Efficiency Standards are Safest Shield for Consumers, Economy against Surging Prices
WASHINGTON, DC (April 14, 2004) - OPEC's brazen decision to slash production quotas at a time when U.S. pump prices are already soaring demonstrates once again the dangerous extreme to which oil producers have American consumers over a barrel. Forecasters including the U.S. Energy Information Administration (EIA) predict average pump prices will keep rising for months, and they say U.S. dependence on foreign oil will increase sharply in coming years unless we decide to stop it.
The only real solution is to reduce our oil dependence in the first place, using sensible standards to increase gas mileage of our cars, trucks and SUVs. While the actual oil savings will take time, a bold declaration by U.S. leaders now will send a powerful signal to OPEC that America is serious about energy security and discourage the cartel from flexing its muscles again.
We could cut the oil needed for U.S. personal vehicles in half by 2020 without compromising the choice or safety of cars and light trucks available today, according to automotive technology experts at NRDC (Natural Resources Defense Council), the National Academy of Sciences and others. But it won't happen until the leaders in Washington and Detroit decide to make it happen.
Raising fuel economy performance to 40 mpg over the next 10 years would save 2 million barrels of oil each day -- about equal to current daily imports from Saudi Arabia and Kuwait. This goal is achievable using technology already on the road today, including more powerful hybrids like the new Ford, Toyota and Lexus SUVs hitting showrooms later this year, as well as simple improvements in conventional drive train design. (For full analysis, click here.)
American companies have the skill and the know-how to meet the oil security challenge. If they don't seize the opportunity, foreign competitors will. That could mean a repeat of the 1970s and 1980s, when thousands of U.S. autoworkers lost their jobs thanks to shortsighted corporate management decisions.
Unfortunately, industry lobbyists continue to block genuine progress on energy security. And they're doing it with help from the Bush administration: carving out new loopholes in the rules, creating new tax breaks for the biggest gas-guzzlers, and blocking stronger fuel economy standards. Despite White House claims, the current energy bill does nothing to reduce oil demand, and may even increase it.
Ain't Too Proud to Beg
Politicians talk about "jawboning" oil producers to cut their prices -- hardly a proud stance for a great country. But unless we break the chain of oil dependence, we may have little choice. The U.S. spends nearly $200,000 per minute on foreign oil, often from places controlled by unstable or unfriendly governments. We spend more than $20 billion a year on Persian Gulf imports. Half our oil is imported today, a share that will reach two-thirds by 2020 if things don't change.
For the second time in a year, oil prices last week approached $40 a barrel, and EIA expects pump prices to keep climbing. While gasoline prices are well below the inflation-adjusted record of nearly $3 a gallon in March 1981, today's spikes have a serious impact on consumers at a time when the economy is struggling. It is too early to tell the effects this time, but the last four major price spikes (1973, 1979, 1990 and 2000) were each followed by recession.
Consumers Held Captive
For years, OPEC kept prices within a band of $22 to $28 per barrel; enough to maximize profits without triggering serious savings by oil consumers. But OPEC prices started going up in early December. OPEC's decision to tighten production again now suggests cartel leaders have decided we're going to sit still, and keep right on paying them. It's time we proved them wrong.
Fuel efficiency of new cars and trucks in the United States is at its lowest in 22 years, according to EPA. U.S. global warming emissions are the highest ever. One reason is that industry lobbyists keep convincing lawmakers to exempt SUVs and light trucks from automotive fuel economy rules. In fact, standards have not been substantially adjusted to keep up with technology since 1975.
In March 2002, a bipartisan group of U.S. Senators tried to break the energy security stalemate with an energy bill amendment to raise fuel economy standards for all cars and light trucks to 36 mpg by 2015 (from the current 27.5 and 20.7 mpg, respectively). Industry lobbyists waged a fierce campaign that ultimately defeated the measure. In June 2003 the Senate voted 99-1 in favor of an amendment requiring the Bush administration to craft policies that would save one million barrels of oil per day. Despite overwhelming support, the measure was dropped in conference committee negotiations.
In a token gesture, the Bush administration last year said it would raise the light truck standard by just 1.5 mpg over three years, starting with 2005 models - a fig leaf of a standard even weaker than voluntary goals that had previously been announced by several automakers, and the savings will be negligible.
Not only does the current energy bill not address oil savings, it may actually increase oil demand by extending a loophole giving automakers extra fuel economy credit for "dual fuel" vehicles that can run on ethanol, even though government studies show the burn plain gasoline 99 percent of the time.
'Boutique Fuels' Myth
Some people blame clean fuel standards for tighter gasoline supplies, complaining that "boutique" gasoline blends drive up prices. In fact, oil refiners themselves insisted on the menu of formulations as an alternative to a unified national standard. Moreover, refining typically accounts for less than 15 percent of pump prices.
Nevertheless, there may be opportunities to simplify the current framework, but only if safeguards to protect air and drinking water are preserved. For example, NRDC supports a request this week by Governor Arnold Schwarzenegger to EPA head Michael Leavitt to waive rules requiring oxygenates such as MTBE and ethanol in California gasoline, which would allow imports from other states to help cool overheated prices while still maintaining strict air quality standards.
Break the Chain
Over the next 20 years U.S. oil demand will increase 50 percent or more in the absence of new policies, at the same time global demand is also rising. According to EIA, 61 percent of the additional oil coming to the market will come from OPEC. Global warming pollution from fossil fuels is also rising at a dangerous rate. We can't afford to ignore these risks any longer. It's time to break the chain of our oil import addiction.