The View From Here . . .

As virtually everyone knows, gas prices are spiking yet again, with the price per gallon exceeding $3 in much of the Northeast and the worldwide price now well over $70 per barrel.

According to a CNN poll, 69 percent of respondents reported that the price increase had caused them personal hardships. Despite pledges by President Bush as well as other Democratic and Republican politicians to investigate alleged price gouging or manipulation, one suspects that there is probably not much that can appropriately be done to change the price structure in the immediate future. Indeed, as we learned in the 1970's, attempts to regulate oil or gasoline prices or to impose "windfall" profits taxes rarely prove fruitful and indeed tend to exacerbate shortages. Even the favorite solution of conservatives, the opening to drilling of the Alaska National Wildlife Reserve, would require a number of years before the supply of oil would become available. Of course, one major recent factor forcing prices higher is rapidly increasing demand from the growing Chinese and Indian economies.

In the longer run, however, the United States does need to do something as a policy matter to wean itself from dependence on foreign oil as the principal source of energy. This should be an area of considerable political consensus since the left has asserted in recent years that excessive consumption of fossil fuels leads to "global warming", while political conservatives have become concerned about the negative national security implications of dependence on hostile regimes abroad. Indeed, President Bush's most recent State of the Union address called for an end to the "addiction" to foreign oil. At present, the United States accounts for only 3 percent of global oil production and imports about 60 percent of its oil.

In his recent book, War Footing (Naval Institute Press, 2006), national security analyst Frank J. Gaffney sets forth a number of steps worth considering to reduce our dependence on foreign oil. These steps include requiring that all new cars are flexible fuel vehicles (FFV's) that may burn alcohol-based fuels (methanol or ethanol), gasoline or any combination; encouraging the production of ethanol and methanol (with appropriate reductions in sugar tariffs to encourage production of sugar-based ethanol); greater use of plug-in hybrid vehicles which also have a fuel tank; increased fuel efficiency, including conservation efforts, better material and more diesel engines.

Not all of the initiatives proposed by Mr. Gaffney and others tackling energy issues will likely prove economically or politically realistic and no one desires to foment a recession. (For example, on the political side, reducing tariffs to aid production of sugar-based ethanol is very unpopular in sugar producing states.) Mr. Gaffney does not emphasize another possible, if very controversial, technology, nuclear power, which is widely and successfully used in France or the possibility that strides may be made in new technologies, like wind or solar power. And, of course there are other possible solutions to sudden increases in gasoline prices - for example, reduction for a time of state and local taxes and temporary relaxation of environmental rules requiring specialized blends in certain areas. Finally, there is always a possibility of a strong negative spike in the volatile oil market; prices hit a low of $10 per barrel as recently as 1998.

While the shape of the program is likely to be hard-fought, this may be the moment when America takes a serious look at its energy policies and begins to consider serious alternatives to its present reliance on foreign oil.