The Terrible Implications of U.S. Oil Policy

The Terrible Implications of U.S. Oil Policy

Printer-friendly version
a a
Type Size: Small

Quick: What was the single best thing to happen to U.S. energy policy in the last 37 years? Answer: When spot prices for crude oil shot past $145 a barrel in July 2008. Regular gasoline hit an excruciating $4 a gallon and kept going up.

It was painful and disruptive, and cruel to those who could least afford it. But it did more to briefly reshape U.S. energy policy in a useful way than anything any Congress or president had done since the first oil embargo in 1973. Car buyers were suddenly swarming dealer lots to purchase 50-mpg Priuses, and SUV owners couldn't dump their vehicles fast enough. People with long commutes to work were car-pooling, and home buyers with dreams of the exurbs began to focus on closer-in homes. Solar and wind power, long too expensive to compete robustly with cheap fossil fuels, began to look much more feasible. It felt as if the nation was undergoing a long-overdue transition to a saner energy policy.

Obviously, it didn’t last. Very quickly the price of oil began to drop, as it always does after a spike. Five months later, regular gasoline had fallen back to $1.61 a gallon and spot prices for crude had tumbled to $30 a barrel. Great for all of us suffering through the recession and good for the economy, but terrible for long-term energy policy. Priuses started to back up on dealer lots while SUVs flew out the door again. Two years later, here we are, just as hooked on oil and as far from a sane energy future as we've ever been. Three thoughts on this:

One: The price of energy changes behavior the way nothing else can. Does anyone doubt that if gasoline had stayed at $4 a gallon or kept rising that we'd be living in a very different world today? That the automobile fleet would look utterly different and miles-per-gallon would be much higher, that there'd be a nationwide drive to conserve energy and that solar collectors would be sprouting on more rooftops in regions where homes are heated with oil?

This is as compelling an argument as there can be for raising the price of oil to reflect its true cost to the environment, to national security, to our balance of payments and to our energy future. Of course, no one wants to pay $4 a gallon. Of course it's hard on the economy, hard on low-income Americans and painful for anyone who drives a car. But Americans don't want to be cleaning up a massive oil spill in the Gulf of Mexico or to be importing the vast majority of our oil, either. If raising the gasoline tax would strain a still-shaky economy, do it slowly. Phase the tax in at the rate of 2 cents a month this year, 3 cents a month next year, and so on. That won't hurt now or even soon, but we'd all know that in three years, gasoline would be about $1 a gallon more expensive, and that it would keep rising after that.

Two: This is a question for Bill Gates, who proposed recently on ABC's This Week that the U.S. increase funding for research into clean energy by $11 billion a year, to $16 billion annually. If R&D were the answer, we’d all be driving electric cars and living in wind-powered homes by now. Yes, there's a role for basic research, but without a price signal, who's going to buy this stuff or invest in it? Over the past 37 years the federal government has spent billions on research. Name one transformative product that has come from that. (Some research advocates say the compact fluorescent bulb, but history also says it was invented at GE.) Or explain how R&D has changed our energy picture broadly for the better since the 1973 oil embargo. Answer: In 1973 we imported about 30 percent of our oil. Today we import 68 percent.

Three: This won’t be popular, but once the six-month moratorium on deepwater drilling in the Gulf of Mexico has run its course -- and preferably sooner -- we should get back to drilling there. And we should expand exploration off the East Coast and in other areas Obama had targeted before the current oil spill.