fresh voices from the front lines of change







Both parties in the Senate have just introduced legislation in response to high gas prices. The Republican announcement states its bill with “Reduce Gas Prices And Decrease Dependence On Foreign Oil,” while the Democrats say theirs “addresses the root causes of high gas prices.”

Neither directly promises to reduce gas prices immediately. Because neither would.

Granted, both bills would temporarily suspend putting oil in the Strategic Petroleum Reserve for the rest of the year to increase commercial supply, which Democrats say could lower gas prices between 2 to 5 cents a gallon. A typical two-car household uses about 1200 gallons of gas. So for a six-month period, that’s upwards of $30. Marginal short-term help, and probably negated by continued price increases.

Beyond that, the Republican bill is just a continuation of the conservative obsession to drill for oil in the Arctic National Wildlife Refuge. Would that reduce crude oil prices? About 50 cents a barrel 17 years from now. Meanwhile, crude oil prices have risen more than $80 on President Bush’s watch. So the answer is yes, but that and two bits will get you … a slightly cheaper barrel of oil 17 years from now.

And Republicans repeat their call to suspend environmental standards for oil refineries, claiming that would produce a greater supply of gas. But oil companies can build refineries now. They choose not to, not because of environmental standards, but because it’s not profitable for them to increase supply.

Regarding the Democratic bill, it would be more precise to say it addresses the root cases of high energy prices. It would jumpstart long-term investment in renewable energy, creating clean and affordable energy alternatives so eventually, we will no longer be at the mercy of gas price spikes.

The bill would repeal tax breaks to Big Oil, and impose a windfall profits tax on “companies that fail to invest in increased capacity and renewable energy sources” and invest the proceeds in renewable energy and “consumer price protection.”

That’s a critical step towards a clean energy future. But diverting that money to consumers is more likely to help mitigate further short-term price increases than to lower gas prices from where they are now.

The Democratic bill also has provisions to combat possible price gouging by oil companies, market speculation by futures traders (CQ reports that “some experts say [speculation] may account for 10 to 30 percent of the price of oil), and price collusion by the OPEC cartel.

There’s been some healthy debate among progressives whether those steps would be effective in lowering oil prices, in part because they are arguably not the “root causes” of the current price spike.

Dan Weiss of the Center for American Progress told the Washington Post that “”With analysts predicting $150-per-barrel oil by fall, efforts to rein in price gougers, speculators and OPEC couldn’t come at a better time.” The Sierra Club also says the bill would “protect consumers.”

But David Roberts of Grist, while strongly supportive of the investment in renewable energy, scoffs at the other planks.

He calls the impact of speculation on prices “a blip,” price gouging a “conspiracy” and going after OPEC pointless because they’re already producing as much as they can. (Regarding gouging, note that one study did find evidence of gouging, but when market prices are heading down, and oil companies drag their feet on lowering retail prices accordingly.)

Both Roberts and the blog Energy Smart lament that Democratic messaging doesn’t emphasize the fundamental root causes — increasing global demand, decreasing global supply, weakening US dollar, and a failed foreign policy that has contributed to destabilized oil-producing regions — to downplay expectation that oil prices can be cheap again and help rally support for investment in renewables.

Fair point and good advice for the long-term. But Americans are suffering in the short-term and do need relief.

The current price for a gallon of gas is 82 cents more than the average price in 2007. For a typical household, that difference amounts to $1000 more spent a gas for the year.

That’s real financial strain in the short-term, but the root causes for higher prices are deep ones not easily affected by short-term measures.

But the reality is that Congress has already done something to deal with the gas price spike.

As I noted when the economic stimulus package was being debated, the tax rebate checks in the mail, which range from $300 to $1200, will largely be swallowed up by higher gas costs. It is effectively a gas price rebate.

Which would be fine, if higher gas prices were our sole economic problem. Sadly, our economic problems run deeper than that.

Pin It on Pinterest

Spread The Word!

Share this post with your networks.