Will Congress Answer the Bell?

By Bob Dinneen | March 11, 2011

Yogi Bera famously quipped that he was experiencing “déjà vu all over again.” For Americans, the recent run up in oil prices and the corresponding price climb at the pump is leaving them with that strange feeling of having been through this before.

When oil began its historic ascent to nearly $150 per barrel in the summer of 2008, gas prices soared to about $4 per gallon. It fundamentally changed America’s gasoline consumption patterns—but it didn’t end them. Speculation of gasoline prices touching $5 per gallon does not seem as far-fetched as it might have been even two months ago. 

Congress, known better for its reactive abilities than its proactive vision, will face increasing pressure to act to mitigate the damage from this current oil price spike. What will Congress do?

There is no shortage of options to help America gain control of its energy future. Frankly, we need them all. We need to rapidly adopt all technologies that stabilize energy supplies while simultaneously conserving and greatly reducing our consumption of oil. That means more efficient cars, new car technologies like plug-in hybrids, responsible increases in U.S. oil production. And yes, an aggressive ramp-up in the use of American renewable fuels.

The advent of the nation’s domestic ethanol industry was largely a response to the twin oil price shocks of the 1970s. President Carter and many in Congress were looking for domestic alternatives to imported oil. America’s farmers stepped up to the plate and an industry was born. As oil prices eased, however, the concern over America’s growing addiction to imported oil waned. As a result, we are more exposed and more vulnerable to volatility in oil markets than at any time in our history. 

To be fair, Congress has taken some measures that are helping to ease the impact on our economy today. The creation and ultimate expansion of the federal renewable fuels standard (RFS) has ensured that more of the nation’s gasoline supply is coming from domestic ethanol production rather than OPEC oil imports. The RFS helped usher in tremendous growth in American ethanol production and use, replacing nearly 10 percent of the gasoline we use with a renewable, cost-effective alternative.

The importance of the growth in American ethanol production and use cannot be trivialized in the current environment. Ethanol today is helping to keep prices at the pump lower than they would otherwise be for two reasons. First, ethanol is cheaper than gasoline. When it is blended with gasoline, it lowers the price drivers pay at the pump. Second, ethanol is replacing one-tenth of all the gasoline we use and displacing the need for more than 445 million barrels of imported oil a year. Without ethanol’s contribution, American demand for oil would be much higher and would drive the price of oil higher still.

The current unrest and the turmoil in the oil markets is not an isolated or once in a lifetime event. It is not a question of if oil prices rise again (provided they ever come down), but one of when. History should teach us that now is the time to implement forward-looking, thoughtful policies that put America in a place to better weather the oil storms of the future.

In order to achieve those goals, Congress must stop wasting time on frivolous debates that do not address any pressing national issue. Recent votes and debate in Congress to limit the use of ethanol in the name of budgetary concerns are prime examples. None of the proposals would meaningfully reduce the federal budget. They would, however, ensure America continues increasing imports of oil. 
Congress must also refine its focus to ensure cutting edge technologies, such as advanced ethanol production, receive priority over investment in the energy technologies of the past. By partnering with private companies and implementing smart tax policy, Congress can dramatically accelerate the commercialization of technologies that turn everyday waste streams into the renewable fuels of tomorrow.

Finally, Congress must have a grown-up conversation about all energy tax policy. Both the House and the Senate have voted to continue providing billions of dollars to oil companies each year, even as oil prices (and oil profits) continue to rise. For its part, the American ethanol industry is willing to discuss transforming the current ethanol tax policy into one befitting of the dynamic and evolving industry we see today. The oil industry should be willing to do the same. Without meaningful reform of all energy policies, we will likely be right back here the next time unrest ripples through oil-rich regions.

Author: Bob Dinneen
President and CEO of the
Renewable Fuels Association
(202) 289-3835