on the energy companies to plow money into research for alternate fuels. The best company in this area is British Petroleum which claims that BP stands for Beyond Petroeum. But upon being pressed on the Charlie Rose show, the president of BP admits that alternate fuel research budget of the company is still very low. As an overall education program (more on another blog), we must increase the number of physics, chemistry and engineering students in this country. A subsidized education in these fields for American citizens is a must. I know that India and China are working very hard in these areas. While losing this race will not be as disastrous as losing the atomic bomb race with Germany, it will have far more economic repurcussion than the increase of price of gas today.

Needless to say the medicine I prescribe is hard to swallow. But we must know that energy policy is not just about our pocket book. It is about a reliance on a geographical area that is totally unstable and this affects our foreign policies. It also affects the foreign policies of China and India. Without stable energy supplies, China will be more and more friendly with countries like Iran, Venezuela and Sudan. Even we are reluctant to put pressure on Saudia Arabia for human rights violations and for indirectly helping terrorists. The $3.15 per gallon we are paying today is not a crisis. It is just a mild cold. But if we don't do more prevention for the future, eventually no medicine will be effective. We may not be around to see the real disasters but we would have left a poorer world for our children and grandchildren.

The president of China, Hu Jintao, completed his visit to the U.S. this week. I must say that I am disappointed with Hu's performance since becoming president. Hu is supposed to be the first of a new generation of Chinese leaders. Hu and many of his deputies were trained as scientists in the most prestigious universities in China. With this background I would expect that they will be less ideologues than the previous generation of leaders who came to power as revolutionaries. Surely they would understand that just having a capitalistic economic system will not be enough. Social reforms will be necessary before China catches up with the West. At first Hu showed a lot of promise. He showed compassion for victims of HIV right after he took office. His government's handling of the avian flu epidemic was better than previous administrations' handling of other health crisis. I thought that having a scientist in charge will bring about more meaningful changes in society. Unfortunately this appears to be a false hope.

I can understand that democracy cannot occur overnight. China is afraid of what happened to Russia. A whole scale attempt to change from communism to democracy quickly was not successful in Russia. The collapse of the Russian economy with increase in crime have led to a backlash and Putin's government is reverting to totalitarianism. But having changed from a state controlled economy to a market based economy over the past twenty years or so, China should be in position to make more social changes. Improvement in human rights will not only make life better for the people but will lead to more creativity and thus move China forward. Some, like Andrew Grove of Intel believes that China can catch up to the U.S. in the next 25 years. I don't think that is possible. China has a lot of problems. Seventy-five percent of the people still in rural areas and are extremely poor. There is no way China can sustain this 9% annual growth rate. Social reforms that can unlock the potential of its huge population is the only way that can take China to the next level. If this generation of leaders do not allow this to happen it will not only be bad for China but will lead to deterioration of the world economy and threaten world peace.

A recent article in the LA Times bolstered my point about illegal immigrants. (Of course, I wouldn't mention it if it didn't help my arguments.) The article was about the use of immigrants, most of them illegal, to work on the reconstruction of New Orleans. Some of them work for contstruction companies contracted by FEMA. So indirectly our government is the employer of these workers. More about that later. These immigrants came from all over the U.S. or directly from Mexico when they heard there were high paying jobs available in this reconstruction effort. Why didn't the Americans who left after Katrina come back to rebuild their own city? I am sure the companies would not discriminate against Americans. And if they did discrminate against Americans then a lawsuit or complaint to the government would take care of that. Some people have argued that if wages were higher then Americans would do the jobs that illegals are doing today. The situation in New Orleans refutes this argument. Some of these construction jobs are paying $16 an hour. All you need is muscles. Yet few Americans want the jobs. Some say that there is not enough housing so few Americans can come back to work in New Orleans. Yet the immigrants are willing to sleep on floors or even outdoors without plumbing to work on these jobs. So you are going to tell me we can deport 11 million people and take over the jobs they are doing?

As I have said before, building a fence on the Mexico border will not stop the flow the illegal immigrants. It will just be a big expenditure that makes us look xenophobic. By the way, it is a 700 mile fence to be built in hot desert conditions. Who are we going to hire to build this fence? I don't think it will be Americans. Few Americans wanted to work to build the railroads at a time when we had much less luxury in the country. Remember much of the railroads were built by Chinese immigrants, most of them illegals. Unless you are going to double or triple the estimated cost of the fence, you are going to have to hire illegals to build the fence to keep out illegals.

Now, about the govenment hiring illegals indirectly. There was a report on the CBS evening news tonight about government contractors hiring illegal to work on construction at military bases. Now if the government is worried about security with illegals, it should look in its own backyard. You tell me that all these military and government officials who work at these bases couldn't see that all the construction workers were Hispanic and that either all the blacks and whites are too lazy to work there or the company is trying to save money by hiring immigrants? As I said, if there is a demand there will be a supply.

I think ultimately nothing significant will come out of this. The House and the Senate probably won't agree to a compromise. Things will drag out with rhetoric coming out of everywhere. Eventually the mid-term election will pass and this will be forgotten. I know there is no great solution at this time. The guest work program, even if it passes, will only help some in slowing down the illegal flow. Don't worry though, after Regan gave amnesty to illegals some thought that illegal immigration would stop while others thought the world will end. Neither proved to be true. Yet economically I think we are stronger than the 80's despite all our complaints. You know, if all the people in the world would come and live in Texas, the population density of Texas will only be slightly greater than New York city. Hard to believe, eh? We are far from being an economic and population disaster. Every immigration group that have come to this country have contributed to the success of this nation. If there is going to be a downfall to America in the future, it would not be because of immigrants, legal or illegal.