Published by the American Geological Institute
Newsmagazine of the Earth Sciences
Prices at the Pump?
Time to Talk Energy Policy
Pictured: the Trans-Alaska Pipeline
What a difference a year makes! In August 1999, Congress passed emergency legislation to provide domestic oil and gas companies with guaranteed loans so that they could “get back on their feet” after low oil prices had crippled the industry, particularly small producers. The bill itself was a small gesture and in order to be considered it had to be appended to another bill providing similar relief to the domestic steel industry. When gasoline prices are low, few lawmakers feel a need to talk about energy policy.
Fast forward to the summer of 2000. Oil prices that had bottomed out at $11 per barrel in March 1999 soared in the first months of the new year, reaching $34 per barrel by March. Gasoline prices had doubled. A half dozen committees in both the House and Senate were holding hearings. Senate Majority Leader Trent Lott (R-Miss.) was spearheading an effort to pass his National Energy Security Act of 2000 (S. 2557).
Billed as a comprehensive energy strategy for the nation, Lott’s legislation proposed a series of measures to decrease U.S. dependency on foreign oil to below 50 percent in the next decade. His more immediate goal was to capitalize on a potent election-year issue and draw attention to the Clinton administration’s lack of an energy plan. Energy policy is now seen as a worthy topic for discussion, but the campaign season has shed more heat than light.
Energy: a campaign issue
Out on the stump, any politician caught without an energy strategy — tailored, of course, to the particular needs and wants of their constituents — might as well start polishing their concession speech. In June, Vice President Al Gore unveiled his 10-year, $125 billion energy plan. Texas Governor George W. Bush unveiled his 23-point “Comprehensive Energy Policy” at a campaign stop in Saginaw, Mich., in September.
The Gore plan focuses on reducing energy consumption by encouraging “green technologies,” using tax incentives for low-emission vehicles, energy-efficient homes, and renewable energy. The Bush plan, which closely tracks Lott’s S. 2557, places a high priority on decreasing U.S. reliance on imported oil by increasing domestic production.
Both Bush and Gore call for greater assistance to low-income families. Both call for greater funding of research and implementation of alternative energy sources. But, somewhat ironically, it is where the plans are most similar that perhaps their greatest difference appears. Bush would pay for these special programs with the leasing bids derived from opening 8 percent of the Arctic National Wildlife Refuge (ANWR) on Alaska’s North Slope to petroleum exploration.
Opening ANWR has long been a priority of the Alaska congressional delegation and the petroleum industry. Supporters argue that modern drilling techniques would minimize the footprint of operations, and they point to the need to maintain flow in the Trans-Alaska Pipeline System as Prudhoe Bay deposits are exhausted.
Gore has sided with environmentalists who are implacably opposed to petroleum exploration in the ecologically sensitive coastal plain of ANWR. In an earlier effort to deflect the pressure to open ANWR, the Clinton administration allowed drilling in 4 million acres of the National Petroleum Reserve-Alaska, located at the opposite end of the North Slope from ANWR.
Attention shifts to winter fuels
If ANWR seems to be an intractable problem, more common ground appears when the issue shifts to additional development of natural gas resources. Both sides in the debate have embraced natural gas as a cleaner-burning, more environmentally friendly energy source to replace petroleum and coal.
Both candidates’ energy plans call for incentives to encourage natural gas exploration. Bush has gone a step further, indicating that he would consider approving development of offshore leases that pre-date the current moratorium on drilling along most of the U.S. outer continental shelf.
The allure of natural gas stems from its domestic abundance and cheap price, making it a viable alternative to coal-fired power plants. But cutbacks in both domestic production and exploration brought on by the low prices of 1998 and 1999 have lowered reserves, and the tight supply has meant natural gas prices have doubled since 1999.
And so it came to pass that even as gasoline prices stabilized in late summer, politicians found themselves confronted with the prospect of rising prices for natural gas as the winter heating season (and the election) approached. Compounding the problem, the cost of heating oil tripled between February 1999 and August 2000. To ameliorate a possible heating oil crisis, both Democrats and Republicans have called for creating a reserve in the Northeast, where heating oil is a major sourceof residential heat and where reserves are down 60 percent from the previous year. In July, President Clinton told the Energy Department to establish such a reserve as soon as possible.
Far more controversial was the president’s decision in late September to release 30 million barrels of oil from the Strategic Petroleum Reserve. Republicans, led by House Majority Whip Tom DeLay (R-Texas), were quick to criticize the president’s decision as election-driven, arguing that refineries are already near capacity and that the additional oil will not increase the amount of heating oil available this winter or decrease the price.
A genuine dialogue?
It seems safe to say that the election season has proven ill-suited for any substantive discussion of energy policy, long-term or otherwise. Rhetoric and posturing are bound to reach a fever pitch as Election Day nears. Moreover, many of the measures being proposed are not likely to have a major impact on real prices. Demand for heating oil varies by 25 percent or more depending on winter temperatures, and the severity with which Jack Frost visits New England will have a much greater effect than any program emanating from Washington.
But if high prices continue into January, the new Congress is bound to take up energy policy. And so will the transition team for the next administration. The federal role is limited, but a number of issues are still worth tackling in Congress from a less partisan approach. From a geoscience perspective, an important question to address is how policy-makers can put information and analysis from the U.S. Geological Survey and the Department of Energy to the best use. Broader questions are: What will be the real costs of shifting away from the current energy supply mix? What are the environmental and security tradeoffs between domestic and international petroleum production? How will the debate over climate change affect energy policy? Has the economy become more resilient to oil-price shocks, as many analysts claim? What incentives and research initiatives will make a real difference in the viability of alternative energy sources?
At best, congressional and presidential actions will only nudge the overall direction of private-sector activity and consumer consumption. But sometimes a nudge is all it takes.