National Commentary

Jim Moran’s News Commentary

The pain at the pump continues as gas prices spike to record highs, surpassing $4 a gallon in parts of the country and heading towards becoming the national average by the summer driving season.

There are two main reasons for the high price of oil. The first is instability in the major oil producing nations such as Nigeria, Venezuela and the Middle East. When the Iraq War began, the price of oil was $27 a barrel. Today, it stands over 300% higher, topping $110 a barrel.

The second reason for high oil prices is that China and India, which represent 35% of world population, are experiencing economic booms that are draining world supplies–a situation not likely to change anytime soon. They represent a whopping 70% of the increase in demand over the past two years.

Oil is a finite resource. The oil producing nations, including the U.S., are producing at or very near full capacity. Despite the rhetoric that exploiting the Alaska National Wildlife Refuge or off-shore drilling would make an appreciable impact on gas prices, those actions would take at least a decade to bring online and would barely make a dent in the 250 billion gallons we are on track to import between now and 2050.

The only realistic way to meet our long term energy demands is through the aggressive pursuit of conservation, alternative technologies (hybrid, electric, hydrogen fuel cell) and cleaner renewable fuels. Improving energy efficiency is the key to minimizing the impact of oil shocks on the overall economy. The federal government has a critical role to play on these issues by setting standards that reduce consumption and support research yielding greater energy efficiencies and cleaner alternative sources like wind, solar, and even nuclear power.

Congress, with passage of the Energy Independence and Security Act in December, has taken some steps in right direction, most importantly requiring that all new cars and trucks sold in U.S. achieve a 35 mile-per-gallon standard for fuel efficiency by 2020. It’s the first increase in the corporate average fuel efficiency (CAFE) standard in over 30 years–a long overdue action, but a big step in the right direction.

With this provision in place, the U.S. will reduce its daily oil consumption by 4 million barrels per day by 2030, twice the amount we import from the Persian Gulf today. Economists believe these new CAFE standards will save consumers somewhere between $700 to $1,000 per year in fuel costs per year and net $22 billion in annual savings. Also by 2030, this legislation will result in nearly 25 percent of the green house gas reductions that most scientists say will be needed by 2050 to reduce the threat of global warming.

Meeting our nation’s energy demands in a cleaner, responsible manner is a long-term problem requiring inventive solutions to perhaps the most pressing threat to our environment and economy. The longer we rely on foreign oil, the longer we borrow money from China to buy energy that drives up the price of oil to the benefit of Iran. National security, energy and the environment are all inextricably intertwined. Skyrocketing gas prices may be the stick that finally pushes our country to develop carrots.