Stop the Energy Insanity

Only in 2007, with gasoline nearing $3 a gallon, did Congress approve the first major increase in fuel efficiency in 32 years, requiring the fleet average to reach 35 mpg by 2020—a measure that would save only 1 million barrels a day by then. Attempts to raise taxes on gasoline to reduce consumption have essentially failed, except for a small tax increase of 4.3 cents per gallon in 1993.

Supply. As costs of oil imports have soared, the benefits of increasing our own supplies have multiplied—while the environmental costs have been reduced by technologies and practices developed over the past two decades. In other words, the benefits exceed the costs.

We can get past the lame repetition of the decades-old argument over the virtues of offshore drilling. Simply put: To refuse to exploit our vast oil reserves is insane. The United States is one of the few countries in the world that choose to lock up their natural resources by dramatically restricting production and exploration. At least, until now. That $4 pump price is changing public attitudes. In a recent Gallup Poll, 57 percent favored drilling in U.S. coastal and wilderness areas that were once off limits. How shocking is that? In the Arctic National Wildlife Refuge, we're talking about a tiny corner of 2,200 acres (an area the size of a small airport) out of 19 million acres. The proposed drilling promises to yield an estimated 10.4 billion barrels, representing well over 20 years of imports from Saudi Arabia. Drilling in ANWR would take place on the coastal plain, a mosquito-plagued tundra and bog in the summer, not in the snowcapped mountains of ANWR that television pictures would have you believe are at stake. In the winter, the area would also be traversed on ice roads that melt in the spring. This would do no permanent damage to an environment in one of the bleakest, most remote places on this continent—except to inconvenience some caribou that might have to find a different place to mate. We cannot lose over $40 billion a year to serve the caribou.

Similarly, the outer continental shelf is estimated to contain some 86 billion barrels of oil, plus 420 trillion cubic feet of natural gas that is overwhelmingly off limits and underdeveloped—even though those reserves could be tapped now with minimal environmental disturbance. This is supported by the fact that there were virtually no oil spills when Hurricanes Katrina and Rita flattened terminals around the Gulf of Mexico. Offshore drilling rigs would be far beyond beach sightlines. The stellar environmental records of eco-sensitive regions such as Scandinavia, the Netherlands, and Great Britain have shown that the greatest oil spills would be avoided because they typically come from tankers importing oil, not from drilling or other offshore locations. The same can be said of the eastern Gulf of Mexico, where there is an estimated 3.7 billion barrels in relatively shallow waters.

If this sounds like a remedy that's a long way off from fixing $4-a-gallon gas, it must be remembered that prices for crude and gasoline are set by future expectations. Any policy that pushes the future supply to increase or leads future demand to drop can cause today's prices to fall or to rise less than they otherwise would. That is why to open up new areas would cause the oil futures markets to respond relatively quickly.

Oil out of the ground is only a start. For new crude to yield lower gasoline prices, we need to reduce the barriers to building or expanding our refineries. Refineries face multiple regulatory barriers in a world of NIMBY ("not in my backyard") and the inevitable litigation from the environmental lobbies.

Here are five more energy imperatives we need to move on quickly:

1. Reallocate resources to concentrate funds on providing the necessary R&D support for energy efficiency. We must do this with the real menace of global warming in mind. James Hansen, the director of NASA's Goddard Institute for Space Studies, frames the issue this way: Our biggest worry is not what we put in our cars but what we put in our power plants. He believes that we should stop the use of coal by 2030, except with those power plants that can capture the carbon dioxide.