Addressing Our Energy Concerns

Addressing Our Energy Concerns
August 19, 2005

Everywhere you look right now there are stories about high gas prices. In Hamilton a gallon of unleaded costs $2.69; it's the same in Piqua. In Fairfield and Huber Heights the price seems to hover right around $2.50 on average. Many residents of the 8th District are asking the same questions: why are prices so high, and what can be done to bring them down?

Let me begin by talking about the "why." Our gas price problem is three-fold.

First, state requirements for "environmentally acceptable"/ "boutique fuels" cause price spikes in times of a tight oil supply. When there is a supply disruption or oil shortage in one part of the country, excess oil from another area often hasn't been able to make up the difference because of different local requirements. Prices are therefore kept artificially high.

Second, America relies too much on foreign sources of oil. In 1973, America imported 30 percent of its crude oil needs. Today, that number has more than doubled to 62 percent. Without any changes, we could be importing 75 percent of our crude oil by 2010.

What does this have to do with gas prices? The infrastructure in petroleum exporting countries (like those in the Middle East) isn't increasing at the same rate as demand. So those who export crude oil are producing the same amount while the world demands more and more.

China's oil demand, for example, is expected to grow this year by 800,000 barrels per day. This alone represents more than one-third of the total growth in global demand, according to the Energy Information Agency (EIA). In the U.S., oil demand is projected to grow by 340,000 barrels per day this year and gasoline demand is projected to grow nearly 2 percent, averaging 9.3 million barrels per day for the summer, according to EIA.

The combination of low global supply and high demand has driven the cost of a barrel of crude oil up past $60. The cost of a barrel now accounts for more than 55 percent of the price of a gallon of gasoline.

Third, environmental regulations have made it difficult for new oil refineries to be built. In fact, there have been no new U.S. refineries built in the last 30 years, and many that had been operating have since shut down. So even if we could buy more crude oil from abroad, we lack the capacity for refining enough to keep up with demand.

So what is being done to bring gas prices down? The Energy Policy Act of 2005 manages to address each of the major issues I mentioned above and more. It is a balanced, bipartisan bill that will ultimately lower energy prices for consumers and spur our economy.

In the event of an extreme and unusual supply emergency, the energy bill gives the EPA administrator the ability to temporarily waive certain "boutique fuel" requirements. The goal is to limit supply disruptions and avoid potential price spikes.

The bill reduces our dangerous dependence on foreign oil by allowing new domestic oil and gas exploration and development on non-park federal lands. It also authorizes expansion of the Strategic Petroleum Reserve's capacity to 1 billion barrels.

And in addition to provisions boosting domestic production of oil and natural gas - which will help lower fuel, fertilizer, and irrigation costs for 8th District farmers - the energy bill contains a Renewable Fuels Standard that will double the use of ethanol and biodiesel. This will replace billions of gallons of foreign oil every year and create around 200,000 new jobs.

Finally, the energy bill streamlines the regulatory and approval processes for the restart of idle oil refineries or the construction of new refineries. The more oil we're capable of refining domestically, the cheaper the cost of gasoline in the long run.

It's important to recognize that the energy bill will not lower prices overnight. But it will boost our domestic supply and lower our demand for foreign oil, and will put us on the road towards lower gas prices.

http://johnboehner.house.gov/News.asp?FormMode=Detail&ID=1007