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Economy needs protection from oil addiction

by Paul Lehman, REP's South Carolina coordinator
published in The State newspaper (Columbia, SC) on June 29, 2005

As the price of oil passes $60 a barrel, we desperately need a sensible energy plan. Otherwise, the list of negatives resulting from our dependence on foreign oil — crippling gas prices and entanglement with unsavory foreign regimes — will include another: job losses.

Rising oil prices fuel inflation. When inflation threatens to rear its head, Fed Chairman Alan Greenspan doesn’t waste time: He starts raising interest rates, as he has been doing for the past year.

When interest rates go up, money gets tight, and consumer purchases slow down. When demand falls, manufacturers must cut costs.

Since CEOs are not lining up for pay cuts, rank-and-file employees pay the price. When jobs are lost, unemployed people cannot afford to spend money on purchases, and the vicious cycle spins faster.

Our insatiable demand for oil will push crude prices and interest rates higher — and push more people out of jobs.

What can we do? We must reduce our dependence on oil. Not just foreign oil; all oil. Tying our future to oil leaves our economy highly vulnerable.

Here’s why: Oil is bought and sold in a global market that is easily spooked. Demand is rising in the United States, China and other countries. The production chain is stretched tight, with little spare capacity.

Prices scurry upward at any hint of trouble in the supply chain — political intrigues in Russia, civil unrest in Venezuela, bomb threats in Nigeria or turmoil in the ever-turbulent Middle East, where two-thirds of the world’s proven oil reserves lie.

As long as we are heavily dependent on oil, we will be vulnerable to forces beyond our control. Our economy and security will be at ever-growing risk.

Drilling for oil in the Arctic National Wildlife Refuge is a wrong-headed answer to the problem. Even if the producible quantity of oil beneath the refuge is as large as drilling boosters claim, pumping it out won’t significantly reduce oil imports or shield us from turmoil in the global oil market.

Drilling the Arctic Refuge would raise false hopes that would sap the political will needed to phase down our dependence on oil and accelerate an inevitable transition to other forms of energy.

Attempting to drill our way out of oil dependence is the equivalent of giving an addict a smaller dose of narcotics and calling that therapy.

The Senate made a useful first step this month in passing an energy bill amendment requiring utilities to obtain at least 10 percent of their electricity from renewable resources by the year 2020. While little oil is used to generate electricity, increasing renewably generated electricity is an important component of an overall energy solution that includes increased fuel efficiency and diversification of America’s energy portfolio.

When it goes to the president, the final energy bill must include three additional measures. First, Congress must approve a long-overdue strengthening of motor vehicle fuel economy standards. Numerous studies show that technology is available to manufacture safe, desirable cars that achieve substantially better fuel economy.

Second, market-based policies are needed to encourage adoption of advanced energy technologies. For example, a carbon dioxide emissions trading market set up through “cap-and-trade” legislation similar to Sen. John McCain’s Climate Stewardship Act would encourage industries to find low-cost ways of boosting energy efficiency.

Third, “fee-bates” should be made available to consumers who buy super-efficient hybrids and advanced diesel cars. Coupling rebates with fees paid by consumers who still choose to buy the most inefficient vehicles would send the car market an urgently needed price signal about the true costs of oil dependence.

Our congressional representatives have a tough job. They must continually make choices that weigh incremental benefits against incremental pain. But we have elected them because we believe they are up to the task.

Resources, both human and natural, need to be managed prudently. We want Congress to protect our jobs, ensure adequate energy security and protect the environment. Adopting smart energy policies would enable Congress to do all three.