President Obama spoke recently at the University of Miami about energy policy. The president laid bare a quintessential truth in the Republican party - it is a party rooting for bad news. The news of skyrocketing gas prices are real, as is the real pinch in the pockets of Americans at the pump. The prices even threaten to weaken a re-emerging American economy. Of course, an economic slowdown is also among the GOP's dream scenarios in 2012.
Be that as it may, there are two parts of pain at the pump - or the household economic effects of high energy prices in general. The first is the unit price of fuel. The second is the source and efficiency of use of that fuel. If, for example, gas prices double but so does the fuel efficiency of the vehicle you are driving, you spend no more money per month filling up your gas tank. If, for another example, more of our energy was produced using renewable sources and more cars were electric or hybrid, total price of consumption would also remain flat or decrease despite rising unit prices.
So when we ask what public policies ought to be undertaken to reduce the cost of energy for an American family, it is exactly the wrong thing to do to focus on the unit price of fossil fuel rather than the consumption, efficiency and diversity of the source of energy that we use. Wrong, even more, in light of the fact that the American government can do very little to control the price of a barrel of oil. Turmoil in the middle east, greed of OPEC nations, and skyrocketing demand in developing countries like China - all factors outside the control of American public policy - are responsible for the global rise in the price of fossil fuels. Indeed, as President Obama pointed out in his speech in Miami, domestic oil production is at its highest point in eight years, and through his leadership, our net imports of oil has dropped to 45% of American gasoline use in 2011, from 60% in 2004. We are at our highest point in total energy production as a percentage of demand met from domestic sources - at 81% - since 1992.
Still, gas prices keep rising. If it were a domestic supply issue, our dramatic drop in net imports would dramatically reduce the unit price of gasoline. But that's not the case, is it? So in order to reduce the cost of energy for our household and our industry, we have to talk about the other side of this puzzle - the side that American public policy can influence. Energy source and fuel efficiency.
Let's address the last part first. What has each party done about fuel efficiency? When for six years, George W. Bush and Dick Cheney, the oil men from Texas, were in charge of the White House with their party controlling all of Congress, they did nothing about fuel efficiency. It wasn't till the Democrats took back Congress in 2007 that George Bush was forced to sign an increase in fuel efficiency standards. Democrats raised fuel efficiency standards to 35 MPG by 2020.
Then, President Obama took office in January of 2009. Just last year, he announced an unprecedented agreement with the auto industry - bypassing the do-nothing Republican obstructionists in Congress - to raise fuel efficiency much more rapidly, reaching 55 miles to the gallon by 2025. And this time, for the first time in history, fuel efficiency standards for commercial trucks were part of the deal. This deal, fully implemented, will save the average American family $8200 a year in gas.
But we can't talk about fuel efficiency without addressing two major policies of the Obama administration opposed by Republicans vehemently. The first is the auto rescue. In the midst of fierce Republican protest and calls from the Republican presumptive nominee for President Mitt Romney to let Detroit go bankrupt, the president stood tall because he wasn't willing to dismantle an entire American industry, more than a million American jobs, and the backbone of American manufacturing. What the president did know, however, is that if the American auto industry was going to re-emerge as a global force, it was going to have to produce vehicles that were leaner on gas, tougher on quality, and serve the needs of an emerging market for more fuel-efficient vehicles. They were going to have to go from the Hummer to the Volt (and yes, Mr. Gingrich, you can put a gun rack in the Volt).
The result? The president and his team provided the industry with the loans they needed conditioned upon the fact that they transform themselves from the industry of the past to the manufacturer of the future. They did, and GM today is once again the world's largest car manufacturer, our vehicle exports are growing and American industry is once again taking the lead on cleaner, more fuel efficient cars - giving Americans searching for efficient vehicles a much broader choice. As a result, at least some of the pain of the unit fuel price is soothed by the need to fill up less often.
There is another key component to fuel efficiency policy when it comes to transportation: mass transit. Fuel demand is cumulative, and effective mass transit systems are among the most effective in reducing that demand. Total fuel efficiency of a population can rise very rapidly with the right kind of public transit. But if there is one part of the president's agenda that has garnered more right wing obstruction than his auto-rescue, it is mass transit. They have fought the president and the democrats tooth and nail against light rail, high speed rail and other mass transit efforts. As a matter of fact, they have used their political power to cut funding for mass transit. The president secured significant funding for mass transit and high speed rail in the 2009 stimulus bill, but the Republicans - now in power in the House - say no more.
In addition to the clean energy investment in the stimulus bill, The administration has approved enough renewable energy development on public lands to power 1.2 million homes upon completion. President Obama has pursued and provided tax credits for renewable energy production, and wants to make it permanent. Not only has the president provided a much needed hand up for the renewable energy of the future, his policies are paying off, as you can see on the renewable energy generation graph on the right. Smart investments right now will also help drive down the cost of production of clean energy in the near future. For example, see how the cost of a typical electric vehicle battery is projected to drop over the next decade and a half, partly due to the investments made in the much-maligned stimulus that kept our economy from plunging into the second Great Depression.
Standing in President Obama's way? A Republican House and Senate Republicans whose only energy "plan" is to further subsidize the oil industry that already gets $4 billion in taxpayer subsidies every year, despite exploding profits. The GOP is not ready to take out a single dollar of taxpayer giveaway to their oil buddies - not to invest in our energy future, and not even to reduce the deficit they so ardently want you to believe they care about. Instead, the Republicans would kill off the investment in smart, renewable, clean energy - in order to protect the oil and gas subsidies.
So while Newt Gingrich might have a fantasy about $2 gas (I wonder if his Tiffany's half-million-dollar credit line comes in handy for these delusions of grandeur), it's time to seriously think just who - and what party - is for making energy more costly to American families, consumers and businesses. President Obama has focused on solutions that would diversify our sources of energy, make our energy use more efficient, and actually moves us away from the dependence on foreign oil (not just talking about it - he actually reduced net imports). The Republican party, on the other hand, has focused on defending the energy status quo, peddling the interests of big oil, and pointing fingers. They have not just defended taxpayer giveaway to oil and gas, they are actively trying to end investment in clean energy.
So who wants you to remain dependent solely on oil and gas and thus vulnerable to geopolitical events half way across the world? Who wants you to stay at the mercy of a middle eastern oil cartel and suffer every time events there cause a problem with the supply chain? Who wants you to be vulnerable to rising demands in China, India, Brazil and other developing economies? Who wants you to remain dependent on these sources and these sources only specifically so that you will feel the pain every time the unit price of gasoline rises rather than attempting to make it less relevant to your life and your budget? The GOP. Every piece of available evidence points to a sole conclusion: the Republican policies are at the root of this pain.
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