Alternatives to gasoline will never come about as long as cheap
gasoline is available. When gasoline reaches $5,$6,$7 or more per
gallon then people may demand more from their present lax governmental
leaders.
"rick murphy" <RichardTRMurphy@[EMAIL PROTECTED]
> wrote in message
news:8817ea6a-8813-4fc7-a7ab-8d5d941ba923@[EMAIL PROTECTED]
Europe and the rest of the World have a very severe learning
disability; cannot learn from the very clear and easy-to-learn lessons
which are very readily avaiable. Everything said about America's
addiction to oil can easily said every person and nation in the World.
Shame on everybody, but especially America and Europe since the two
has the most resouces to develop alternative sources of energy.
Shame on America and Europe. Shame, Shame, Shame. god-damn shame!!!
http://www.nytimes.com/2008/07/06/business/06oil.html?_r=1&hp&oref=slogin
American Energy Policy, Asleep at the Spigot
By NELSON D. SCHWARTZ
Published: July 6, 2008
Correction Appended
JUST three years ago, with oil trading at a seemingly frothy $66 a
barrel, David J. O’Reilly made what many experts considered a risky
bet. Outmaneuvering Chinese bidders and ignoring critics who said he
overpaid, Mr. O’Reilly, the chief executive of Chevron, forked over
$18 billion to buy Unocal, a giant whose riches date back to oil
fields made famous in the film “There Will Be Blood.”
For Chevron, the deal proved to be a movie-worthy gusher, helping its
profits to soar. And while he has warned about tightening energy
supplies for years and looks prescient for buying Unocal, even Mr.
O’Reilly says that he still can’t get his head around current oil
prices, which closed above $145 a barrel on Thursday, a record.
“We can see how you can get to $100,” he says. “At $140, I just don’t
know how to explain it. We’re surprised.”
For the rest of the country, the feeling is more like shock. As
gasoline prices climb beyond $4 a gallon, Americans are rethinking
what they drive and how and where they live. Entire industries are
reeling — airlines and automakers most prominent among them — and gas
prices have emerged as an im****tant issue in the presidential
campaign.
Ninety percent of Americans, meanwhile, expect the pain at the pump to
pose a financial hard****p in the next six months, according to a
recent Associated Press-Yahoo News poll. Stocks now trade inversely to
crude prices, and the Dow Jones industrials are in bear-market
territory. Old icons have been written off, with Starbucks boasting
nearly twice the market value of General Motors, which some on Wall
Street say faces the possibility of bankruptcy.
Outside the thriving oil patch, it makes for a bleak economic picture.
But it didn’t have to be this way.
Over the last 25 years, op****tunities 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 re****t after another
has cautioned against America’s oil addiction.
Even as politicians heatedly debate opening new regions to drilling,
corralling energy speculators, or starting an Apollo-like effort to
find renewable energy supplies, analysts say the real source of the
problem is closer to home. In fact, it’s parked in our driveways.
Nearly 70 percent of the 21 million barrels of oil the United States
consumes every day goes for trans****tation, with the bulk of that
burned by individual drivers, according to the National Commission on
Energy Policy, a bipartisan research group that advises Congress.
SO despite the fierce debate over what’s behind the recent spike in
prices, no one differs on what’s really responsible for all that
underlying demand here for black gold: the automobile, fueled not only
by gasoline but also by Americans’ famous propensity for voracious
consumption.
To be sure, the American appetite for crude oil is only one reason for
the recent price surge. But the country’s dependence on im****ted oil
has only kept growing in recent years, undermining the trade balance
and putting an added strain on global supplies.
Although the road to $4 gasoline and increased oil dependence has been
paved in places like Detroit, Houston and Riyadh, it runs through
Wa****ngton as well, where policy makers have let the problem make
lengthy pit stops.
“Much of what we’re seeing today could have been prevented or
ameliorated had we chosen to act differently,” says Pete V. Domenici,
the ranking Republican member of the Senate Energy and Natural
Resources Committee and a 36-year veteran of the Senate. “It was a
bipartisan failure to act.”
Mike Jackson, the chief executive of AutoNation, the country’s biggest
automobile retailer, is even more blunt. “It was totally preventable,”
he says, anger creeping into his affable car-salesman’s pitch.
The speed at which gas prices are climbing is forcing a seismic change
in long-held American habits, from car-buying to commuting. Last week,
Ford Motor re****ted that S.U.V. sales were down 55 percent from a year
ago, while demand for its full-size F-series pickup, a gas guzzler
that was the country’s best-selling vehicle for 26 consecutive years,
is off 40 percent. The only Ford model to show a sales increase was
the midsized Fusion. A Ford spokeswoman says the market ****ft is
“totally unprecedented and faster than anything we’ve ever seen.”
If the latest rise in oil prices isn’t just another spike — like those
of the 1970s and 1980s — but is instead a fundamental repricing of the
commodity responsible for much of modern American life, the impact of
that change will affect everyone from home builders and homeowners in
exurbs to cor****ate leaders, landlords and commuters in cities.
Although Asian consumers have begun emulating America’s love affair
with the automobile, with the commercial booms of China and India
playing pivotal roles in increased oil demand, the largest energy
appetite in the world is still found in the United States. Home to
only 4 percent of the world’s population, the nation slurps up about a
quarter of the planet’s oil — and Americans’ daily use is nearly twice
the combined consumption of the Chinese and Indians, according to an
annual energy survey published by BP, the British oil giant.
Indeed, low-priced gasoline has long been part of the American social
contract, according to Newt Gingrich, the former House speaker and
Republican leader. While in office, Mr. Gingrich battled efforts to
modulate demand through tools like increased gas taxes and tighter
fuel standards, and he argues that voters won’t sup****t such measures
even now.
For Chevron, the deal proved to be a movie-worthy gusher, helping its
profits to soar. And while he has warned about tightening energy
supplies for years and looks prescient for buying Unocal, even Mr.
O’Reilly says that he still can’t get his head around current oil
prices, which closed above $145 a barrel on Thursday, a record.
“We can see how you can get to $100,” he says. “At $140, I just don’t
know how to explain it. We’re surprised.”
For the rest of the country, the feeling is more like shock. As
gasoline prices climb beyond $4 a gallon, Americans are rethinking
what they drive and how and where they live. Entire industries are
reeling — airlines and automakers most prominent among them — and gas
prices have emerged as an im****tant issue in the presidential
campaign.
Ninety percent of Americans, meanwhile, expect the pain at the pump to
pose a financial hard****p in the next six months, according to a
recent Associated Press-Yahoo News poll. Stocks now trade inversely to
crude prices, and the Dow Jones industrials are in bear-market
territory. Old icons have been written off, with Starbucks boasting
nearly twice the market value of General Motors, which some on Wall
Street say faces the possibility of bankruptcy.
Outside the thriving oil patch, it makes for a bleak economic picture.
But it didn’t have to be this way.
Over the last 25 years, op****tunities 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 re****t after another
has cautioned against America’s oil addiction.
Even as politicians heatedly debate opening new regions to drilling,
corralling energy speculators, or starting an Apollo-like effort to
find renewable energy supplies, analysts say the real source of the
problem is closer to home. In fact, it’s parked in our driveways.
Nearly 70 percent of the 21 million barrels of oil the United States
consumes every day goes for trans****tation, with the bulk of that
burned by individual drivers, according to the National Commission on
Energy Policy, a bipartisan research group that advises Congress.
SO despite the fierce debate over what’s behind the recent spike in
prices, no one differs on what’s really responsible for all that
underlying demand here for black gold: the automobile, fueled not only
by gasoline but also by Americans’ famous propensity for voracious
consumption.
To be sure, the American appetite for crude oil is only one reason for
the recent price surge. But the country’s dependence on im****ted oil
has only kept growing in recent years, undermining the trade balance
and putting an added strain on global supplies.
Although the road to $4 gasoline and increased oil dependence has been
paved in places like Detroit, Houston and Riyadh, it runs through
Wa****ngton as well, where policy makers have let the problem make
lengthy pit stops.
“Much of what we’re seeing today could have been prevented or
ameliorated had we chosen to act differently,” says Pete V. Domenici,
the ranking Republican member of the Senate Energy and Natural
Resources Committee and a 36-year veteran of the Senate. “It was a
bipartisan failure to act.”
Mike Jackson, the chief executive of AutoNation, the country’s biggest
automobile retailer, is even more blunt. “It was totally preventable,”
he says, anger creeping into his affable car-salesman’s pitch.
The speed at which gas prices are climbing is forcing a seismic change
in long-held American habits, from car-buying to commuting. Last week,
Ford Motor re****ted that S.U.V. sales were down 55 percent from a year
ago, while demand for its full-size F-series pickup, a gas guzzler
that was the country’s best-selling vehicle for 26 consecutive years,
is off 40 percent. The only Ford model to show a sales increase was
the midsized Fusion. A Ford spokeswoman says the market ****ft is
“totally unprecedented and faster than anything we’ve ever seen.”
If the latest rise in oil prices isn’t just another spike — like those
of the 1970s and 1980s — but is instead a fundamental repricing of the
commodity responsible for much of modern American life, the impact of
that change will affect everyone from home builders and homeowners in
exurbs to cor****ate leaders, landlords and commuters in cities.
Although Asian consumers have begun emulating America’s love affair
with the automobile, with the commercial booms of China and India
playing pivotal roles in increased oil demand, the largest energy
appetite in the world is still found in the United States. Home to
only 4 percent of the world’s population, the nation slurps up about a
quarter of the planet’s oil — and Americans’ daily use is nearly twice
the combined consumption of the Chinese and Indians, according to an
annual energy survey published by BP, the British oil giant.
Indeed, low-priced gasoline has long been part of the American social
contract, according to Newt Gingrich, the former House speaker and
Republican leader. While in office, Mr. Gingrich battled efforts to
modulate demand through tools like increased gas taxes and tighter
fuel standards, and he argues that voters won’t sup****t such measures
even now.
Perhaps, but on Capitol Hill, members of both parties now say they are
furious with Detroit for fighting so hard, and for so long, against
higher fuel-efficiency standards.
Though analysts say automakers who shoveled out highly profitable and
highly inefficient road hogs like S.U.V.’s and pickups deserve much of
the blame, they also criticize legislators who failed to provide an
incentive for consumers to switch to fuel-sipping cars. Some
politicians are quick to acknowledge the problem.
“We’ve got to fix it or our standard of living will change within a
decade,” says Senator Domenici, who is retiring this year. “Oil was
too damn cheap, it’s too high now and it’s going even higher. I hope
I’m wrong, but the problem is, we can’t catch up soon enough.”
According to energy policy experts, it was in the late 1980s and early
1990s — during the administrations of President George H. W. Bush and
Bill Clinton — that things began to go wrong.
Before that point, the country reaped the benefits of the first fuel-
economy standards, passed in 1975, known as cor****ate average fuel
economy, or CAFE. Between 1974 and 1989, the efficiency of a typical
car sold in the United States almost doubled, to 27.5 miles per gallon
from 13.8.
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. Oil prices were in the
middle of a long downward slide that would take them from well above
$30 a barrel in 1980 to a low of just under $10 in late 1998 and early
1999, interrupted only by brief spike in 1990 after Iraq’s invasion of
Kuwait.
In 1990, Richard H. Bryan, a Nevada Democrat, teamed up in the Senate
with Slade Gorton, Republican of Wa****ngton, and proposed lifting fuel
standards again over the next decade, with a goal of 40 m.p.g. for
cars. 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. “It was one of the most frustrating issues in my Senate
career,” says Mr. Gorton, who left the Senate in 2001.
Dan Becker, then a lobbyist for the Sierra Club, still remembers his
shock when he saw Mr. Levin and Mr. Helms, diametrically opposed on
most issues, walk amiably together onto the Senate floor to cast their
votes. “This wasn’t East-West, right-left, or North-South,” he says.
“But had we passed that bill, we’d be using three million barrels less
oil a day now.”
That amount may not sound like much, given total global consumption of
85 million barrels a day, but it’s more than OPEC’s spare capacity
now.
Mr. Levin didn’t return calls for comment. (Mr. Helms died on Friday.)
But Representative John D. Dingell, the powerful Democrat from Detroit
who chairs the House Energy and Commerce Committee, argues — as he did
more than a decade ago — that tightening CAFE standards unfairly
penalizes domestic automakers while rewarding foreign rivals who make
more small cars.
Mr. Dingell, who has defended the automakers fiercely during his 52
years on Capitol Hill, decided to sup****t the stronger CAFE standards
last year. But he does not apologize for his longtime stance. “The
American auto industry has sold the cars people wanted,” he says.
“You’re going to blame the auto industry for that or the American
consumer? He likes it sitting in his driveway, he likes it big, he
likes it safe.”
A much more effective approach would be to simply raise taxes on
gasoline, Mr. Dingell says, because higher prices are the easiest way
to change buying habits. Some Europeans agree with this, noting that
policy changes engineered through taxation can alter consumer choices
without impeding economic growth.
Consumers overseas might not like higher taxes on gasoline, but
they’ve adapted, says Jeroen van der Veer, chief executive of Royal
Dutch Shell, the European energy giant. “A society can work, can
function and can grow even at higher fuel prices,” he says. “It’s a
way of life — you get used to it.”
In Mr. van der Veer’s native Holland, for example, gasoline sells for
more than $10 a gallon, with $5.57 of that going to taxes. Even in
Britain, which has substantial North Sea production, gasoline sells
for $8.71 a gallon.
A SUBSTANTIAL gas tax increase was considered during the
administration of the first President Bush, recalls William K. Reilly,
who ran the Environmental Protection Agency at the time. But it was
whittled down in 1990 to just 5 cents after Mr. Gingrich and other
conservatives in the Republican Party broke with the president.
“This was a stark lesson and people decided the gas tax was the third
rail of public policy,” Mr. Reilly says.
Even as Congress idled when it came to tightening CAFE standards or
substantially raising levies on gas, the Exxon Valdez oil spill in
1989 made offshore drilling yet another unpalatable option. “That
caused a sea change and after that no one had any sympathy for the oil
industry,” Mr. Becker says.
In 1990, three months before the effort to raise fuel-efficiency
standards failed on Capitol Hill, President Bush issued an executive
order making large swaths of the continental shelf off-limits to new
exploration. That policy remains in effect today.
When Senators Charles E. Schumer, a New York Democrat, and Frank H.
Murkowski, an Alaska Republican, attempted to put together a grand
bargain of opening up more of Alaska in exchange for raising auto
efficiency in 1998, the two couldn’t persuade enough members of either
party to go along.
“It was a no-action policy,” says Lee R. Raymond, the former chief
executive of Exxon Mobil, who has had a ringside seat for most of the
energy policy debates of the last 25 years. “By the time there is
panic, people need to realize this: There is no quick-fix on this. By
the time you panic, it is way too late.”
Still, many analysts argue that increased drilling alone is no
panacea. They note that many of the oil giants don’t drill in areas to
which they already have access. Exxon, in particular, has been
criticized as spending too much to buy back its own stock and not
enough on exploration. Chris Welberry, a spokesman for Exxon Mobil,
defends the company’s record, saying, “We are investing in our
business at record levels — around $25 billion this year.”
In any event, added drilling is unlikely to generate sharply lower
prices. A recent study by the federal government’s Energy Information
Administration estimated that under the best-case scenario opening up
the Arctic National Wildlife Refuge would reduce prices by $1.44 a
barrel by 2027. Drilling in broader swaths off the continental United
States wouldn’t affect prices until 2030.
On the taxation frontier, President Clinton did manage to get through
a small tax increase on gasoline — 4.3 cents — in 1993, but with oil
prices hovering between $10 and $20 a barrel for most of the 1990s,
conservation ended up on the back burner.
Indeed, President Clinton did propose a broader tax on energy
consumption in 1993, but it died quickly when Senate Democrats
rebelled, much as House Republicans derailed President Bush’s gas tax
in 1990. Still, environmentalists like Mr. Becker remain disappointed
with Mr. Clinton for not doing more in his first term when oil prices
were low and Detroit was enjoying a recovery in profits after the lean
years of the early 1990s.
Congressional Republicans made matters worse in 1995, when they
attached a rider to a huge appropriations bill forbidding the National
Highway Traffic Safety Administration from spending any money to raise
fuel standards. That law, in effect until 2001, made any change in
CAFE standards impossible, says Representative Edward J. Markey, a
Massachusetts Democrat who has pushed for better fuel efficiency.
As Paul Bledsoe, strategy director of the National Commission on
Energy Policy, recalls it, “The 1990s were something of a lost decade
for American fuel efficiency.” With oil prices low, consumers began
snapping up pickup trucks and s****t utility vehicles, which were
governed by less stringent fuel economy standards, thanks to a
loophole in the original 1975 law. These carried higher sticker prices
and profit margins, and both Detroit and foreign automakers were happy
to oblige.
Although oil prices remained low through the 1990s, consumption
patterns were taking an ominous turn. By 2000, daily demand reached
19.7 million barrels a day — nearly three million more than in 1990, a
17 percent jump in 10 years that wiped out much of the fuel savings
that followed the energy crises of the 1970s.
Since then, global consumption has taken off, rising to 85.2 million
barrels a day last year from 76.3 million in 2000.
In recent years, Mr. Reilly says that both the White House and
Congress have passed up op****tunities to call for higher gas taxes and
fuel standards in the name of national security, especially after the
Sept. 11 attacks. “We could have, but we didn’t,” says Mr. Reilly, who
describes himself as a moderate Republican. “It’s part of a long
pattern in which Democrats and Republicans have not wanted to wade
into this issue.”
BY 2001, oil prices were slowly creeping up, but few seemed to notice,
perhaps because the march was slow and steady. By 2004, crude was at
$37 a barrel and the next year it hit $50. With higher prices for oil,
an increase in gas taxes was political poison, but Mr. Markey says
sup****t for new fuel standards was reawakening.
Nevertheless, his efforts to pass new fuel economy legislation in
2001, 2003, and 2005 went nowhere amid continued opposition by
sup****ters of the auto industry on both sides of the aisle as well as
many conservative Republicans. Although the United States had long
ceased to be energy-independent — that era ended just after World War
II — Mr. Markey says he believes the memory of plentiful domestic
supplies created a different mind-set here than in Europe, where oil
was generally scarce.
Other veterans of those battles cite lobbying by the domestic
automakers as a main factor in the failure of Mr. Markey’s
legislation. “The auto companies didn’t see the handwriting on the
wall,” Mr. Schumer says. “The auto companies would go to people and
say, ‘If you vote for CAFE standards, the auto plant in your district
could shut down.’ They got the message.”
Representative Mike Castle, a Delaware Republican whose district
includes plants owned by G.M. and Chrysler, adds that “nothing was
ever said directly but it would go through the minds of members that
Detroit might respond.”
“Sometimes, things don’t have to be said,” he added.
Susan M. Cischke, group vice president for sustainability, environment
and safety engineering at Ford, says the recollections of Mr. Schumer
and Mr. Castle are “way over the top — you don’t just pull up or put
down auto plants.” Instead, she says, when lobbying on CAFE, “we
talked with our friends and indicated what it did with jobs. You want
sup****t.”
Oil industry insiders say they remained on the sidelines during
Congressional debates over CAFE standards, although legislators from
oil states tended to vote against more rigorous rules.
In 2007, with oil at $82 and gas nearing $3, Congress finally approved
the first big increase in fuel-efficiency standards in 32 years,
requiring the fleet average to reach 35 m.p.g. by 2020. That will save
one million barrels a day by 2020, but onetime CAFE opponents like Mr.
Castle now say they wish that Congress had acted sooner. Since the
1980s, fuel efficiency has flatlined at 24 m.p.g., while vehicle
weight has jumped more than 25 percent and horsepower has nearly
doubled. In Europe, on the other hand, fuel efficiency currently
stands at 44 m.p.g. and is slated to hit 48 m.p.g. by 2012.
“It’s a shame we’re doing this now instead of 10 or 20 years ago,”
says Mr. Castle, who sup****ted the legislation last year. “It was
always my hope they would just do it without a mandate.” He adds that
while he still opposes drilling in Alaska, “Republicans aren’t all
wrong when they talk about increasing supplies of oil. There are
op****tunities in the Gulf of Mexico.”
Senator Domenici, the senior New Mexico Republican, agrees that it’s
time to look at new supplies but is even more critical of Detroit.
“They all said to us: ‘Don’t change CAFE. It’ll come when it’s
supposed to.’ That’s baloney,” he said.
UNTIL last year’s vote, Mr. Domenici was an opponent of new fuel-
efficiency standards, a stance he now regards as a mistake. “We were
like everybody else,” he says. “We should have been more active on
CAFE sooner.”
With Detroit again seeing profits collapse as sales of big cars
plunge, Mr. Domenici says he is worried about the survival of the
domestic automakers.
“They talked a good research game,” he says. “But let’s face it,
little was being done. They are suffering the consequences and could
go broke just like the airlines.”
What Congress didn’t or couldn’t do, the free market is now doing in
the form of higher gas prices: forcing Americans into more fuel-
efficient cars. Ms. Cischke of Ford says that in the last two months,
“We have seen more of a ****ft in the market than in 20 years of CAFE.
People are buying what they need.”
Unfortunately, the ****ft is happening too fast for a company of Ford’s
size. That is among the reasons Wall Street expects Ford to lose more
than $2 billion this year.
Congress, meanwhile, in its bid to explain the run-up in fuel prices,
is examining the role of speculation and the increased flow of
investor money into commodities. Most energy economists emphasize the
fundamental issue of supply and demand, rather than market
manipulation, but financial factors like the weak dollar are also
exacerbating the situation. Stephen P. A. Brown, director of energy
economics and microeconomic policy analysis at the Federal Reserve
Bank of Dallas, estimates that a little more than 20 percent of the
price of oil today can be attributed to the dollar’s fall against the
euro and other currencies.
Another financial factor behind the price rise that hasn’t been talked
about much on Capitol Hill or elsewhere is reduced hedging by oil
companies on futures markets, says Larry Goldstein, a longtime energy
analyst. In the past, crude producers would offer buyers a ****tion of
their energy output in future years in order to protect themselves if
prices pulled back. But energy companies got burned as prices kept
rising during the last two years and have since cut back on selling
untapped production — forcing prices for energy futures even higher.
Now, the prospect of a perpetual climb in oil prices has become part
of market psychology, which is notoriously hard to change. William H.
Brown III, a former Wall Street energy analyst who now consults for
hedge funds and financial institutions, says investors have become
convinced that the White House and Congress are unlikely to do
anything dramatic to bring down prices.
For example, a release of supplies from the Strategic Petroleum
Reserve after disruptions in Nigeria or Venezuela might have persuaded
the market that Wa****ngton was on the case and shaken some complacency
out of the market. “I’ve been a little surprised at what has not been
done or what has not been talked about to get a handle on the consumer
situation,” Mr. Brown says.
Others say that although the push to blame market speculators rather
than discuss economic realities is likely to intensify on Capitol Hill
as the presidential election draws near, they believe that what the
world is confronting is a momentous ****ft in energy supply and
demand.
“Speculation and manipulation are two different things,” says Mr.
O’Reilly of Chevron. “Most of where we are is because of fundamentals
and concern about the future.”
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