How We Can Save Money and Cut Our Dependence on Foreign Oil

This story was written by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, and Ali Frick.

The last time Congress set corporate average fuel economy (CAFE) standards -- mandating a 25-mile-per-gallon standard for cars -- Gerald Ford was in the White House, Jaws was showing in movie theaters, and disco was king.

But on Friday, Speaker of the House Nancy Pelosi (D-CA) announced a historic new agreement with House Energy Committee Chairman John Dingell (D-MI), supported by the major automakers, that allows the House to move forward with its stalled energy bill.

The agreement would set CAFE standards at a fleet average of 35 miles per gallon, but would separate standards for SUVs and light trucks in an important compromise to automakers. The proposed energy bill, in the final stages of negotiation, would also vastly increase the use of biofuels, such as "cellulosic" ethanol, a more efficient biofuel than corn ethanol, and require utility companies to generate 15 percent of their energy from renewable sources, such as wind or solar.

Despite the hard-fought bipartisan support for this bill, the White House has threatened to veto it.

When he signed the first CAFE standard into law in 1975, President Ford admitted the law was hardly perfect, yet he recognized that "[t]he single most important energy objective for the United States today is to resolve our internal differences and put ourselves on the road toward energy independence." "If I were to veto this bill, the debates of the past year would almost surely continue through the election year and beyond. The temptation to politicize the debate would be powerful, and the Nation could become further divided," Ford said.

Hopefully, Congress can push ahead to pass this historic bill and President Bush can recognize, as Ford did, how even what he may deem an imperfect energy bill serves the national interest.

CAFE Standards

With oil futures "up about 76 percent from this year's lowest levels, in January," and Americans concerned about global warming and national security, Rep. Ed Markey (D-MA) said the timing presented "a perfect political moment" to take action.

The Union of Concerned Scientists (UCS) forecasted that the new CAFE standards would result in a lifetime savings to car owners of roughly $4,500 and, more importantly, cut oil imports by 1.1 million barrels per day in 2020, equal to half the amount currently imported from the entire Persian Gulf.

Had these standards been fully implemented today, the average driver would have used 160 fewer gallons of gas, and saved $420 this year. "This agreement breaks 30 years of gridlock on fuel economy. ... This is a victory for Americans struggling with $3 per gallon gasoline and would deliver savings of more than $20 billion in 2020," said UCS's David Friedman.

The support of the auto industry, along with Rep. John Dingell (D-MI) and Sen. Carl Levin (D-MI),  is key to the measure's success. Rick Wagoner, chairman and CEO of General Motors called the CAFE measures "tough" but assured that "GM is prepared to put forth its best effort" to meet them.

Dave McCurdy, president and CEO of the Alliance of Automobile Manufacturers, the trade group that represents Detroit's Big Three, Toyota, Daimler AG, and five other automakers, said that "this tough national fuel economy bill will be good for both consumers and energy security. We support its passage." "This vehicle fuel economy agreement is the single most important step Congress can take to reduce our energy costs and dependence on Mideast oil," said Mark Cooper, Director of Research for the Consumer Federation of America. " Now it's up to Congress and President Bush to leave the past behind once and for all by prompt passage of and signature on these 21st Century fuel economy standards," said Dan Weiss, a fellow at the Center for American Progress.

Renewable Fuels

Another provision of the bill would require "20.5 billion gallons of renewable fuels like ethanol to be mixed with U.S. motor fuel supplies by 2015, with 5.5 billion gallons of that coming from non-food sources like cellulosic ethanol."

Automakers will continue to receive credits to encourage the development of "flex fuel" cars, which can run on a mixture of gasoline and other fuels, even though there is "no way to tell if such vehicles actually use biofuels or regular petroleum-based gasoline," and few gas stations sell such fuels.

Oil companies have successfully blocked gas stations from selling E85. As the Center for American Progress noted yesterday, although there are currently only 1,261 gas stations nationwide selling E85, a mixture of ethanol and gasoline, this figure represents a 9 percent increase since June.

The final energy bill may include incentives to sell E85 at more service stations.

Renewable Electricity

Pelosi is also pressing for a controversial provision that requires utilities to generate 15 percent of their energy from renewable sources. The American Council for an Energy-Efficient Economy predicted such a measure would save $35 billion on energy bills through 2030.

The measure has powerful enemies, including the utility trade group the Edison Electric Institute and southern Congressmen who mistakenly fear their states don't have enough renewable fuel sources to meet the 15 percent threshold.

Sen. Mitch McConnell (R-KY) said the provision would make the bill "very troublesome for all of us in the Southeast," and Rep. Joe Barton (R-TX) "says Southerners' outrage makes Senate passage a 'worst-case scenario.'"

Yet the bill would allow utilities "to purchase credits if renewable fuels are not available and allows efficiency programs as a partial substitute." Even though his state has implemented its own successful renewable electricity standard, Sen. Pete Domenici (R-NM) is leading the fight to oppose the measure, telling reporters yesterday, "At this time, I have instructed my staff to cease their work on the energy bill, since the final bill apparently will not be the product of our bipartisan negotiations."

Yesterday, Bush's outgoing economic adviser Al Hubbard threatened a White House veto of the entire energy bill, objecting to the utilities provision and the CAFE standards. He wrote to Pelosi that the bill "should rely on market innovation" rather than legislated standards. "It appears Congress may intend to produce a bill the President cannot sign," Hubbard wrote.

Speaking to reporters yesterday, however, Senate Majority Leader Harry Reid (D-NV) said he expected the provision to pass the Senate. "I think, yes, we do have enough votes, but time will tell," Reid said. The House is expected to vote on the energy bill this Wednesday, with a Senate vote on an identical version -- thereby eliminating the need for a conference committee -- to follow next week.

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