By Benita M. Dodd
Vice president, Georgia Public Policy Foundation
There’s an extraordinary disconnect among Americans between our wants and our needs; in understanding how the choices we make impact the outcomes we bemoan. The latest example is the perennial astonishment over rising fuel prices, which bleed into every aspect of the economy.
As Transportation Secretary Mary Peters warned in her visit to Atlanta this week, gas prices will continue to go up, up and away. Stop worrying about the current record high prices. Start thinking about next year, and the next and next; soon motorists in Georgia could see $4 a gallon and more.
Why aren’t we “energy independent,” some wonder. Energy independence, after all, seems like a great solution. Except, of course, for how interdependent we are — as a state, as a region, as a nation and as a competitor in a global economy. About 65 percent of U.S. petroleum is imported, even though only about 16 percent of imports are from the Persian Gulf — lower even than last year.
Amid rising demand, despite rising prices and notwithstanding the bill of goods proposed called “energy independence,” Americans appear to be banking on the Energy Information Administration’s forecast this week. The EIA says prices for regular gasoline aren’t expected to increase much beyond the present range “absent any major petroleum infrastructure problems or overseas disruption in supplies.”
It’s more than likely that supplies will tighten and prices will soar. It could be another Katrina-like domestic event, an unexpected outage at any of the nation’s 149 refineries, or Nigerian or Iranian instability. Then, watch for the hue and cry over “price-gouging” gas stations.
But who’s to blame for there being only 149 refineries, with not one refinery built after 1976? Who’s to blame for stagnating refinery numbers even as vehicle miles traveled increased 178 percent from 1970 to 2005 and the U.S. population grew 42 percent? Refineries are doing their part: They ran at 90.6 percent of their capacity (operable utilization rate) in 2005 and at an even higher 93 percent in pre-Katrina 2004. (By contrast, the typical manufacturing industry operates at about 82 percent of capacity.)
Who’s to blame for vast swaths of “public” federal lands and offshore areas being off-limits to exploration despite massive potential for oil and natural gas resources? Who’s to blame for federal and state environmental mandates on fuels that take their toll on supply and prices? Domestic ethanol production is trumpeted as the latest elixir to boost energy independence, apparently providing energy efficiency, environmental benefits and reducing the impact of unstable geopolitical situations that hike the cost of oil. Not yet, however: It isn’t yet cost-efficient or energy-efficient; its environmental benefits are in question and it can’t be transported via pipeline.
Regional specialty blends — “boutique” fuels for areas, including metro Atlanta, out of compliance with federal air quality standards — continue to heighten supply concerns. The petroleum industry reports its pipelines handle more than 90 fuel types, including gasoline, on-road and off-road diesel fuel, heating oil, kerosene and jet fuel. Then, in gasoline alone, the industry must supply segregated regions under about 20 distinct fuel formulation mandates, not including the various octane grades. Should an unexpected outage or shortage hit any of these regions, there is little room to compensate. (Hence the waiver of fuel mandates after the hurricanes of 2005.)
So who’s to blame? That’d be Joe Q. Public. American voters and consumers are neglecting our role in the checks and balances on gullible leaders who regurgitate alarmist theories and proposals. Politicians who are hoodwinked by TV comedians yet wax lyrical on “peak oil,” “anthropogenic climate change” and “energy independence.”
Despite more efficient cars, despite increasing use of alternative sources of energy, gasoline demand will grow, according to the energy Information Administration. Even if motorists reduce consumption, additional domestic refining capacity and production is needed. Georgia motorists already are doing their part, according to the Metro Atlanta Performance report from the state’s transportation agencies: Individual drivers have reduced their vehicle miles traveled. The pressure of gas prices probably inspires wiser travel. Overall, however, total VMTs still increased, because the state’s population increase has more than made up for the decrease in individual VMTs.
As gas prices rise, the marketplace will come into play. Consumers will look to more efficient vehicles, public transportation, car pooling, telecommuting and other alternatives. Congestion relief measures will become more urgent. But it’s time to call policy-makers to task, and demand true leadership on energy policy in a global economy where willing developing countries such as China divert capital and resources.
The hot seat is growing more uncomfortable for the American consumer: Next up, global warming.
Vice president, Georgia Public Policy Foundation
There’s an extraordinary disconnect among Americans between our wants and our needs; in understanding how the choices we make impact the outcomes we bemoan. The latest example is the perennial astonishment over rising fuel prices, which bleed into every aspect of the economy.
As Transportation Secretary Mary Peters warned in her visit to Atlanta this week, gas prices will continue to go up, up and away. Stop worrying about the current record high prices. Start thinking about next year, and the next and next; soon motorists in Georgia could see $4 a gallon and more.
Why aren’t we “energy independent,” some wonder. Energy independence, after all, seems like a great solution. Except, of course, for how interdependent we are — as a state, as a region, as a nation and as a competitor in a global economy. About 65 percent of U.S. petroleum is imported, even though only about 16 percent of imports are from the Persian Gulf — lower even than last year.
Amid rising demand, despite rising prices and notwithstanding the bill of goods proposed called “energy independence,” Americans appear to be banking on the Energy Information Administration’s forecast this week. The EIA says prices for regular gasoline aren’t expected to increase much beyond the present range “absent any major petroleum infrastructure problems or overseas disruption in supplies.”
It’s more than likely that supplies will tighten and prices will soar. It could be another Katrina-like domestic event, an unexpected outage at any of the nation’s 149 refineries, or Nigerian or Iranian instability. Then, watch for the hue and cry over “price-gouging” gas stations.
But who’s to blame for there being only 149 refineries, with not one refinery built after 1976? Who’s to blame for stagnating refinery numbers even as vehicle miles traveled increased 178 percent from 1970 to 2005 and the U.S. population grew 42 percent? Refineries are doing their part: They ran at 90.6 percent of their capacity (operable utilization rate) in 2005 and at an even higher 93 percent in pre-Katrina 2004. (By contrast, the typical manufacturing industry operates at about 82 percent of capacity.)
Who’s to blame for vast swaths of “public” federal lands and offshore areas being off-limits to exploration despite massive potential for oil and natural gas resources? Who’s to blame for federal and state environmental mandates on fuels that take their toll on supply and prices? Domestic ethanol production is trumpeted as the latest elixir to boost energy independence, apparently providing energy efficiency, environmental benefits and reducing the impact of unstable geopolitical situations that hike the cost of oil. Not yet, however: It isn’t yet cost-efficient or energy-efficient; its environmental benefits are in question and it can’t be transported via pipeline.
Regional specialty blends — “boutique” fuels for areas, including metro Atlanta, out of compliance with federal air quality standards — continue to heighten supply concerns. The petroleum industry reports its pipelines handle more than 90 fuel types, including gasoline, on-road and off-road diesel fuel, heating oil, kerosene and jet fuel. Then, in gasoline alone, the industry must supply segregated regions under about 20 distinct fuel formulation mandates, not including the various octane grades. Should an unexpected outage or shortage hit any of these regions, there is little room to compensate. (Hence the waiver of fuel mandates after the hurricanes of 2005.)
So who’s to blame? That’d be Joe Q. Public. American voters and consumers are neglecting our role in the checks and balances on gullible leaders who regurgitate alarmist theories and proposals. Politicians who are hoodwinked by TV comedians yet wax lyrical on “peak oil,” “anthropogenic climate change” and “energy independence.”
Despite more efficient cars, despite increasing use of alternative sources of energy, gasoline demand will grow, according to the energy Information Administration. Even if motorists reduce consumption, additional domestic refining capacity and production is needed. Georgia motorists already are doing their part, according to the Metro Atlanta Performance report from the state’s transportation agencies: Individual drivers have reduced their vehicle miles traveled. The pressure of gas prices probably inspires wiser travel. Overall, however, total VMTs still increased, because the state’s population increase has more than made up for the decrease in individual VMTs.
As gas prices rise, the marketplace will come into play. Consumers will look to more efficient vehicles, public transportation, car pooling, telecommuting and other alternatives. Congestion relief measures will become more urgent. But it’s time to call policy-makers to task, and demand true leadership on energy policy in a global economy where willing developing countries such as China divert capital and resources.
The hot seat is growing more uncomfortable for the American consumer: Next up, global warming.