Oil: What a Difference a Year Makes
Rep. Carolyn B. Maloney (D-N.Y.) filed this guest blog post:
Last year, as gas prices eclipsed four dollars a gallon, you couldn’t walk the halls of Congress without hearing lawmakers crying out for a new energy policy that would reduce our demand for oil. What a difference a year makes. Congress’s focus on climate change legislation is long overdue, but we can’t lose sight of oil prices creeping up as the economy recovers and demand increases.
Last week, the Joint Economic Committee, of which I am chair, held a hearing to examine the crushing economic impact last year’s oil prices had on the current recession. We saw the devastating impact that a rapid increase in the price of oil and gasoline can have on consumers, businesses and the economy at large. The sky-high prices we all paid at the pump last year didn’t just change our driving habits; they had profound impacts on employment and consumers’ confidence and willingness to purchase new goods and services.
Daniel Yergin, the chairman of Cambridge Energy Research Associates made a compelling argument that in the long run, our energy security depends on encouraging investments across the broad energy spectrum, while factoring in environmental and climate change considerations. In his testimony, he said:
“Major initiatives in research and development, innovation, and the “green stimulus” can have significant long-range impact. Moreover, the new recognition of the potential for energy efficiency is wholly welcome. Indeed, we have never seen anything like the embrace of energy efficiency that is taking place today all across the spectrum. But there is no single answer to the energy needs of our $14 trillion economy.”
Last year’s high oil prices and the painful shock they gave to our pocketbooks were not an anomaly. The relatively low pump prices that consumers are facing now give Congress some breathing room, but we must implement long term changes in energy policy now to move America beyond oil and into a vibrant and diverse 21st century energy economy. If we don’t, then the pains of last summer are an all too likely future.
--Rep. Carolyn Maloney (D-N.Y.), is chair of the Joint Economic Committee.
By
Sara Goo
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May 25, 2009; 7:26 AM ET
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Posted by: Indy2009 | May 25, 2009 9:24 AM | Report abuse
The crunch in the supply of petroleum was the base cause of the world economic meltdown. There simply wasn't enough transportation fuel on the market to keep supplying expansion. All the wild bets on growth, chiefly in the domestic mortgage markets, were exposed as a result.
When the crunch in supply came, the cries for "drill here, drill now" were met with caveats that it would take ten years for any new petroleum to reach market.
Now, we are in the fiddler's refrain from the Arkansas traveler that "the roof doesn't leak when it doesn't rain".
Posted by: edbyronadams | May 25, 2009 1:58 PM | Report abuse
I've seen gas prices rising recently. That's money that I'm not spending on goods and services, and so the economy is suffering as a result. On a personal level, I'd be happy to pay more upfront for reduced exposure to gasoline prices (be that with a more efficient car or taxes or housing costs that provide better alternatives to my car).
I am concerned that alternatives to oil should, in the long run, provide both cost and environmental benefits. This is particularly relevant to corn sourced ethanol which I have heard is problematic in those regards, but should apply to any other solutions considered as well.
One more thing to check is that it's not just energy--oil is also a key ingredient for plastics, fertilizers and other things. There may also be opportunities in the chemical ingredient side to reduce demand for oil.
Posted by: rfingas | May 26, 2009 7:22 PM | Report abuse
Concurrently in 2008, as consumer spending was hammered by the sharp rise in oil prices, Exxon reported its largest annual profit in history.
The company reported a drop in profit in the first quarter of 2009, but it still recorded a profit at a time when many companies were declaring losses and laying off hundreds of thousands of employees.
Chevron also reported huge profits in 2008, thanks to the boost in prices at the pump.
As we saw last summer, squeezing consumers was very good business for big oil. With gas prices at my local pump seeing a significant increase in the last week (summer's here and the time is right!) - it's looking like a big win for big oil in 2009. Loss goes to the consumers.
http://wardonwords.blogspot.com
Posted by: anne3 | May 26, 2009 11:50 PM | Report abuse
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If last year's high oil prices "were not an anomaly" then perhaps congress need not be too aggressive as it implements "long term changes in energy policy now to move America beyond oil" for risk of doing more harm than good.
Some people, especially large families, benefit greatly from larger vehicles - more efficient per person when moving large loads vs multiple vehicles - and which will soon be made much more expensive - perhaps even unaffordable - by the new CAFE standards. I predict a thriving pre-2010 used-SUV market for years to come.
If people rationally predict that we will experience a quick and enduring return to painful gas prices - (which is precisely what is indicated by the contango in the futures market and why we are storing produced oil in tankers instead of delivering it to the spot market) - they already have a strong incentive to purchase more efficient vehicles.
I remember anecdotal reports that this is precisely what people began to do when the oil price shot past 100 dollars per barrel without the help of legislation, and in the boom times before the crash.
Of course, there's always the psychological phenomenon of overemphasizing upfront expenses and overdiscounting future marginal costs - the whole incandescent vs. fluorescent light bulb problem. There's probably no way around that besides forcing people to buy future rights to 100,000 miles worth of gasoline when they purchase a new vehicle.