Anyone who’s been to a gas station recently knows the feeling. You see the price of regular unleaded, about $3.52 per gallon — up 77 cents since 2010. Your pulse quickens, because this is not a dream! The days of $4-a-gallon fuel are about to return.
How we got here is no mystery. The turmoil in the Middle East, including a supply disruption in war-torn Libya, has raised market anxiety. The flood of money coming from the Federal Reserve contributes to commodity-price inflation from food to precious metals to oil. Increased demand, in emerging markets in particular, translates to more-expensive fuel at home.
The appropriate policy responses are not mysterious: The sooner Moammar Gadhafi is overthrown, the faster supplies can be restored. Ending the Fed’s program of monetary stimulus would reduce the amount of dollars inflating the commodities bubble. And the best way to compensate for rising demand is to increase supply.
We wish we could say President Barack Obama is pursuing such a course. But the five people who managed to stay awake during his soporific news conference last week know better. He says he wants Gadhafi out, but doesn’t appear interested in doing much to make it happen.
Obama has given Federal Reserve Chairman Ben Bernanke free rein to accelerate the recovery, but doesn’t seem worried about the long-term consequences of inflationary policies. He proudly (and correctly) touts the fact that in 2010 domestic oil production reached its highest level in seven years. But that supply must increase by a lot more, and a lot more quickly, if Americans are to enjoy affordable fuel.
The president wants to know if the oil companies are sitting on any untapped reserves. He’d like to see further research and exploration and “information gathering.”
There are plenty of ways to encourage production right now. Moping that it takes time for new fields to come online is no excuse. All Obama needs to do is read a copy of the “Roadmap for America’s Energy Future.”
Authored by Republican Devin Nunes of California, the energy road map is a comprehensive strategy to increase production in a responsible way.
Nunes would open the Outer Continental Shelf to oil and gas exploration, allow drilling in the Arctic National Wildlife Refuge after years of delay, restore oil-shale leases the Obama administration canceled in 2009 and repeal the prohibition on government purchases of “coal-to-liquid” synthetic fuel. He’d forbid the U.S. Environmental Protection Agency from regulating carbon dioxide as a pollutant.
Better yet, Nunes would do all this while establishing a “Renewable Energy Trust Fund.” Government revenue from carbon-based energy would be dedicated to research into alternatives such as wind, solar, biomass and others.
The money would be disbursed through a reverse auction in which projects with the greatest potential energy efficiency win contracts. Once they enter into the contract, recipients would forgo all other tax credits and would place a deposit in the Treasury. If the project fails, the recipients lose funding — and the deposit.
It’s a safe bet that demand for Nunes’ program will rise in direct proportion to gas prices. There are plenty of Democrats, many of them senators from red states, who are interested in reducing the de facto tax that voters pay whenever energy prices rise.
This article appeared in The Weekly Standard.