Record-high energy prices affect almost every aspect of daily life. The soaring costs of gasoline, home heating oil, and diesel create tremendous hardships for American families, truckers, and small businesses. They are a major cause of the current economic downturn.
Our nation needs a dramatic change in our energy policy to protect ourselves from rapid increases in oil prices without sacrificing our environment for future generations. In 1957, America responded to the challenge of Sputnik with a concerted effort to land a man on the moon, and 12 years later we succeeded. In the same way, we now must rally around a national effort to achieve energy independence by the year 2020 for our economic, environmental and national security. I do not know if we can reach that goal in 12 years. I do know that no goal is ever reached without first being set.
In order to launch this effort, I introduced my 10-point plan for energy independence in the Senate on April 22nd. I chose that date – Earth Day – because I believe that energy security must go hand-in-hand with environmental stewardship.
My plan includes both actions we can take in the short term to mitigate high prices as well as actions to achieve energy independence in the long term.
This week, my column will cover the first four points, which lay out immediate steps we can take to address the current crisis. Next week’s column will present the second six, which chart a course toward a secure energy future.
First, my plan calls for stopping government purchases for the Strategic Petroleum Reserve (SPR) in these times of high prices. The SPR is an emergency stockpile of oil that already contains 700 million barrels. In 2005, I led a bipartisan effort to better manage the SPR by requiring the Department of Energy to avoid purchases when prices are high so as not to drive up consumer prices further by taking oil off the market. I don’t believe the Department of Energy is abiding by this law.
I have called on the President to stop filling the SPR until prices drop. It simply does not make sense for the government to be purchasing oil for the Reserve at a time when prices exceed $100 per barrel and when consumers are struggling to pay their fuel bills.
The Energy Information Administration estimates the impact of these purchases on gas prices as between four and five cents a gallon. Other experts believe it adds as much as 20 percent to the price of oil. It is a bad deal for taxpayers for the Department to be purchasing oil when prices are so high.
My second point addresses a significant factor that may be pushing up oil prices -- excessive speculation on electronic futures markets.
One expert testified before Congress that this speculation has inflated oil prices by as much as 100 percent. Unfortunately, at present there is a lack of publicly available data to track the effect of speculation on prices, and manipulation can go undetected on certain markets that are unregulated. Greater transparency and better reporting of trades could help prevent abuses such as occurred in the natural gas markets in 2006.
That is why I have joined Senator Olympia Snowe in legislation that would expand the authority of the Commodity Futures Trading Commission to guard against price manipulation. The Commission regulates trading in many commodities such as agricultural products. It should oversee energy electronic futures markets as well. This would not prevent futures markets from performing their important risk-hedging functions, but it could help regulators spot, and act upon, evidence of deliberate attempts to distort prices.
Third, Congress must curtail tax breaks for big oil and gas companies and use the billions of dollars instead to help the American people use energy more efficiently and American innovation develop alternative energy sources. With net profits of a single oil company reaching almost $10 billion in a single quarter, we should not expect struggling taxpayers to continue to subsidize this industry.
During consideration of this year’s Budget Resolution, I offered a bipartisan amendment to end these needless tax breaks and to redirect that revenue to support renewable energy and energy efficiency initiatives.
Our amendment was accepted by the Senate. We need to continue that momentum and quickly take up legislation to enact this proposal.
The fourth immediate step is to fully fund and restructure the Low-Income Home Energy Assistance Program. LIHEAP provides vital funding to help low-income and elderly citizens meet their home energy needs. Nationwide, over the last four years, the number of households receiving LIHEAP assistance increased by 26 percent from 4.6 million to about 5.8 million, but during this same period, federal funding increased by only 10 percent. The result is that the average grant actually declined, from $349 to $305. Since crude oil prices have soared from around $60 per barrel last August 2007 to over $100 today, a grant buys less fuel today than it would have just months ago.
Low-income families and senior citizens living on limited incomes in Maine and many other states faced a crisis in staying warm this winter. In addition to fully funding LIHEAP, Congress must make this vital program more flexible to allow states to take a regional approach to low-income energy issues, or to better balance energy bill assistance with grants for longer-lasting energy efficiency improvements, such as winterizing the homes of low-income families.
These four steps will help relieve the current pressures on energy prices and help those most in need, but they will not “get us to the moon.” I look forward to describing my vision for that journey next week.