Oil and gasoline prices, low since 2008, are projected to rise again, rapidly returning our oil addiction to the national spotlight. Analysts say that oil prices are heading toward $100 a barrel, and former Shell Oil chief Carl Larry warns that we could see $5 a gallon gas by 2012. Inevitably, the price increases will inspire calls to reduce our dependence on oil, and Congress will consider some legislation to do just that. But as we try to make progress on oil alternatives, we need to bear in mind the lessons of low gas prices. Otherwise, we are doomed to repeat the same debilitating cycle of energy politics we've been trapped in for years.
Here's how that cycle goes: High oil prices make energy alternatives a top political priority, as they did before the 2008 price drop, but the urgency is suddenly forgotten when these prices collapse. That's not just short-sighted -- it's bad policy. Unless we can finally extend our national attention span beyond the latest price rise, the inevitable 2011 push for alternative energy isn't going to be any more fruitful than the last few times we tried.
Anyone who was buying gas in the early 1980s will recall when surging oil prices (reaching, in April 1980, a high of $103/barrel in today's dollars) prompted a variety of reforms, including President Carter's establishment of the Synthetic Fuels Corporation. But oil prices tumbled in the mid-1980s, national attention on energy issues dissipated, and President Reagan canceled the synthetic fuels program. In the early and mid 2000s, sustained price increases, hitting $145 a barrel in 2008, revitalized interest in how to promote alternatives to oil. But when the U.S. financial crisis pushed down oil prices in 2008, alleviating our oil dependence once again became a lower priority.
"Energy policy traditionally tends to be, particularly when it comes to liquid fuels, something we do when prices are high," Roger Ballentine, the president of the consulting firm Green Strategies, Inc., told me. "When prices are high, that provides an immediate political feedback that provides political cover for taking steps to address the issue."
Fears over climate change have gotten energy issues some political attention during the last few years, but it's been the wrong kind of attention to specifically address oil dependence, which is a liquid fuels problem. Both parties have confused this point, with Democrats suggesting that solar and wind power can reduce oil dependence, while Republicans point to nuclear power as an oil alternative. But U.S. oil dependence is not about the country's power grid; it's about the transportation sector. As Ken Silverstein, the editor-in-chief of EnergyBiz Insider, noted: "Oil, in this country, now comprises 2 percent of total electric generation. But it still provides 96 percent of the fuel in the transportation sector." Most electricity generation comes from a combination of coal, natural gas, nuclear, and renewable sources--not from oil. Until there is widespread electrification of the transportation sector, solar, wind, hydro or nuclear power cannot alleviate the U.S.'s oil dependence.
There are three kinds of problems with U.S. oil dependence: environmental (particularly climate change), economic, and national security. But the solutions to these three problems are sometimes at odds. Since the drop in oil prices, much of the political focus on energy policy has been on (unsuccessfully) trying to pass a bill to address climate change. While addressing climate change is one of the key challenges that will define our generation, a climate bill would have had little to no immediate impact on the national security problems related to oil dependence, and was in fact projected to incur measurable economic costs.
The past two years have seen some policy advances, but Congress' two major efforts will have a rather limited (albeit positive) immediate impact on oil dependence. First, it passed policies designed to promote auto efficiency. Ambitious new Corporate Average Fuel Economy (CAFE) standards, which mandate fuel economy increases of a third by 2016 and 40 percent by 2020, are the centerpiece of these efforts. "The time period since 2008 hasn't been a complete missed opportunity in that two years ago there was still enough momentum to move forward on efficiency gains," Susan Tierney, managing principal at the consulting firm Analysis Group, told me. "Because of CAFE standards, I think this period is a really mixed bag."