A National Policy in Support of Affordable Energy | Promoting Greater Reliance on Domestic Energy Supplies | Approving the Keystone XL Pipeline | Electric Vehicles: “Losing Spark with Public?” | The Pathway to a Clean Energy Future
High gasoline prices can cause hardship for consumers throughout Arizona, threaten jobs, and hinder economic recovery. An economist with Moody’s Analytics put it this way: every 50-cent increase in the per-gallon price of gas will drain about $60 billion from consumers’ pockets if prices stay that high for a year.
So what drives gas prices? The Associated Press, in a March 2011 news report, listed some of the many factors that influence gas prices:
- The cost of oil, which is the biggest factor in gas prices, accounts for 50 to 70 percent of the cost. Oil prices can be moved by geopolitics, the value of the dollar, extreme weather, and rising demand in the U.S. and other countries.
- Sellers of commodities, such as gas station owners and refineries, price their product based not on what it costs to produce it, but on what it costs to replace it, meaning they must constantly adjust their prices to keep up with the changing costs of their shipments.
- Gas prices can also rise as refiners switch to more expensive blends of gasoline to help protect against evaporation or reduce pollution levels during the warmer summer months.
So, with so many different factors influencing the price of gasoline, what can we do to try to provide some relief for motorists and better protect our economy?
President Obama spoke in February in favor of the extension of the temporary payroll tax cut, suggesting that it was needed to help ease the pain of rising gas prices. But a $20-a-week tax cut that he would extend for a mere 10 months is hardly a plan to deal with rising prices. It’s a gimmick, not a plan.
The fact is, under President Obama’s stewardship, gasoline prices have skyrocketed. CNSNews reported that the price of regular unleaded gasoline rose a whopping 83 percent between Inauguration Day 2009 and December 2011.
What we need is a real national policy in support of affordable energy, and that begins with responsible development of domestic energy resources, including oil reserves, coal, natural gas, and nuclear power. It also requires development of new refinery capacity, as well as increased cooperation with Canada on such projects as the Keystone XL Pipeline.
In an op-ed that appeared in The Washington Times, Ed Feulner of the Heritage Foundation wrote: “For far too long, ‘drilling for oil’ has been something that Americans think of as occurring only in the Middle East, the Gulf of Mexico and in select parts of Alaska. The good news, though, is that it appears we've barely tapped our energy potential. The answer to many of our needs, it turns out – both for energy and for economic recovery – may be right under our feet.” I couldn't agree more.
Legislation that Congress passed last year – with my support – will facilitate responsible development of resources on the Outer Continental Shelf off the Alaskan coast. That measure is now law.
There are also significant oil and gas supplies in Alaska’s Arctic National Wildlife Refuge (ANWR). Tapping those resources would require opening just 2,000 acres of the 19-million-acre Arctic plain (an area equivalent to the size of Sky Harbor Airport inside the state of South Carolina) to such development. With very little environmental impact, at least 1 million barrels of oil a day could be obtained from just this one area for the next 20 years. The U.S. Geological Survey estimates the area could have up to 16 billion barrels of recoverable oil – about 30 years’ worth of Saudi oil imports.
We should also support the shale oil development that is occurring in several Western states, including in the Bakken Formation, an underground deposit located in North Dakota and Montana that is estimated to contain up to 20 billion barrels of recoverable oil.
In 2008, the TransCanada oil company applied for a Presidential Permit from the State Department to construct the Keystone XL pipeline, which would transport an estimated 830,000 barrels of oil per day from Alberta, Canada to refineries in the southern United States.
Not only would the pipeline provide additional oil supplies from a friendly neighbor, but, according to the Congressional Research Service, it would provide a boost to our economy of up to $600 million per year and create as many as 343,000 U.S. jobs, all at no cost to taxpayers.
Despite the thousands of jobs that would be created, and despite the badly needed supply of oil it would provide for years to come, President Obama rejected the permit for the pipeline in January. If his decision is allowed to stand, we will have forfeited thousands of jobs and a chance to become more energy secure. Moreover, Canada has already signaled that it will develop the reserves regardless of whether or not we take the oil; if we don’t take it, they will simply sell that oil to other buyers – most likely the Chinese.
I have cosponsored legislation to approve construction of the Keystone XL pipeline; I will work with my colleagues to find a way to pass it and force President Obama to decide whether to support American jobs and energy security by signing it, or forfeit jobs and energy security by vetoing it.
The Arizona Republic published a report in January suggesting that “the plug-in car revolution is feeling more like a fizzle.” It noted that the scarcity of recharging stations limits these vehicles’ use, that some face significant safety issues – such as lithium-ion battery packs that could catch fire – and that they are facing “stiffer competition from conventional cars and hybrids that not only are cheaper, but also have gotten more fuel-efficient as automakers work to meet tightening federal fuel-economy rules.”
The Obama Administration had optimistically predicted that green cars would create thousands of new jobs, and it devoted an estimated $80 billion of stimulus money to grants and loans for clean energy and energy efficiency programs, companies, and research. Yet, waning consumer interest raises questions about the wisdom of that significant investment of taxpayer dollars.
The Washington Post reported that a battery maker that received $380 million in government support was forced to lay off workers because of declining orders; instead of the 3,000 new jobs that the president predicted, the company instead employed just a few hundred workers. Another company that received a $300 million grant opted to build just one factory instead of two because of lower-than-projected demand – and even that single plant is now operating at half capacity. Even General Motors reported that sales of the Chevy Volt fell 38 percent shy of the goal for 2011.
If a market develops for electric vehicles, auto companies will produce them, regardless of whether the government provides subsidies. But, if consumers decide they want a different kind of vehicle, it makes no sense for the government to promote a product that will not sell, at least not in sufficient numbers to justify the huge costs involved.
President Obama has suggested “it is time for us to move to a clean energy future,” and that is certainly a worthy goal. But, how do we get there, and what are the costs and benefits? Is the path forward best determined by the government through multiple new taxpayer subsidies, mandates, and regulations? Or, is the free market the best way to test the viability of new sources of energy and their appeal to consumers?
The fact is that government has long had a poor track record for picking alternative sources of energy. President Jimmy Carter launched the U.S. Synthetic Fuels Corp. with great fanfare in 1980, with the intent of producing enough synthetic fuels made from shale and coal to supply the equivalent of 40 percent of petroleum imports. Congress authorized up to $88 billion for the project, but it was plagued by scandals, charges of lavish spending, and mismanagement. It was eventually repealed just six years later, after wasting billions of taxpayer dollars and yielding less than 2 percent of the production target Congress had set, according to Science News.
More recently, the Obama Administration extended $535 million in loans to a solar-panel manufacturing company, Solyndra Inc., in California. President Obama personally visited the plant and declared that “companies like Solyndra are leading the way toward a brighter and more prosperous future.” However, by August 2011, the company had filed for bankruptcy and laid off 1,100 workers. Yet again, Washington politicians got it wrong – and taxpayers paid the price.
Similarly, it wasn’t that long ago that corn-based ethanol was touted as an environmentally friendly, homegrown gasoline substitute to foreign oil, and Congress lavished the industry with new taxpayer subsidies and guaranteed a growing share of the marketplace for it. But myriad problems with ethanol have come to light since then. An article in AAA World noted some of them: an average 25 percent drop in a car’s fuel economy if E85 fuel is used (if you can even find it, given that it’s sold at less than 2 percent of gas stations nationwide); higher CO2 emissions than the gasoline it is meant to replace; and even greater reliance on foreign oil because of the energy intensiveness associated with producing and transporting the corn-based product. Food prices shot up as well.
Ultimately it’s the marketplace, not government, that will determine the most economically viable kinds of power production
