by Jim Ball
In the summer of 2008 gas prices reached over $4 a gallon, helping to tip the economy into the Great Recession from which we are still recovering. Could we be heading towards $4 a gallon once again, this time helping to stall our still fragile recovery?
According to the federal government's Energy Information Administration (EIA), the average price for gas around the country was higher than any February in history even before the crises in Egypt and Lybia kicked in. Subsequently, gas prices during the last week alone jumping 20 cents a gallon.
One reason gas prices spiked in 08 was due to speculators, a situation that probably won't be repeated this year. However, unease in the Middle East has been driving prices upward, and no one can predict what the situation there will be when the summer driving season hits.
Even without such instability, EIA projects that prices will continue to rise. Looking even further out to 2012, a recent CEO of Shell, John Hofmeister, has predicted that gas could be over $5 a gallon in 2012. And secret State Department cables on WikiLeaks has revealed that even a senior Saudi official privately admits that Saudi reserves may have been overstated by as much as 40%, and that by 2012 his country could no longer be counted on to pump enough extra oil to keep prices from rising too high.
Meanwhile the current rise in gas prices threatens our recovery and is already having detrimental impacts on US consumers. According to an economic analyst at Moody's, if the price for a barrell of oil averages over $90 this year -- and EIA's projection even before the Middle East unrest was $93 -- it would erase a quarter of the $120 billion payroll tax cut recently enacted to further stimulate the economy.
As for consumers, the NYTimes reports:
Rising gasoline prices have already led Jayme Webb, an office manager at a recycling center in Sioux City,Iowa, and her husband, Ken, who works at Wal-Mart, to cutback on spending.
In the last month, they have canceled their satellite television subscription and their Internet service. They have also stopped driving from their home in rural Moville to Sioux City on weekends to see Ms. Webb's parents.
Along with making their commutes to work more expensive, rising oil prices have driven up the cost of food for animals and people. So the couple have stopped buying feed for their dozen sheep and goats and six chickens and instead asked neighboring farmers to let them use scraps from their corn fields.
"It's a struggle," said Ms. Webb, 49. "We have to watch every little penny."
Interestingly, in the same NYTimes article they interviewed an owner of a company that makes church pews:
"Revenue is down, costs are up, and you can't make anymoney," said R. Jerol Kivett, the owner of Kivett's Inc., a company that manufactures pews and other church furniture in Clinton, N.C. "You're just trying to meet payroll and keep people working, hoping the economy will turn. But it just seems like setback after setback after setback."
Given all of this, isn't it well past time we really started moving the country towards energy independence through increased fuel economy and the development of alternative fuels and electric vehicles powered by clean electricity?
Rising gas prices are bad news for most of us and the economy in general, but good news for oil companies because their profits go up. Indeed, the big 5 oil companies have done exceedingly well over the past decade, earning nearly $1 trillion in profit.
So here's an idea. Why not take the billions in subsidies we give to oil companies and use it instead to invest in efficiency, renewables, electric vehicles, and alternative fuels -- in a true transition towards energy independence, in other words? Certainly in an era of national debt and budget cutting some of the richest corporations in America don't need public assistance to incentivize them to find and produce oil when it's at $100 a barrel? Indeed, former President George W. Bush, a former oil man himself, proposed that the oil companies do without public assistance when oil was at $55 a barrel. So, surely, they don't need our subsidies when it's at $100 and they've earned nearly $1 trillion in profit in the last decade? Surely this rich and mature industry, which began receiving subsidies in 1916, is ready to be weaned off public assistance? Let's take the $36 billion they would receive this decade and create a better future with it, ok?
Well, unfortunately, House Republicans still think these rich oil companies need our tax dollars even as they cut funding for research that would help to create energy independence and a clean energy future (see my earlier blog). On Tuesday (Mar 1) every single House Republican (except for 4 who didn't vote) voted to keep the billions in public assistance/subsidies flowing out of the US Treasury and into the oil company's coffers. As they vote to protect public assistance for oil companies, they do so against the wishes of the American people, as reflected in a NBC/WSJ poll out this week showing 74% approval for eliminating these unnecessary subsidies.
With gas prices once again approaching $4 a gallon this summer and many families like the Webbs already struggling just to get by, the oil companies certainly don't need any more of our money. And it's well past time for us as a country to make real investments in energy independence and clean energy.
The Rev. Jim Ball, Ph.D., is Executive Vice President at EEN and author of Global Warming and the Risen LORD.