Just the Facts

THE SUMMER DRIVING season is just around the corner, and gasoline prices have steadily been climbing upwards of $4 a gallon. There are many factors putting pressure on gasoline prices that are outside of our control, such as turmoil in the Mideast and growing demand for oil by China, India and other developing countries. There are a number of actions our policymakers can take, however, to help alleviate pain at the pump.

Many people believe America uses too much imported oil (approximately 50 percent) and that we must switch to vehicles powered by electricity, bio-fuels and natural gas. However, electric vehicles have severe range limitation and are not widely available, and hybrids vehicle sales make up only a tiny portion of new car sales. Ethanol fuel only exists with heavy government subsidies and mandates, and other bio-fuels are not economically feasible with current technology. There are no natural gas-powered vehicles for sale in the United States for individual consumers. Even if natural gas-powered vehicles were available to consumers, there is no refueling infrastructure, and building one would cost billions of dollars.

A government interested in helping to reduce gasoline prices should take the following actions:

• Reduce permitting red tape and encourage oil and gas development both offshore and onshore, including in Arctic National Wildlife Refuge.
• Reduce the myriad of “boutique” fuels (specially blended fuels based on regional clean air requirements) required by the Environmental Protection Agency and state environmental departments.
• Place a moratorium on EPA rulemaking, such as proposed rules on oil refiners and CO2 emission regulations that make it more expensive to produce gasoline.

Some policymakers are calling for a release of oil from the nation’s strategic petroleum reserve, hoping this would lead to lower gas prices, but energy policy should not be based on short-term political considerations. The Obama administration has so far resisted efforts to raid the strategic petroleum reserve, although some believe this could be because the administration supports the electric vehicle market.

Other policymakers have recommended that the United States develop all of our energy resources in North America, including off-shore oil reserves, as well as oil shale in the west and oil sands in Canada. Such an approach would lessen the United States’ vulnerability to price shocks and oil shortages.