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Yesterday's Thinking for Tomorrow's Energy Problems
April 22, 2005
Congressman Ken Calvert (R-CA) complained the other day that he had to spend $82 to fill up his SUV's gas tank. So, he concluded, we must open the Arctic National Wildlife Refuge to oil drilling.
Calvert's non-sequitur sums up the shallow thinking that went into the energy bill the House passed on April 21. The House can't see beyond yesterday in fashioning energy policy.
Back to Congressman Calvert's problem. We have news for him. He's likely to continue paying $82 to fill up his SUV -- whether the Arctic Refuge is drilled or not. In fact, if we continue tying our energy future to oil, as the House majority seems to prefer, he's likely to pay more than $82 to fill up his SUV in the years ahead – whether the Arctic Refuge is drilled or not.
The problem is oil dependence. Oil prices are set in a global market. Demand is rising, fueled by an unrestrained appetite for petroleum in the U.S., China and other countries. Supplies are tight. There are signs that oil production in the non-OPEC countries is close to or already has reached a peak – meaning the non-OPEC producers are pulling as much conventional crude oil out of the ground as we're likely to see.
In the global oil market, the Arctic Refuge would be small potatoes. It wouldn't make much difference putting some slack back into the market or lowering prices.
In the future, we can look forward to greater dependence on the big OPEC producers. Even if the OPEC countries were paragons of reliability, they may reach peak production in 10 years. If demand continues to rise, something will have to give, and that something will be prices.
In short, it's Economics 101: tight supplies and rising demand translates into higher prices. A desperate grab for oil in America's protected public lands won't solve the problem.
What would make a difference is addressing the demand side of the equation through improved fuel efficiency – the Western weapon that the OPEC oil barons fear most. Tougher standards, such as Senator Olympia Snowe's (R-ME) bill to tighten light truck fuel economy standards to 27 miles per gallon by 2011, would be a good start. Snowe and her co-sponsor, Senator Dianne Feinstein (D-CA), estimate the higher standards required in this modest bill would save 1 million barrels per day – about 5 percent of current U.S. consumption.
High gasoline prices may be here to stay, but if Detroit builds more fuel-efficient vehicles, and customers buy them, we can leave the Arctic wilderness alone and Congressmen Calvert won't have to spend as much to keep his SUV fueled.
