Intellectual Dishonesty On Oil Prices

I think a June 11 NY Times article shows the problem our nation has in taking our oil problem seriously. And the problem is in both sides of the aisle in Congress--and ultimately with the American public.

The rise in the price of oil is already transforming American habits. The large SUV market is tanking (so to speak) as people flock to cars with better fuel efficiency. Some people are carpooling. Others are rushing to mass transit. Miles driven is dropping. Economists have been saying for years that Americans will use less oil when the price of gasoline is high enough to matter. Now it has become high enough to matter, and their predictions are coming true.

And the side effects of these changes are many. Using less oil means sending less money to countries that don't like us. It means less reliance on our troops to secure oil supplies. It means less pollution and lower global warming emissions. High gas prices make other energy sources more economically viable. All of these results further goals that most of us seem to think are important to us as a country and for the world generally.

So what is the reaction in Congress? Both sides are arguing about how to lower the price of oil. Democrats have argued for releasing supplies from our national Strategic Petroleum Reserve, and for imposing an excess profits tax on oil companies. The Republican proposal is simple: drill. Drill in the Arctic, and drill offshore.

There are two problems with what's going on in Congress. First, it seems fairly obvious that nothing government does will have much of an effect on the price of gasoline. An excess profits tax on oil companies will not increase supply. Using the Strategic Petroleum Reserve might have some minimal short-term effect, but I can't imagine that the result would be dramatic. And any oil from drilling won't come onto the market for nearly a decade. Republican John Cornyn of Texas says in the NY Times article that "We have a winning argument as long as we keep making it." I find it hard to believe that he actually believes this. With the US accounting for nearly 25% of the world's oil usage, possessing only 3% of proven oil reserves, and importing 65% of the oil we use today, drilling will neither provided short term relief at the pump nor lead to independence from foreign oil down the road. To say that drilling is the solution--and to say that the more we say it, the truer it will be--is nothing less than intellectual dishonesty (or a blatant refusal to face reality).

But the second problem, and the more serious one, is with the attempt to lower gas prices at all. The high price of gas is leading, finally, to good results in American behavior. Lower gas prices, while making people's wallets feel better, will result in less fuel efficient cars, more emissions, and more dependence on foreign oil. It would undo the beneficial changes we see happening before our very eyes.

Before the last election, the Democratic National Committee put out door hangers in battleground districts stating the principles that Democrats were running on in 2006, such as open and effective government and affordable higher education. One item was "Energy Independence/Lower Gas Prices." I shook my head, wondering how those who wrote and approved that line could possibly think that it was coherent. The way to get to energy independence is to get off of oil. And the most powerful incentive to get off of oil is if the stuff costs a lot.

And it's not as if it would take a revolution to dramatically reduce our reliance on oil. Most of our oil is used in transportation. And the fact is that we as a society have made lousy choices about the cars we drive. Congress passed legislation requiring average fuel economy to rise to 35 miles per gallon by 2020. Presently, we get slightly over 20 miles per gallon. But if the price of gas stays high, we'll achieve the 35 mpg mark long before 2020. And we know that goal is achievable, because Europeans average over 40 miles per gallon. Today. (It's no coincidence that they also pay over $8 a gallon for gas.) If this issue is important to us, if it's so vital to our future as a nation, why should we wait for over a decade to achieve what one of our peer societies is doing right now? (And just imagine where Europe will be in 2020 on this issue.)

So I recently asked a congressman about this tension between freeing ourselves from imported oil while acting to lower the price of gas. Yes, high gas prices are painful for some people, but don't we need them to achieve the goals we say we want? Won't they be more effective than just raising fuel efficiency standards? Don't they put all the incentives for behavior in the right place? Couldn't Congress advance these goals by putting a floor on gas prices? He said it was simply politically impossible to do so: no congressman could vote year after year to keep gas prices high. So if the market keeps prices high, so be it. If the price drops, we have the fuel efficiency mandate as a backup.

I find that response inadequate on three counts. First, it wouldn't take a vote every year to set a floor for gas prices. It would take one vote, and the price could automatically be adjusted for inflation. (Perhaps he meant that opponents would force a vote on repealing such legislation every year.) Second, there is no guarantee that more fuel efficient cars will be not be more expensive than the cars we buy today. If they do wind up costing more, then the consumer will wind up getting hit in the wallet anyway, regardless of what happens to gas prices.

But the most substantial problem relates to why it would be so politically difficult to pass legislation keeping gas prices high. If politicians can't take such an action because it would be rejected overwhelmingly by the public, then it shows that it's the public that is refusing to take the situation seriously and is unwilling to do what is necessary to solve our oil problem.

Ultimate accountability in our political system does not rest with the 535 elected representatives in Washington. It rests with over 200 million eligible voters. And we as voters cannot expect those in Congress to make the hard choices that we ourselves are not willing to make. We cannot expect that just putting the "right" people in office will solve our problems for us. Our problems will get solved when enough of us are willing to act on the issues we say are important, and then implement our common will through our government.

So there is general agreement in the public that reducing our oil usage would have tremendous beneficial effects. But there seems to be little recognition that the best incentive for using less oil is if its cost is high, which rewards people who use less and penalize those who use more. We seem to want the result of using less oil but unwilling to implement the most effective societal tools to get ourselves to actually do so. If we were serious about improving our bargaining positions with oil producing nations, if we were serious about keeping our troops out of harm's way, if we were serious about the effects of our actions on the environment, we would embrace higher gas prices.

And there's a failure of political leadership as well. I don't think our elected officials should force higher gas prices on an unwilling public. But leadership consists of asking people to face the inconsistency between what we say we want to happen and the absence of support for policies to bring it about. Politicians could say "if we're serious, we should support X. So, are we serious?" And the final decision should be left to the people, who are accountable for the result--for better or worse. If we choose lower gas prices, then we have only ourselves to blame if we continue to depend on the Saudis to keep our cars running.

I in no way mean to diminish the substantial burden that high gas prices have on some people. Many people don't have access to mass transit. Many people can't afford to get a more fuel efficient car. And rising gas prices are tremendously regressive, since the increase of any necessary commodity eats up a greater percentage of the funds of those who don't have much to spend to begin with. A NY Times article from last month reported that some communities are now spending an average of 15.6% of their income on gas. No one should have to bear that burden for the good of the country.

But there are ways of dealing with that burden that don't involve lowering gas prices. We could provide greater government assistance for low-income earners, for instance by raising the earned income tax credit. If recipients wanted to spend that money on gas, they could do so; but it would reward those who take conservation measures by leaving them with more money if they did so. So the cost of higher gas prices could be alleviated for those who would be hurt the most while maintaining the incentives we should all have to move to more fuel efficient vehicles, live closer to where we work, and generally look at how we can use less oil.

And government could offer rebates for cars that meet certain efficiency standards (perhaps subject to income limitations). If the price of gas goes up 40%, it doesn't cost any more to drive around if your vehicle is 40% more efficient. But that's a choice we have to make: to buy that more efficient car.

So if our government is going to be honest with us--and if we are going to be honest with ourselves--we should recognize that higher gas prices can be a good thing. And we can take steps to ease the effects of gas prices on lower income groups. We can act so that in a few years many of us won't be spending much more on fuel than we were a few years ago. But it requires a decision to act. It requires the political leadership to ask us to face the consequences of our choices. And if we choose to act collectively, to put in place the incentives to change our behavior, and to allow our elected officials to pass legislation creating those incentives without voting them out of office for it, then we can accomplish those goals that we say are so important to us.