Time for Action on Energy - July 2006
Dear Friend,
Just as millions of Americans are beginning their vacations and the summer driving season reaches its peak, gasoline prices have risen to record levels this year. And because the world market price for crude oil has spiked this summer to $75 per barrel, energy experts have predicted that there won’t be much relief until at least Labor Day. That’s discouraging news indeed, for vacationers as well as for commuters who will be spending a larger portion of their family income on energy. While the gas prices will force some people to conserve, take shorter trips, consolidate errands, etc., others whose livelihoods depend on driving will suffer economically.
Consumers are understandably frustrated, wondering why prices can increase so quickly and why something can’t be done at the national level to mitigate the impact of these sharply rising energy costs. The answers aren’t simple, but at the same time there are some measures the federal government can adopt to address the situation.
To begin with, there are many causes of the problem, including increasing worldwide consumption, geopolitical tensions in Iran and the ongoing war in Iraq, all of which have undoubtedly contributed to the recent spike in gas prices. But there’s more to it, in my judgment.
A consolidation in the oil business has meant that fewer oil companies are now controlling more of the wholesale market for gasoline. They are able to exert greater market influence by charging significantly higher prices to independent stations than they charge company-affiliated stations, or by carving out price zones that lead to large price discrepancies in the same town. The potential for manipulation of the market is thus very real, and in May of this year I joined with a majority of my colleagues to approve legislation that gives the Federal Trade Commission specific direction to determine whether price gouging is taking place at this time of record oil industry profit margins.
In his 2006 State of the Union Address, President Bush said America is “addicted to oil,” though the efforts of this Administration to treat this “addiction” have thus far been rather modest. A year ago the President signed into law the Energy Policy Act of 2005, which was sent to him by a Congress that is led by those who think we can drill our way out of the problem. With only 3 percent of the world’s oil resources, I simply don’t think it is realistic to think that America can become energy independent by drilling more oil wells. And the legislation the President signed didn’t even increase the fuel economy standards for American automobiles – a logical initiative that would send the right message to U.S. and international automakers at this time. The Energy Policy Act did contain some positive aspects – a moderate level of incentives to encourage the development of alternative fuels, hybrid vehicle production and research into future technologies. But it seems to me, after seeing many years of efforts with no diminishing of our appetite for imported oil, we will only be able to reach the goal of treating this “addiction,” with a more direct involvement and with a more aggressive and comprehensive approach at the national level.
While there is no quick fix, it is clear that in order to lower fuel prices in the years ahead, we should be acting to conserve energy and reduce the U.S. demand for foreign oil by requiring automakers to improve fuel economy – something we already have the technology to do without reducing safety. In a letter to the President that I signed recently with a large number of my colleagues in the House, we urged him to boost the “Corporate Average Fuel Economy” (CAFE) standards for cars and trucks sold in the U.S. This is a small but important step. If we could actually increase the average from 25 miles per gallon today to 33 miles per gallon over the next decade it would reduce our nation’s oil needs by millions of barrels a day, save Americans money at the gas pump, and greatly reduce our dependence on foreign oil.
In addition, we should aggressively invest in and promote new technologies, alternative fuels, and power generation in order to avoid future spikes in energy prices. One of the promising alternatives that has emerged recently is biodiesel, a vegetable oil-based fuel made from renewable crops that burns cleaner than traditional petroleum-based diesel fuel. Our state has already demonstrated leadership in the biofuels industry and I have been working recently on locating of one of the nation’s largest biodiesel fuel production facilities in Grays Harbor producing pure, unblended biodiesel fuel. The permitting process for this 100 million gallon/year facility, operated by Seattle Biodiesel, is already underway and construction is expected to begin this summer. The benefits are obvious: the plant will create about 50 full-time jobs, and allow our state to use some of our own agricultural resources to break America’s dependence on foreign energy and keep costs low.
Another related and hopeful development is the use of ethanol mix fuels such as E-85 in automobiles. Today only 10 percent of the cars on the road can utilize E-85 gas. With the right mandate, the government could require all new cars – perhaps by 2015 or 2020 – to operate on this ethanol mixture, representing a giant step toward energy independence.
While I regret that none of these efforts will reduce the cost of a tank of gas this summer, I believe the government must also be prepared for an oil crisis situation that could conceivably arise if there were an interruption of U.S. oil imports for some reason. We must be prepared to release oil that has been stockpiled in the Strategic Petroleum Reserve, and to suspend, temporarily, the federal excise tax on gasoline – both of which could offset the devastating and immediate price impact for consumers. Particularly at this volatile time in the Middle East, it is only prudent for our nation to be planning for contingencies.
My purpose in writing today is to emphasize my conviction that the federal government must adopt a bolder stance toward addressing energy issues. Because of the critical impact of energy prices on nearly all sectors of our economy, and because of our obvious inability to make major advances through incentives and inducements, it’s time for real investments and real action. A few of my colleagues have likened the task of achieving energy independence to the Apollo program that achieved a manned space flight to the moon within a decade. My view is that the technological accomplishment would be just as significant, but the difference now is that the penalty for not reaching the goal is far greater.
So I intend to continue working aggressively within Congress and with current and potential leaders of business and government to promote an action agenda that will ultimately help our nation end its longstanding dependence on imported oil supplies. As always, I appreciate your interest and your suggestions.
Sincerely,
NORM DICKS
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