Failed American Energy Policy

The New York Times has a fine article today summarizing the failure of American energy policy over the past many years. Given the current gasoline price of more than $4 a gallon there is much concern among people of all economic positions in the nation. Everyone is suffering the consequence of decisions made over the course of the past 30 years or more.

Entire industries are reeling — airlines and automakers most prominent among them — and gas prices have emerged as an important issue in the presidential campaign.

Over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries. What’s more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America’s oil addiction.

Where did we go wrong? In large measures the source of trouble may be seen in our own driveways. Americans are now and have been for years obsessed with large vehicles.

Nearly 70 percent of the 21 million barrels of oil the United States consumes every day goes for transportation, with the bulk of that burned by individual drivers

For many years low cost gasoline was part of American culture. We built houses far from centers of business and continued to drive everywhere we wished to go. Today we are paying the price of our neglect.

In 1975 the first corporate average fuel economy (CAFE) standards were passed.

LARGELY as a result, oil consumption in 1990 totaled 16.9 million barrels, basically on a par with the 17 million barrels consumed in 1980, even as the economy grew substantially.

A proposed revision of the CAFE standards to raise the average to 40 miles per gallon failed.

Amid furious opposition from Detroit, liberal Democrats from automaking states, like Carl Levin of Michigan, joined conservative Republicans like Jesse Helms of North Carolina to block new CAFE standards

The argument at the time included automakers responding to public demand. People bought more larger vehicles instead of smaller, more fuel efficient vehicles. I'd argue this was in large part due to advertising pressures as automakers made the larger vehicles seem more attractive and macho. The better profit margins on larger vehicles (especially SUV's) made the pressure on automakers even more decisive.

Since the 1970's

global consumption [of oil] has taken off, rising to 85.2 million barrels a day last year from 76.3 million in 2000.

BY 2001, oil prices were slowly creeping up, but few seemed to notice, perhaps because the march was slow and steady.

But the handwriting was on the wall for those willing to take notice. The automakers missed the call and continued to build and market their profitable gas guzzlers.

Now even politician regret their previous stance on CAFE standards.

...onetime CAFE opponents like Mr. [Mike] Castle [R-DE] now say they wish that Congress had acted sooner.

Nice to see him on the right page for a change, but now is much too late.

The crisis is upon us today. The pain of the current market will not ease any time soon. Solutions lie in the distant past. Today we must face the situation and look for long term solutions.

“It’s a shame we’re doing this now instead of 10 or 20 years ago,” says Mr. Castle, who supported the legislation last year.

But where was he in 2001 when he voted against raising CAFE? Hindsight is wonderful but today we need honest foresight in Congress.

Solutions are not going to be found easily found. Foreign car makers are much better positioned to take advantage of the rise in gasoline prices and the changing demand of American consumers. Detroit is seeing the profit margins of large vehicles dropping faster than the companies are able to respond. The Chrysler plant here in Delaware is closing for an 8 week period this summer to retool for a pair of hybrid vehicles. The entire American auto industry must move as fast as possible to produce smaller, more fuel efficient vehicles.

Our government needs to invest in research and development to insure technological advance into the future. The current crisis is one more warning sign about a future we must face. Our society must take a look at housing development patterns. We must begin to improve our mass transit opportunities. We can no longer afford our oil addiction.

The pain of today is not to be relieved any time soon. We must demand accountability and truth from our elected officials. We must insure a future for our children and our grandchildren by moving to renewable energy sources and we must make the move very soon. Bluewater Wind will supply a small fraction of our electricity. We need a great deal more resources like that. We must move to electric cars or to hydrogen powered vehicles. There is much work to be done. If we fail to move today we stand to lose much more in the future.

Together we can face this situation. Americans have shown themselves to be resourceful and flexible over all these many years. We can face the issues of today if we stand together and take action. We stand together or we fall apart.

Peace.