How The Press Distorts The News About US Energy Security
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So what are Romney's positions on the policies that promote energy security? Romney said at a debatein Rochester, MI, that "the federal government, by putting in place CAFE requirements that helped foreign automobiles gain market share in the U.S., was hurting Detroit." Romney said in February that CAFE standards were one of the reasons the auto companies "got in trouble," adding, "We need to get the government out of these companies' hair and let them go to work to become competitive ... we've got to get these companies on a global footing as opposed to kowtowing to Washington." Romney also criticized fuel economy standards back in 2008 after they were strengthened by President Bush's energy bill. The standards hadn't been raised since 1975, an oversight that energy analyst Vaclav Smil has called "irrational" and "irresponsible." The Obama administration has since improved the requirements considerably.
When asked his opinion of the Chevy Volt, GM's plug-in hybrid electric sedan, Romney laughed and said it was "an idea whose time has not come." He opposes federal programs to fund companies that build alternative vehicles and wants to limit clean energy funding to basic research. These are the opinions and policy positions that are relevant to gasoline prices and energy security, but reporters are not connecting the dots.
The Expert Consensus
A recent analysis by the nonpartisan Congressional Budget Office lends support to the Energy Security Leadership Council's assessment. Defining energy security as "the ability of U.S. households and businesses to accommodate disruptions of supply in energy markets," CBO explained that the U.S. is more vulnerable to disruptions in oil markets than other energy markets because we have few alternatives to oil, we use a ton of it, and it is priced in a turbulent global market. When the price of oil spiked last summer, households' fuel costs jumped $104.4 billion, "nearly offsetting any benefits of the 2011 payroll tax cut," according to ESLC.
CBO stated that increased domestic production would "probably not" improve energy security because, for one, other oil-producing countries will likely reduce their own production in response, "thereby diminishing or eliminating the effect of such U.S. actions on the world price." CBO notes that Saudi Arabia recently made such an adjustment in response to increased development in Brazil and Iraq. To the extent that "drill baby drill" actually expands the global supply of oil, the price impact "would be small compared with the price fluctuations that are common to the oil market" (EIA estimates that opening ANWR to drilling would bring down gasoline prices by 1-3 cents in 2025 all other things equal), not to mention that any reduction in price "encourages greater use of oil, thus making consumers more vulnerable," CBO said.
Following two decades of decline, U.S. oil production is now on the rise and the Energy Information Administration expects it will continue to increase through at least 2035, due largely to the development of unconventional oil from shale rock and deep offshore wells. The ESLC attributes this oil boom in part to the "progressive increase in prices -- which, critically has been viewed by most industry participants as predominantly driven by long-term global economic fundamentals."
This gets to a point that much of the media coverage has missed: unconventional oil production doesn't solve high prices -- it requires them. As we exhaust traditional wells, engineers have figured out how to reach new geologic nooks and crannies to keep the oil flowing. Since these techniques are more difficult and costly, the price has to remain high to justify the investment. A recent Time cover story on "The Future of Oil" noted that "the new supplies are for the most part more expensive than traditional oil from places like the Middle East, sometimes significantly so," concluding: "The oil the U.S. uses may be American, but that doesn't mean it will be cheap."