Can high oil prices be good for the world?
If we take a very long-term view, it is not so clear that high oil prices are bad for the world as a whole. For example, if high oil prices were the result of taxes that were then redistributed to oil users, they would be unambiguously good.
To be sure, most taxes entail heavy "excess burdens": The cost is significantly greater than the value of the revenue raised because of potential taxpayers' myriad attempts at evasion and avoidance. A tax on oil, however, does not entail excess burdens. On the contrary, it implies excess benefits. Shifts to more energy-efficient means of transportation ease congestion. Attempts to shave costs by economizing on energy use reduce pollution. Higher prices for oil substitutes spur research into other energy technologies -- research that is much needed today if we are to tackle the problems of global climate change tomorrow.
A well-designed tax on oil would also reduce demand, thereby lowering the potential for windfall profits for those who rule or own the ground over the oil deposits. A little more than a decade ago, Lloyd Bentsen, President Bill Clinton's first Treasury Secretary, tried to ensure precisely that, proposing to use a "BTU tax" to close America's fiscal deficit.
The Republican Party and the American Petroleum Institute sank that proposal. A decade later, we have high oil prices, but they are not due to a well-designed tax, either in America or elsewhere. As a result, the price boom is boosting windfall profits for the owners of oil deposits rather than improving countries' public finances.