Price is the market clearing mechanism.  So it has always been; so it shall always be.

We do not pay the true cost of petroleum product consumption in this country.  We do not pay enough to support the infrastructure needed to consume it, or to abate the pollution associated thereto.  Likewise, we do not factor in the national defense costs associated with protecting the supply lines.

Given that subsidy, we do not provide alternative sources a level playing field, thereby worsening market entry barriers.  VC remain gun shy to alternative fuel investing, as they have seen multiple cycles in the past several decades that have washed out other efforts.  Per Barrel oil prices sky rocket.  Alternative energy players build business cases assuming the higher energy cost.  Energy prices drop; they go out of business.  They leave lead users and early adopters high and dry when they go out of business, to boot.

That hammers the capital markets and the demand side of the equation.  VC won't invest, and users become more reluctant to convert over based on the knowledge of past users caught holding the bag.  Who wants a $35,000 wind turbine in their back yard for which they cannot get parts?

So government needs to intervene in the market to simply assign the non-pecuniary costs of consuming petroleum products back to the transaction point.  With that accomplished, we will have a level playing field, and a higher per gallon price against which to benchmark alternatives.

 And who says it necessarily has to be alternatives?  Price will alter consumption patterns.  We'll drive smaller cars.  We'll double up on errands, to travel less.  We'll turn down thermostats.

But government does not seek to work that way.  Government seeks to legislate outcome by looking forward rather than simply correct market distortions by doing some backward analysis to calibrate the problem and then assigning a tax to solve it.

That is not good enough.  Politicians want to dictate the outcome.  "Use Ethanol" Congress wheezed.  And so we consume 110 units of energy to create 100 units of Ethanol.  We further constrain supply lines by washing out smaller distributors who do not want to invest to be able to store ethanol.  We drive up the price of gas based on these new storage requirements and based on the tighter supply lines.  We drive up the price of food based on resource shifting to corn to get in on the government mandated spike in demand.

 Congress needs to stop trying to legislate outcomes.  Price the product correctly and the market will do the rest.  Intellectual pedants likely seek to reject the answer based on its simplicity, but some of the best solutions happen to be the ones that can be summarized on the back of a cocktail napkin, as they are the easiest to remember and to execute.

Price it correctly, and let the market do the rest.