Washington Responds to High Energy Prices (11/00)

The following column by GAP Intern Audrey Slesinger is reprinted from the November 2000 issue of The Professional Geologist, a publication of the American Institute of Professional Geologists . It is reprinted with permission.

High gasoline prices this summer moved energy and resource issues up on administrative and congressional agendas.  Many on Capitol Hill saw the price hikes as a clarion call-to-arms to prevent future energy crises. Criticism abounded for the Clinton Administration’s perceived lack of a comprehensive energy policy. No fewer than 18 bills were submitted to deal with either the high gasoline and heating oil prices or with overall energy protection strategies. Numerous bills proposed methods to temporarily relieve consumers of the price burden, and the Senate Republican leadership put forward their version of a broad, long-term national energy security strategy.  Even as gasoline prices stabilized later in the summer, new concerns arose about price hikes and possible shortages in natural gas and home heating oil this winter.

The last several years have seen unusually dramatic price fluctuations in petroleum, even given the cyclic nature of the commodity. In November of 1997, the Organization of Petroleum Exporting Countries (OPEC) produced too much oil at the same time that the Asian economy was suffering a major downturn.  High supply and decreased demand lowered gasoline prices to record levels in 1998.  Eventually, OPEC slashed production, and 1999 prices rebounded towards the long-term average.  However, continued low production levels, combined with a number of other highly debated factors, contributed to a heating oil crisis in the Northeast last winter and gasoline price hikes in the spring and summer.

Congressional Action
In Congress, Democrats and Republicans alike responded to the high gasoline prices by introducing new legislation both for short-term solutions and for long-term energy policy.  In May, Senate Majority Leader Trent Lott (R-MS) introduced the National Energy Security Act of 2000 (S. 2557). This broad energy plan was designed to address the nation’s increasing reliance on  foreign petroleum sources. It endeavored to increase domestic petroleum production by opening more public lands, like the controversial Arctic National Wildlife Refuge in Alaska, to oil exploration and production.  It also would establish a home heating oil reserve in the Northeast, encourage more natural gas research and development, and extend tax credits to power producers using renewable energy sources.  Many of the other energy-related bills, like H.R. 3644 and S. 2072, sought to address the short-term problem of price hikes by dipping into the Strategic Petroleum Reserve and repealing federal and excise gas taxes for the rest of the year.

Administration Response
As the proposed legislation made its way through Congress, the Clinton Administration began initiating its own solutions.  During the spring and early summer, Secretary of Energy Bill Richardson took several trips abroad to convince OPEC and non-OPEC producers to increase their crude oil production levels.  Small increases were agreed to, but the trips generated criticism that the Administration was increasing domestic dependence on petroleum imports.  Meanwhile, President Clinton also proposed creation of a home heating oil reserve for the Northeast -- an action that would require congressional appropriations. Progress has slowed due to criticism that without a defined “heating oil crisis trigger” for opening the reserve, the federal government may end up in direct competition with private Northeast oil companies.

When gasoline prices spiked in the upper Midwest, Clinton ordered a Federal Trace Commission investigation into possible collusion or anti-trust violations by major U.S. oil companies.  Congress responded in kind, organizing numerous hearings to account for the skyrocketing gasoline prices.  Midwestern congressional members were the most active because prices were notably 50 cents higher in Chicago and Milwaukee than the rest of the country.  Several explanations circulated involving the higher than usual crude oil prices and the refineries’ practice of keeping inventories low, both of which contribute to a tight supply.  When supplies are nearly equal to demand, the market becomes volatile and overly sensitive to disruptions, such as the pipeline breakage and construction problems experienced in early spring.  But many in Congress laid the blame on EPA's unpopular Phase II reformulated gas (RFG) program, which began at the start of the summer. They argued that RFG ethanol requirements -- instituted after MTBE was found to cause ground water contamination (see related intern article) -- may have been responsible for up to half of the Midwest’s price increase.

Focus Shifts to Winter Price Spikes
Shortly following the announcement of the FTC investigation, gasoline prices began stabilizing closer to normal levels, and Congress turned its attention towards spiraling natural gas prices, which had tripled in recent months. Climbing natural gas prices sparked hearings to address the predicted shortages of natural gas supply, which could keep prices high through the Spring of 2001. The Energy Information Administration forecasts that demand for this resource will increase by a third in the next 10 to 15 years.  It is generally agreed that the U.S. has more than adequate natural gas resources, but that these are not “proven” reserves, and the industry will require significant capital investments to meet that demand.

As long as gasoline and natural gas prices stay high, energy issues are sure to stay in the spotlight as one of the greatest challenges for the incoming 107th Congress and the new administration.  Geology’s prospects are in part linked to the fate of these issues and the roles they will play in the next administration. Geologists should take an active role in influencing new energy policies, keeping in mind the delicate balance of national security, affordable prices, and environmental protection.

Audrey Slesinger completed her master's degree in geochemistry from the University of Bristol (U.K) this spring. She holds a B.S. in geology from Tufts University. She currently works in the office of Senator Harry Reid (D-NV).


This article is reprinted with permission from The Professional Geologist, published by the American Institute of Professional Geologists. AGI gratefully acknowledges that permission.

Please send any comments or requests for information to the AGI Government Affairs Program.

Posted December 4, 2000


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