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  D e s e r t   E x p o s u r e    August 2008


Pumped Up

For 30 years, US energy policy has been heading for a cliff. Welcome to the edge!

It's too bad that Sen. Pete Domenici saw the light on automobile fuel-efficiency standards only after he chose not to run for re-election. In a revealing New York Times article last month, Domenici confessed, "We should have been more active on CAFE sooner." The Corporate Average Fuel Economy standards — CAFE for short — stayed stuck for 32 years, from 1975 to 2007, thanks to a combination of bullying by Detroit automakers and lack of vision and will by Washington lawmakers. Today, Detroit is reaping the whirlwind, unable to retool fast enough to respond to the soaring price of oil, and there's even talk of a General Motors bankruptcy.

The rest of America is paying the piper, too, with the flat CAFE standards only part of how we largely dozed through the decades since the last energy crisis, which policymakers seemed to shrug off as just a bad dream. In 2008, it's a nightmare.

"Much of what we're seeing today could have been prevented or ameliorated had we chosen to act differently," Domenici told the Times. "It was a bipartisan failure to act."

As the ranking Republican on the Senate Energy and Natural Resources Committee, with a 36-year career spanning America's long energy-action slumber, Domenici must shoulder some of that blame. His fellow Republicans made things worse in 1995 when they attached a rider to a big appropriations bill specifically blocking the National Highway Traffic Safety Administration from spending a dime to boost fuel-economy standards, effectively freezing CAFE rules until 2001. Congressional Democrats, especially those representing automaker districts, aided and abetted this slow-motion disaster.

To put it in automotive terms, America has been driving towards a cliff for almost 30 years. Only now, as the actual abyss looms, are we even beginning to talk about how to hit the brakes.

"We've got to fix it or our standard of living will change within a decade," Domenici warned. "Oil was too damn cheap, it's too high now and it's going even higher. I hope I'm wrong, but the problem is, we can't catch up soon enough."

The New Mexico senator is correct, but he would have done a lot more good for his country if he'd spoken out sooner. Recall the 2004 election, in which Sen. John Kerry was pilloried for having once, briefly, voiced faint support for a 50 cents per gallon gas tax increase. Bush attack ads characterized that notion as "wacky" — back when gas was $1.76 a gallon. We don't recall Domenici rising to his Senate colleague's defense and pointing out that oil was "too damn cheap." A gas-tax increase could have pushed Americans toward conservation sooner rather than later. And the money could have gone to alternative-energy development and to offset the costs to lower-income taxpayers, instead of to oil companies and foreign countries.

President Bill Clinton had boosted the gas tax back in 1993 — when oil was $10 to $20 a barrel instead of $125-plus — by a meager 4.3 cents, not enough to change anybody's driving habits. But the Clinton administration, like the Bush presidencies bookending it, largely failed to show any leadership on energy issues.

So Domenici is sadly on target about a "bipartisan failure to act." The last president to take energy issues seriously was the much-maligned Jimmy Carter, whom Americans never quite forgave for wearing a sweater in the White House.

Though only part of the puzzle, those CAFE standards are among the most glaring examples of "coulda, shoulda" inaction by Washington politicians on both sides of the aisle. Despite Detroit automakers' complaints — and veiled threats to shutter plants in the districts of noncompliant congressmen — the CAFE standards do work, and they would have forced US automakers to make cars that would be more competitive today. Between 1974, the year before the first CAFE rules were enacted to mandate fleet-wide fuel-economy levels, and 1989, US cars' fuel-efficiency almost doubled, from 13.8 miles per gallon to 27.5.

That improvement helped keep US oil consumption almost flat at about 17 million barrels per day from 1980 to 1990, even as the economy grew. (After decades of energy inaction, that figure has now zoomed toward 21 million barrels a day — 58 percent of it imported.) And oil prices reached a low of $10 a barrel in 1998.

Belatedly, in 2007, Congress finally approved an increase in CAFE standards to 35 mpg by 2020, which will save a million barrels of oil a day. But the US will still trail behind Europe, where average fuel efficiency is already 44 mpg and will reach 48 mpg by 2012.

Boosting fuel-economy standards won't do much in the short term for the New Mexico car owner who's wincing at paying more than $50 to fill his tank. This painful summer, gas prices are like the weather: Everybody's talking about them, but nobody does anything about them. Unfortunately, despite what some politicians would have you believe, there's no quick fix for high gas prices. (Aside from the collateral damage to the economy caused by the spike in prices, arguably we shouldn't do anything about gas prices even if we could; finally, $4 a gallon has gotten the attention of the gas-guzzling American public.)

A few short-term actions could at least help prevent further price hikes, however. When saber-rattling over Iran's nuclear program cooled, at least temporarily, last month, oil prices promptly fell $5 a barrel. The Bush administration needs to put a cork in its wild notions of sending the already overstretched US military to somehow "take out" Iran's nuclear program, and Sen. John McCain must stifle his loose talk about "bomb-bomb-bomb Iran." An attack on Iran would trigger Middle East chaos and send prices at the pump into the stratosphere.

Some tough talk by McCain and his Democratic opponent, Sen. Barack Obama, about the need to curb federal deficits and balance the budget might reassure the world that the US dollar is not headed the way of the old Italian lira. Besides those inconvenient laws of supply and demand, the weakness of the dollar is a key factor in the recent runup in oil prices, which has not been as sharply felt in Europe. Depending on which expert you believe, somewhere between $22 and $45 of the $125 a barrel price of oil (at this writing) can be blamed on the sagging dollar. One source calculates that if the dollar had remained as strong as the euro, our effective price for a barrel of oil would be just $80 — under $3 a gallon at the pump.

Like the runaway price of a gallon of gas, the dollar's decline has many causes. But the two most significant are the cuts in interest rates aimed at boosting the sagging US economy and the ballooning federal budget deficit. The latter can be blamed largely on the ever-escalating tab for the Iraq and Afghanistan wars. If the Iraq invasion was supposed to be "all about oil," as many critics claimed, its effect for the average American has proved just the opposite: By driving up the deficit, forcing the treasury to (metaphorically at least) print ever more dollars, the conflict has eroded the dollar's value and thus its power to buy a barrel of oil. (Conveniently for the nation's oil companies, however, skyrocketing prices have led to equally eye-popping profits.)

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