Smoke, Mirrors and Pain at the Pumps

In my last column in this space, I looked at how the Bush administration had missed the opportunity to reform the Corporate Average Fuel Economy (CAFE) law, and failed to close a loophole by which the largest trucks and SUVs weighing 8,500 pounds or more are exempt from any federal regulation. It’s actually worse than I thought. "At a time when Americans are paying record prices for gas, the Bush administration has sided with its cronies in the auto industry and rejected real solutions," says Dan Becker of the Sierra Club.

The Prius averages 45 mpg in the real world.© Toyota

"Americans should buckle up for continued pain at the pump," adds David Friedman, research director for the Clean Vehicles Program at the Union of Concerned Scientists (UCS). "At best, the administration"s approach does nothing. At worst, it creates new loopholes that increase our oil dependence."

Bush"s proposed standards require so-called "light trucks" (including SUVs) to increase their fuel economy by 1.8 miles per gallon over four years. But loopholes in the bill permit automakers to continue getting credit for "bi-fuel" vehicles that can run on gasoline or ethanol. In practice, the fact that we have only a skeletal ethanol infrastructure means these vehicles mostly run on gasoline. But ethanol (produced from corn) is the favorite charity of farm state politicians, so any actual use is beside the point.

According to UCS, the Bush plan claims to save 10 billion gallons of gasoline, but the savings are spaced out over 15 years, and amount to less than one month’s worth of gasoline at national consumption rates. UCS says that if the Bush plan had closed existing loopholes (including requiring light trucks to meet today"s car standard of 27.5 mpg within five model years) it could reduce energy demand by 11 billion gallons of gasoline in 2015 alone, saving consumers $14 billion.Closing this fuel-economy gap would cut fuel costs for truck owners by 25 percent.

This is a crucial national debate, but it"s not the one we"re having. Instead, we"re moving right from passage of an oil company-friendly energy bill (with $4 billion in giveaways) to a discussion of drilling in the Arctic National Wildlife Refuge (ANWR). Though drilling was not part of the energy bill and would probably fail in an up-or-down Senate vote, Congressional Republicans are poised to try and sneak it through with parliamentary sleight of hand.

Again, we"re being told that increasing supply is necessary for energy independence, and that despoiling ANWR is our best bet. "The case for greater self-reliance has never been more compelling," said Senator Pete Domenici (R-NM), using some of the administration"s favorite code words. "The case for environmentally sensitive energy development in Alaska has never been sounder. We will see for ourselves how American ingenuity and innovation protects our environment and our wildlife while allowing us to develop our own energy."

Congressman Richard Pombo (R-CA) is leading the Republican charge in the House, claiming that "environmental special interest groups have distorted the facts about ANWR energy production to raise money and advance political agendas."

Let"s let one of those special interests (the Wilderness Society) speak: "Oil drilling in [ANWR] would ruin one of America"s last unspoiled wild places for what government experts at the U.S. Geological Survey say is far less oil than we consume in a single year, and which even oil companies concede would not be available for a decade."

The U.S. Department of Energy has already predicted that oil drilling in ANWR would have little or no impact on oil prices. The Energy Information Administration (EIA) reported last year that even if commercial amounts of oil were discovered in ANWR, by 2015 it would amount to only 0.3 percent of world production. Even at the predicted peak of ANWR production, in 2025, it would make up 0.7 percent, and would quickly decline thereafter. Since oil prices are set on the world market, ANWR"s contribution will be minuscule and, says EIA, "The Organization of Petroleum Exporting Countries could countermand any potential price impact of ANWR coastal plain production by reducing its exports by an equal amount."

The U.S. consumes 20.4 million barrels of oil a day, triple China"s consumption of 6.5 million barrels in 2004. That imbalance probably won"t last forever. Demand is rising rapidly, especially in rapidly developing countries like China, leading to a collision course between production and supply, resulting in unprecedented pain at the pump. We could do our own part to ease the situation by curbing our consumption, but the CAFE fiasco is just one example of our failing to do so.

SUVs and related vehicles, which were five percent of the U.S. fleet in 1990 and 54 percent of it today, are part of the problem, but so is our car-based infrastructure and abandonment of public transportation. (We have half the rail miles we had in 1920, for instance.) As the Washington Post recently reported, if American cars averaged 40 miles per gallon (a figure routinely exceeded by the Toyota Prius and other hybrids), we could reduce our energy demand by two to three million barrels of oil per day. That could translate to slashing oil prices by $20 a barrel.

Fareed Zakaria, editor of Newsweek International, notes in the Post piece that paying high oil prices to feed our SUV habit also supports terrorism: "Over the last three decades, Islamic extremism and violence have been funded from two countries, Saudi Arabia and Iran, not coincidentally the world"s first- and second-largest oil exporters. Both countries are now awash in money and, no matter what the controls, some of this cash is surely getting to unsavory groups and individuals."

So what should patriotic Americans do? Paste yellow ribbons on their SUVs, or actually get serious about conserving fuel? The Rocky Mountain Institute"s Winning the Oil Endgame offers some cogent bullet points that would lead to real reductions:

"Double the efficiency of using oil. This could be accomplished by increasing the use of hybrid cars, and making them even more fuel-efficient through the use of composite materials or lightweight steel. RMI says that lightweight materials could double the mileage of hybrids, and the extra cost of building them would be returned to consumers with three years of fuel savings.

"Meet a quarter of U.S. oil needs with biofuels. RMI says that replacing fossil fuels with domestically produced plant-based energy (using advances in cellulose-to-ethanol technology, among others) would add billions to net farm income and create 750,000 jobs.

"Replace the gas guzzlers. Since much local air pollution and fuel waste is caused by old clunkers, the government could create a scrap-and-replace program to lease or sell super-efficient cars to low-income Americans. "This makes personal mobility affordable to all, creating a new million car-a-year market for the new efficiency technologies and helps clean our cities" air," RMI says.

"Guaranteed investments. Since the U.S. is losing the hybrid technology race to Japan, how about federal loan guarantees to automakers that commit themselves

to actually producing fuel-efficient vehicles? (The government/industry Partnership for a New Generation of Vehicles failed because it contained no actual production commitment.)

Another very good approach is for states to endorse the California emission standards, the strongest in the world, which will require automakers to meet strict greenhouse gas emission levels by 2016. Since this can only be accomplished with fuel efficiency, the law (currently embraced by six states in the Northeast and, very likely, the whole west coast) will do far more than CAFE to reduce energy dependence. Not surprisingly, the auto industry is suing to stop the law, but it may soon pass in both Oregon and Washington.

I find it amusing that the same auto analysts who routinely undermine the case for hybrid cars by charting the lengthy return on investment seldom examine SUV mania in the same light. If Americans are "wasting" their money on fuel-efficient cars, what are they doing when they pay premium prices for huge four-wheel-drive trucks that rarely leave the road? One very good reason the hybrid market has grown 960 percent since 2000 is that Americans are increasingly concerned about our foreign oil dependence, which could reach 70 percent—it"s not all about the bottom line. Consumers don"t want to pay more than $100 to fuel up their behemoths while simultaneously funding terrorism. So who"s really deluded here?

ANWR drilling may well happen. If it does, President Bush and his Capitol Hill allies will have to look elsewhere for a scapegoat as energy prices continue to rise. Get ready to hear about the environmental special interest groups that are blocking fast-track nuclear power licensing.

JIM MOTAVALLI is editor of E.

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Winning the Oil Endgame Executive Summary