When Americans Gas Up for July 4th Weekend, They Should Be Mindful That the Energy Bill Does Nothing to Lower High Gas Prices

July 1, 2005

When Americans Gas Up for July 4th Weekend, They Should Be Mindful That the Energy Bill Does Nothing to Lower High Gas Prices

WASHINGTON, D.C. – When the 34 million Americans expected to take a trip by motor vehicle during this July 4 weekend gas up at the pumps, they probably will not realize that the answer to their high fuel bills lies not with energy legislation pending in Congress, but with improved fuel economy standards, which have not been significantly upgraded for almost 30 years.

Gas prices are expected to remain well above $2 a gallon throughout the summer, meaning each American household will be paying $220 more than last year to fuel their vehicles. Each additional penny that consumers pay at the pump soaks up $1.5 billion out of the economy; since March, consumers paying higher gasoline prices have been socked with the equivalent of a $48 billion tax increase.

President Bush is pushing for final passage of the Senate-passed energy bill, which is now in a House-Senate conference committee, saying recently that the bill will address “the root causes of high energy prices.” But this is patently false, as admitted even by Republican backers of the bill. U.S. Rep. Joe Barton (R-Texas), chairman of the House Energy and Commerce Committee, stated recently that “short term, this will not be a [gas] price-relief bill.” U.S. Rep. Sherwood Boehlert (R-N.Y.) called the bill a “tragedy and farce” for not reducing oil consumption by a single barrel by 2020. The Energy Department has suggested the House energy bill would raise gasoline prices by 3 cents per gallon. Even U.S. Sen. Jeff Bingaman (D-N.M.), a chief sponsor of the Senate energy bill, cautioned that “this bill does not bring down the price of gasoline at the pump in the near term.”

“Lawmakers are ignoring the easiest, most effective way of reducing American energy consumption, and that is to raise vehicle fuel economy standards,” said Public Citizen President Joan Claybrook. “Instead, the Congress is offering a gargantuan giveaway of taxpayer money to oil companies, which are making obscene profits off the backs of American drivers. And President Bush has no plan to address the high cost of gas, which is putting a severe strain on the trucking and airline industries and is boosting inflation.”

The current fleet of vehicles has the lowest overall fuel economy in 20 years. The average fuel economy for model year 2004 light trucks was 17.9 miles per gallon; for passenger cars, 24.6 miles per gallon; and combined, 20.8 miles per gallon. Despite vast improvements in efficiency technology in the past two decades, the most fuel-efficient vehicle fleet rolled off the assembly lines in 1986. Improvements are possible; when Congress established the fuel economy program in 1975 in the wake of the Arab oil embargo, average mileage almost doubled from 14 miles per gallon in 1972 to 27.5 miles per gallon in 1987 under standards issued by the U.S. Department of Transportation’s National Highway Traffic Safety Administration.

“Off-the-shelf” technologies such as more efficient engines, smarter transmissions and high-strength, lightweight materials exist and can safely raise the combined average fuel economy of America’s cars and light trucks to 40 miles per gallon. If the vehicle fleet average fuel economy was increased to 40 miles per gallon by 2015, we would save 1.65 million barrels of oil per day. And if the average was ramped up to 55 miles per gallon by 2020, we would save 4.89 million barrels a day.

Both the House and Senate versions of the energy bill contain provisions that would extend fuel economy credits for automakers who produce vehicles capable of using alternative fuels, such as ethanol as well as gasoline. But this program has long been a failure. Most people who purchase these vehicles never use the alternative fuel because it is costly and hard to find. At the same time, the credits to manufacturers result in less fuel-efficient vehicles being produced; credits awarded in one year alone will waste 2.5 billion gallons of gasoline over the lifetime of 2004 vehicles.

While gas prices are at record highs, oil companies are making record profits. The world’s 10 largest oil companies earned more than $100 billion last year in profits, with profits increasing 20 percent. Their combined sales of more than $1 trillion are greater than Canada’s gross domestic product. The top five oil companies operating in the United States have earned profits of over $230 billion since 2001. Because of this, Public Citizen has called for an excess profits tax.

Nevertheless, Congress, in the energy bill, is moving to give a massive handout of taxpayer money to energy companies. The Senate bill contains $2.8 billion in tax breaks to the oil and gas industries. The House version of the energy bill offers $3.2 billion in tax incentives for oil and gas companies. Only 5 percent of the tax relief offered in the House bill applies to renewable resources or energy efficiency.

The House bill also would give legal immunity from pollution lawsuits to manufacturers of the gasoline additive MTBE, a group that includes many of the major oil companies. The legal immunity would leave thousands of local communities bearing the costs of any MTBE cleanup despite the fact that oil companies were well aware of the risks MTBE posed to drinking water when they marketed the gasoline additive. In addition to providing legal immunity, the House bill also gives MTBE producers $2 billion in cash payments to help them transition towards producing alternatives to MTBE.

Both versions of the energy bill contain many other anti-consumer, anti-environment provisions, including more than $10 billion in subsidies, tax breaks and other incentives to the mature nuclear industry to build new nuclear reactors in the Senate bill and more than $6 billion in nuclear industry giveaways in the House bill. The bill also would abolish the Public Utility Holding Company Act, which protects consumers and investors by regulating the financial investments of utilities, opening up ownership of approximately $1 trillion worth of electric generation, transmission and distribution assets and natural gas distribution assets to any kind of company, anywhere, for the first time since 1935.

“Congress is going in the wrong direction with this bill,” Claybrook said. “Lawmakers should increase fuel economy standards and encourage the use of renewable energy. We can’t afford not to.”

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For more information about the energy bill, click here.

For more information about fuel economy, click here.