I recently drove to the Adirondack Mountains in Upstate New York and felt the $4 sticker shock so many Americans are now feeling at the pump. There is no doubt that soaring gas prices are making hard economic times even harder. The question is what can we do about it.
Plenty of pundits have jumped in with their miracle solution. Senators McCain and Clinton called for a gas tax holiday. Newt Gingrich is suggesting we drill our way out of this fix.
The truth is many factors influence the price of gas, including growing demand in China and India, the weak dollar, and the flight of capital to oil futures. No single approach can unravel this complex, global tangle. But here are a few steps that can help.
Don’t Drill for Oil in Exceptional Wild Places
America is home to 3 percent of global oil supply. That’s right: 3 percent. We cannot drill our way to cheaper oil prices--our piece of the pie is far too small to have any impact on the global market. Taking oil from pristine wilderness landscapes like the Arctic National Wildlife Refuge would be just a drop in the bucket.
- There is less than a year’s supply of oil in the Arctic Refuge, and it would take 5 to 10 years to access it.
- Increasing fuel efficiency standards for new vehicles to 40 miles per gallon would save more than 10 times the likely yield of oil from the Arctic Refuge.
Would you rather degrade the irreplaceable refuge to get 3 to 4 cents of relief from higher gas prices in 5 years, or would you prefer to spend those 5 years encouraging Detroit to make more efficient cars and employing Americans in clean energy jobs. Fortunately the latter got even easier this past year when Congress required automakers to build cars and trucks that average at least 35 MPG by 2020. All we have to do is raise the fuel-efficiency bar a little higher.
Drive Down Demand
We may only have only 3 percent of the global oil supply, but we account for about 25 percent of the demand. That is our best tool for lowering oil prices. The only way OPEC will get the message that we are serious about these prices is if we slash our 20 million-barrel-a-day habit. With more efficient cars, plug-in hybrid-electric vehicles, and homegrown biofuels, OPEC’s biggest customer won’t be so beholden any more. For more details, listen to my colleague Deron Lovaas's appearance on NPR's Diane Rehm show.
Diversify Our Energy Sources
At some point the multiple forces that feed rising oil prices will stabilize and prices will go down. A little bit. For awhile. And then they will rise again. Given the complexity of the market, it is inevitable. An indispensable, long-term route off of the gas-price rollercoaster is to diversity our energy sources. Fuels made from plant materials instead of petroleum can help free Americans from our dependence on volatile markets and hostile or unreliable foreign oil sources. Plus, homegrown biofuels--if they are grown right--can curb global warming and help American farmers.
Reduce the Trade Deficit by Ending Our Addiction to Oil
Like most addicts, we are caught in a vicious cycle. The declining value of the dollar has pushed up the cost of crude oil, yet it is our addiction to oil that increases our trade deficit and lowers the value of the dollar. A staggering 85 percent of our trade deficit is made up of car and oil imports. Imagine if US auto makers produced a car that used little or no gas that Americans would buy. It would wipe out our trade deficit at once.
Don’t Forget that Oil Companies Are Profiting Substantially
The oil industry’s PR machine has been trying to persuade Americans that it is suffering just like everybody else. Consider the charts that been widely used to show where your gasoline dollars are going. The graphics depict how much money goes to crude oil prices, taxes, and refineries, but there is literally no space for oil company profit. You would think these companies are providing their product for free. I don’t buy it, especially given the fact that oil companies are sitting on huge crude reserves. Instead of releasing some of those reserves, they are watching prices--and profits--rise.
For example, ExxonMobil’s oil reserves were valued at about $300 billion four years ago. Under current prices they are worth more than $1 trillion. Why aren’t they using their eye-popping profits to develop more energy choices for Americans?
Pass Global Warming Legislation
Last week, the Senate missed an excellent opportunity to drive down gas prices when they failed to pass the Lieberman-Warner Climate Security Act. Under the act, the amount of money consumers pay for transportation fuel would have dropped over time because the policy promotes greater fuel efficiency and alternative fuels. Right now the oil industry has a monopoly over our transportation dollars, but they won’t be able to charge as much if they’re not the only game in town. Federal global warming legislation will diversify our energy supply, focus on efficiency not consumption, and could cut our oil imports by half trillion dollars in the next 25 years.