It would be a good way to counter the drill our way out of this notion taking hold in mass media.
Miss two quarters in a row and rationing kicks in until the target reduction is back on track. And emergency rationing would be the standby plan to discourage quick supply constraint oil schocks to the economy. With rationing, emergency use of the national oil reserve would be feasible.
A 5% reduction per year would do the trick over 20 years. So that would be 1 1/4% per quarter.
Just like the fed uses money supply to cushion economic shock, government oil policy should use demand control and emergency supply to cushion oil price schocks.
Either we get serious about demand reduction or oil war and climate disaster will bankrupt our economy.
How well has market based hedging worked to reduce the oil price shock risk to our economy?
How much better would targeted reduction, that keeps ahead of supply restriction, coupled with emergency rationing be at eliminating that oil price shock risk to our economy?
It would mean a whole new economic boom based on stability of energy prices and a reduction of inflation. Our currency would gain strength immediately, and that would lower prices signifigantly.
In a world of state owned oil companies and OPEC price fixing and corrupt insider trading, how could a market based approach to hedging risk, that depends on real free market (a free market that doesn't exist) efficiency, be effective? It doesn't work. As we all can see.
