::  Point of View  ::

During the 1970’s oil embargo, when I was a senior in college and also a Legislative Aide in the Virginia General Assembly, I remember watching cars back up for blocks at gas stations in Richmond. “We need some kind of energy plan,” I thought to myself. Many people seemed interested, but as soon as the embargo was lifted and the lines went away, so did most people’s desire to formulate an energy plan. Somehow they thought our growing dependence on foreign oil would just take care of itself. Unfortunately, it did not. In 1973, the U.S. was dependent on foreign countries for 34.8% of our oil supply. Today, we are dependent on foreign countries for 57.2% of our oil.

Last April, I wrote a weekly column that began, “In the last couple of weeks it has become less and less surprising that $20 is hardly sufficient to fill your tank at the gas station.” At that time, the national average at the gas pump was $1.81. I was shocked by that price then. Today the average is $2.23 and I am even more shocked now. Today, a look into the reasons why gasoline is so expensive quickly reveals that while there is substantial work to do in addressing our nation’s energy needs, the place to start is in the formulation of a national energy plan.

While there is no single reason why Americans are paying so much at the pump, there are plenty of factors. The U.S. Department of Energy reports that when you pay for gasoline, your money is typically paying for the following four things: crude oil, refining costs, distribution & marketing, and taxes. Crude oil inventories consistently have the most dramatic effect on gas prices. And the single largest entity impacting how much oil the world has is OPEC, a consortium of 11 nations that produce 40% of the world's oil production and hold roughly two-thirds of the world's oil reserves. 

When OPEC wants to raise the price of crude oil, it can simply reduce production. This causes gasoline prices to jump because of the short supply, but also because of the possibility of future reductions. Sometimes just the threat of oil reductions can raise gas prices. Since the United States depends heavily on foreign oil supplies, OPEC has a significant effect on what Americans pay for their gasoline.

Additionally, extremely fast growth in oil demand from China and India is also causing gas prices to rise – and will continue to do so in the near future. Together, these two nation’s combined populations account for a third of the world’s populace. In the next two decades, China's oil consumption is expected to grow at a rate of 7.5% per year and India’s 5.5%, compared to a 1% growth rate for the industrialized countries. And as China and India continue their economic expansion, these countries will continue to see securing access to oil as a strategic imperative. 

Many other things also affect oil prices. Typically, the demand for gas spikes during the summer when many people go on vacation which, in turn, pushes prices up. Price increases also occur when refineries perform spring maintenance, decreasing the amount of gas refineries can produce. Varying state and local taxes cause varying prices around the country. Gas station competition can also play a part. Even the distance from which the gas station is located from the oil refinery can also affect prices because of transportation costs. 

Because there is no one factor influencing how much we are paying at the pump, there is clearly no one solution. In order to have the maximum impact, each of these solutions needs to be pursued in tandem. To do that, the United States needs a national energy plan.

Two weeks ago, the House of Representatives passed H.R. 6, the Energy Policy Act of 2005 which will lay out a national energy plan. This is virtually the same energy bill that the House has passed for four straight years, only to see the measure fail in the Senate. While the House bill is hardly the panacea of the energy problem and while its positive effects on energy costs may not be felt for years, it nevertheless is a first and necessary step in addressing our nation’s energy problem.

The bill encourages more domestic production of oil with incentives such as a streamlining the permit process, promoting a greater refining capacity to bring more oil to market, and increasing the gasoline supply by stopping the proliferation of expensive regional boutique fuels. 

The bill also makes a first stab at energy diversification and conservation. To scale back the demand for oil, the proposal encourages vehicles powered by hydrogen fuel cells and increases funding for the Department of Transportation effort’s to improve fuel efficiency standards. Additionally, the bill authorizes $200 million for the “Clean Cities” program, which will provide grants to state and local governments to acquire alternative-fueled vehicles. 

Equally as important, this bill will reduce our dangerous dependence on foreign oil by allowing new domestic oil and gas exploration and development. The legislation authorizes expansion of the Strategic Petroleum Reserve’s capacity to one billion barrels and promotes clean and renewable fuels by providing incentives for clean coal technology and renewable energies such as biomass, wind, solar and hydroelectricity. 

Gas prices have always been volatile, and like any commodity on the world market, we can’t expect to control them completely. We can, however, work to ensure that the United States has adequate and affordable future energy supplies by formulating a national energy plan that is focused on increasing domestic production of oil, expanding fuel efficiency, and continuing to search for other viable and cost-efficient fuel sources. 

:: Wishing Mom a Safe Mothers Day ::

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