No Way to Handle a Fuel Crisis

By Benita M. Dodd 

You don’t have to have your ear to the tracks to hear the hullabaloo blaming “big oil” and Americans’ “addiction” to foreign oil for alarmingly high energy prices. Once again, snake-oil salesmen are outshouting reasoned discussions about three-dollar gas. 

The clamor from Capitol Hill is one example. Capitalism has become a dirty word. Congressional leaders from both sides are demanding investigations of oil companies for “price-fixing,” “price-gouging” and “windfall” profits. In response, President Bush ordered an investigation into gouging, urged an end to tax breaks for oil companies and suspended deliveries to the Strategic Petroleum Reserve through the fall. Suspending deposits will keep about 25,000 barrels more a day on the summer market, according to Bloomberg News – a drop in the ocean considering U.S. petroleum consumption averaged 20.7 million barrels a day in 2004.

A waiver of boutique-fuel requirements the president also authorized could bring some temporary price relief again this year to the 45-county metro Atlanta region. The ozone-reducing blend is required under federal clean-air rules from June 1 through Sept. 15. May 1 through Oct. 31 is ozone forecasting season for metro Atlanta; the hot summers, high humidity and tree cover that draw more people here also make smog in metro Atlanta as perennial as its sprawl castigation. 

Washington’s steps, along with proposals for boycotts, renewables and rebates, are no solution. There is no big oil “collusion;” the crude oil price is universal. It was 54.8 percent of the cost of a gallon of gasoline in March and rising in response to supply concerns amid geopolitical tensions in oil-producing countries. Federal and state taxes account for about 24 percent of the price; Georgians pay local taxes as well. This nation is competing for fuel globally, but current fuel shortages have as much to do with “peak” oil – the belief that we’ve reached the point at which oil extraction and processing can no longer meet world oil demand – as humans and fossil fuel use have to do with global warming, which is nothing. We haven’t even begun to reach the limits of technology, exploration and extraction.

American complacency certainly aggravates shortages. Yes, environmental regulators remain inflexible on regional boutique blend requirements. But it’s no longer an emergency when supplies are short every summer; it’s an expectation. Last year Congress mandated ethanol use in gasoline, even though facilities and supplies are insufficient; the oxygenate must be trucked, not piped, to destinations, and massive subsidies and tariffs are needed to make ethanol “competitive.”

Vehicle miles traveled have increased 149 percent since 1970, yet the last refinery built came on line in 1976. Refineries have not completely recovered from Katrina. Heightening nervousness about supplies, forecasters estimate we’re just one-third through a 30-year cycle of intensified hurricane activity.

If only Americans would use public transit at the same rate as Europeans, this country could cut its reliance on foreign fuel by 40 percent, says the American Public Transportation Association. Even high-density Europe is no transit nirvana: More than 83 percent of travel is by passenger car or motorcycle in the 25-nation European Union, with about 9 percent bus; 6.5 percent railroad and 1.4 percent tram. In this country, 88 percent travel by car or motorcycle; 4.7 percent use public transportation.  

Transit is also cheaper, says the Center for Transportation Excellence, which puts the annual cost of driving a single-occupant vehicle at between $4,826 and $9,685, while the annual average cost for public transportation for one adult ranges from $200 to $2,000, depending upon the service. No mention, of course, that an auto owner has a personal responsibility to pay for that car, while everyone must subsidize the transit rider’s ticket.  

The Center for Transportation Excellence reports that public transportation saves more than 855 million gallons of gasoline a year. If a motorist averaging 15,000 miles a year gets 25 miles per gallon in a midsize car, that’s the equivalent of taking 1.425 million cars off the road. But are buses and trains filled with transit riders who left a car at home? A national survey found 44 percent of bus and rail passengers combined (49 percent of bus and 39 percent of rail passengers) were from households without cars, while another 33 percent were from a one-car household.  

Lost in the hysteria are long-term solutions that can ease the need for foreign fuels. It requires facing down activists who hinder nuclear power generation – the safest, cheapest, cleanest energy source available. It requires building new facilities and exploitation of domestic resources. Forward-thinking Georgia legislators, realizing that expanding domestic supply reduces the global influence, this year urged the federal government to open up promising off-shore fields for exploration and called for expanded use of nuclear power.

But snake oil remains the prescription as long as Congress blames big oil and Americans buy the bluster.

Benita M. Dodd is vice president of the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (April 28, 2006). Permission to reprint in whole or in part is hereby granted, provided the author and her affiliations are cited.

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