Long Term Gains

On September 17, the House of Representatives passed H.R. 6899, the Comprehensive American Energy Security and Consumer Protection Act. The measure, which allows for some domestic oil drilling and exploration in a zone 50 to 100 miles offshore, is widely viewed as a concession by congressional Democrats to the Republican minority during an important election year in which gasoline prices skyrocket and the economy continues to stagger.

While the pinched wallets of gas-guzzling Americans has sparked a political showdown over offshore drilling, the partisan warfare has unfortunately obscured a larger, more serious issue—the need for a comprehensive energy security policy. Fortunately, the Democratic majority has made a crucial strategic decision to rise above the partisan fracas and actually begin constructing a cohesive and sensible energy policy for years to come. While the concession to offshore drilling advocates is unfortunate, it was a necessary sacrifice in securing more significant provisions: the removal of enormous subsidies given to the oil companies in 2005 and the redistribution of this revenue to extend tax credits for renewable energy firms.

There is no doubt that the United States is facing major problems in the energy sector, especially the supply of petroleum products for the transportation sector. Since 2003, the price of oil futures contracts on the New York Mercantile Exchange (NYMEX)–the largest coordinated global market for futures trading in commodities–has more than tripled. This major increase in fuel costs has had a seriously detrimental effect on the American economy, causing enormous demand destruction and adversely affecting GDP growth.

But despite the passionate advocacy of public figures such as Governor Sarah Palin of Alaska and House Minority Leader John Boehner of Ohio, offshore drilling provides little windfall: drilling will have a minimal, if any, effect on gasoline prices in the near future. According to the New York Times and the Department of Energy, it is unlikely that repealing the current bans on offshore drilling will result in any short-term extraction, given the difficulty of acquiring the necessary equipment and the complexities of actually locating and extracting the petroleum. And in the long term, it is likely that continued growth in international demand, especially from India and China, will negate any benefits of offshore drilling.

While H.R. 6899 contains several notable measures designed to move the United States towards a cleaner and more renewable energy profile, it is important to remember that the simplest way to address the energy issue to tackle the basic problem: Seventy percent of American oil consumption goes into the transportation sector. Given that the United States currently has the lowest automobile fuel-efficiency standards in the developed world, we need a combination of more stringent regulations, such as closing the “light truck” loophole for sport utility vehicles and creating more market-oriented incentives for the development of plug-in hybrid vehicles and flex-fuel technologies.

As high gas prices and a collapsing housing market continue to harm American families, it is important that policymakers learn to separate politicking from actual policymaking. H.R. 6899 demonstrates that by defusing hot-button squabbles, it is possible to move ahead on issues of actual import. We hope to see not only a bicameral consensus on this issue emerge before Congress adjourns next week, but more collaborative action in addressing the systemic energy consumption problems that plague the US.