By Staff
Congress must act
The United States currently imports 60 percent of the oil we consume. And with the price of gasoline approaching $4 a gallon, many Americans are suffering. We see ourselves as victims in a cruel conspiracy caused, in part, by our nation’s involvement in an unpopular war in the oil-rich Middle East.
Others say it’s the oil companies that are responsible. They feel consumers are being taken advantage of and accuse oil companies of price-gouging.
Presidential candidates Hillary Clinton and John McCain suggest that Congress temporarily suspend the 18 cents-per-gallon federal gas tax this summer to give consumers relief. This could do more harm than good. The proposed tax holiday would reduce the collecting of tax revenue that is sorely needed to repair, expand and restore our nation’s aging roadways and bridges.
Forty years ago, world oil reserves were largely owned by international oil companies based primarily in the U.S. Today, 80 percent of the world’s oil reserves are controlled by foreign governments. Only 6 percent of reserves are held by private companies.
The emerging economies of China and India compete with us for oil in the world market. Add the declining value of the dollar against other currencies, and American consumers pay more for crude than countries with stronger currencies.
It’s not just a matter of supply and demand. Other factors come into play in determining the cost for a barrel of crude, like the war in Iraq, civil unrest in Nigeria and political uncertainty in Venezuela — all sources of foreign oil on which we depend. Even hurricanes have affected U.S. and Mexican refinery operations.
As the world’s demand for oil increases — by 1.3 billion barrels of oil per day by next year — we are faced with making difficult decisions. We can either continue going down the same irresponsibly dependent path we’ve been on for decades or we can more aggressively pursue energy independence.
The first thing we all need to realize is that increasing taxes on the big oil companies is not the answer. In fact, according to the American Petroleum Institute, only 1.5 percent of industry shares are owned by company executives. Tens of millions of middle-class stockholders own the rest.
Anyone with money invested in a 401-K or a mutual fund likely has oil-company shares in his or her portfolio. When politicians like Hillary Clinton and Barack Obama talk about taxing “Big Oil” on their “record profits,” they’re talking about taxing us.
In addition, increasing oil company taxes would restrict the money the oil companies desperately need to search for new oil and natural-gas reserves to meet our ever-increasing demand.
We must also realize that the oil we are using today is a result of exploration and investment made by oil companies years ago. Billions of dollars are spent each year in search of new sources of supply that, if discovered, may not reach the marketplace for nine or 10 years. The largest share of oil company earnings is spent on exploration as well as adding new property and more technically advanced equipment to its operations.
Although no new refineries have been built in the U.S. since 1976, technological upgrades have increased our existing refining capacity by 20 percent since 1985. Current domestic refining capacity is projected to increase by 800,000 barrels per day within two years.
Building new oil refineries or expanding existing ones is among the most affordable and reliable ways to increase supplies and lower prices according to H. Sterling Burnett, a senior fellow with the National Center for Political Analysis. But he states that it’s the emission controls and clean-air regulations that have forced some refineries to close and made building new ones difficult. Construction of a new refinery in Arizona has been delayed since 1997 over concerns about its impact on air quality, even though it has received the required permits.
Oil companies also continue to spend billions researching alternative sources of energy such as wind, solar, geothermal and landfill digester gas. Even if all of these potential alternative energy sources come to fruition, it is still predicted that by 2030 more than half of the world’s energy demands will continue to be met by oil and natural gas.
Lessening this country’s dependence on foreign oil will require not only drilling closer to home and building new or expanding existing refineries but also real conservation efforts by us all. Our government needs to adopt an energy policy that emphasizes conservation while allowing oil companies to access the abundant supplies of oil and natural gas we have right here at home. Cutting our oil imports would have a major influence on the sensitivity of the U.S. economy to global oil conditions.
It is estimated by API that there are 112 billion barrels of oil potentially available in the U.S. That’s enough to power 60 million cars for 60 years. Those same areas are estimated to contain 656 trillion cubic feet of natural gas or enough to heat 60 million homes for 160 years.
So, while America waits for the panacea that will one day solve all of our energy needs, we will continue to stand in line and pay OPEC and others the ever-escalating prices for crude.
Consider this: If our government allowed us to start drilling at home tomorrow in areas like Alaska, the offshore Gulf, Atlantic and the Pacific regions, along with the onshore regions within our borders, we still would not realize the benefits for several years. But doing nothing guarantees we will remain hostage to foreign sources of oil indefinitely.
Several years ago, President Bush pushed Congress to allow opening up the aforementioned regions to drilling. Had Congress listened and acted, new supplies of oil and natural gas would be coming to market today, prices would be less volatile here and abroad and we would be further along the road to energy independence.
Now, Congress needs to get it right.