Fuel Prices and the Energy Policy of the USA - Research Paper Example

Fuel Prices Remain High Because of the United s Energy Policy Other Fuel price is one of the biggest issues in the world nowadays because its consumption is much higher then the production. Fuel is “a substance that produces useful energy when it undergoes a chemical or nuclear reaction. Fuel such as coal, wood, oil, or gas provides energy when burned. Compounds in the body such as glucose are broken down into simpler compounds to provide energy for metabolic processes. Some radioactive substances, such as plutonium and tritium, provide energy by undergoing nuclear fission or fusion” (American Heritage Dictionary, 2005).i Energy cannot be produced or destroyed by itself, it can only be transformed. In 1970s and 1980s renewable energy was called alternative energy because it was the best alternative for nuclear power and fossil fuel. There are different sources of energy. Firstly, I would like to discuss renewable energy that can be extracted from natural resources. Types of renewable energy are wind, solar, hydroelectric, biomass, geothermal and tidal energy. Then we also have fossil fuel sources extracted from coal or hydrocarbon, which are the remains of decomposition of animals and plants. There are three types of Fossil fuels: coal petroleum, natural gas and liquefied petroleum gas (LPG). Third one is Nuclear power based on fission and fusion. The US is second largest energy consumer in world. The US is seventh country in the world in terms of consumption of energy per capita. We know that in 20th century, after coming out of isolation US played a major role in the world socially, politically and economically. Every event or crisis in US has its own historical background; nothing happens within some days or months. Same is the case of fuel price, which is one of the biggest issues in the US now days. US was an agrarian state in 18th century but industrial revolution brought changes in the energy requirements and its production ways. At that time major source was coal to produce energy till 20th century then it took drastic change during WWII era. Petroleum and natural gas attracted the attention of US energy production sectors in 1950s. ”Following World War II, oil heating boilers took over from coal burners along the Eastern Seaboard; diesel locomotives took over from coal-fired steam engines under dieselization; oil-fired electricity plants were built; petroleum-burning buses replaced electric streetcars in a GM driven conspiracy, for which they were found guilty, and citizens bought gasoline powered cars. Highways helped make cars the major means of personal transportation” (United States Department of Energy, 2007).ii With the passage of time demands of petroleum and gas increased rapidly. In 1977 The United States Department of Energy (DOE) was created to establish policies regarding energy productions and safety in handling nuclear material. It is a Cabinet level department. It also sponsors basic research centers and funded them through United States Department of Energy National Laboratories. The energy policy of the US is determined by federal, state and local governments, where lobbies play a major role in policy making and decision making. “Energy policy may include legislation, international treaties, subsidies and incentives to investment, guidelines for energy conservation, taxation and other public policy techniques.”iii Before 1970s US oil was quite cheep. In 1950s the most noticeable policy was made by Dwight Eisenhower, who did not allow any import of oil and focused on US’s own oil reserves and increased oil prices high enough to satisfy the oil producers but not as very that could create problem for public (Graetz).iv As the dependence on oil increased, the US policies also moved towards Middle East rapidly, especially Saudi Arab and Iran. US had established new programs and policies. In 1973 US faced atrocious oil crises that shuddered the US economy badly. “On October of 1973 Middles-eastern OPEC nations stopped exports to the US and other western nations. They meant to punish the western nations that supported Israel, their foe, in the Yom Kippur War, but they also realized the strong influence that they had on the world through oil. One of the many results of the embargo was higher oil prices all throughout the western world, particularly in America.”v US got a great lesson during crisis era and seriously thought about new policies regarding energy production through other means except oil. Richard Nixon came up with new policy to counter the oil crisis. He presented a solution and made Saudi Arab and Iran close allies through providing them military aid and encouraging their economic independence with US. He hoped that they will support US in the matter of oil, but in 1979 Iran revolution did great damage to the US’s policies regarding oil purchasing from Iran.vi In August, 1977 US’s president Jimmy Carter signed The Department of Energy Organization Act of 1977 (Pub.L.95-91, 91 Stat. 565, enacted August 4, 1977), that brought the Department of Energy into being.vii On this point a statement was issued by Jimmy Cater “United States will never again import as much oil as it did in 1977 (Carter 1979).viii But the main reason was failure of policies not only on international level also on domestic level. Jimmy cater received the presidency when it was already damaged by the Nixon’s improper policies, especially regarding energy production. The US had 4 percent population of the world, but it was consuming 25 percent oil of the world. In 1970s, US imported less than half a billion barrels of oil; by 1980s it increase to nearly 2 billion. “Our energy policy creates chronic instability in our economy. Of the 11 economic recessions the U.S. has suffered since World War II, 10 were preceded by a jump in oil prices” (Hamilton 2010).ix  In 1980s the US moved towards more market oriented policies. The energy policy of US has seen three Energy Policy Acts, in 1992, 2005, and 2007x in which many provisions were included for conservation, such as Energy Star program, and energy development programs, with tax incentives and grants for renewable and non renewable energy. Now we can see the oil crisis in 21st century, during 2003, price of oil per barrel rose above $30, reached $60 by 2005, and peaked at $147.30 in 2008. The typical reason of this crisis, in the language of economics, is demand and supply issue. But this was the period of Bush administration. During his regime US went for wars in Afghanistan and Iraq. “One may deny that the United States is engaged in military operations today in Iraq and Libya, but not in Syria, only because of oil, but no one should believe that oil is irrelevant to our foreign policy or military choices.”xi  These two wars led US economy downward especially due to the cost of war. The major lacking point in these two wars was improper planning which led the US, out of the pan into the fire. According to Rocky Anderson “It often is said that the United States has no energy policy. That isn’t true. Our national energy policy has been clear for generations: We are committed to using the dirtiest and most volatile forms of energy; to undermining economic stability and the health of our people; and to defending our energy supplies by sending our children to war”(Andreson).xii Bush ruled for two terms and he mostly focused on War policies rather then domestic issues. The energy turmoil forced Bush to establish the National Energy Policy Development Group (NEPDG) that was a task force, charged to formulate a long range plan to counter the energy crisis. Report presented by NEPDG in 2001 was announced by Bush as energy policy that was paying most of its attention on boosting up the production of oil at home and slow down the oil import but he did not focused on alternatives of oil. In the report one third recommendations were based on the ways to obtain access to petroleum sources abroad. During US election campaigns, energy issues and future policy regarding energy production is very important to be discussed and presented by candidate in front of public to win their votes. During Bush’s administration things goes exactly the way he wants them to. He led the nation towards difficult choices that would be faced by them onto next generation. He delayed the projects of renewable energy, but made his friend happy in energy business.xiii When Obama came into the power, he was handed over a trembling economy. The energy policy was very impotently discussed in his election campaign speeches. But these policies failed because of some reasons which kept oil prices higher. First of all the US is utilizing 20 million barrels a day but produces only seven million.xiv Demand is higher then the production or supply. Secondly, US is not seriously investing money inside the US to drill out natural reserves and utilize them rather than depending on others. Thirdly, US’s defense budget is covering 45% of its GDP because of the wars that are too expensive. In Afghanistan US is spending about $300 million per day. Some time US’s oil containers have burnt by extremists in Pakistan that creates problems for US troops in Afghanistan and it’s a big loss for US, because wastage of oil is not affordable for US when she is facing crisis in same regard at home. Fourthly, Obama said “NO” to Keystone XL pipeline that would provide 830,000 barrels of oil per day from Canada to the US, as well as it will provide employment opportunities, economic growth and tax revenues. But Obama said “NO” to this project that will be a great loss. Fifthly, Obama has shown deep interest in green energy revolution and funded the green projects by taxpayer dollars. He handed over billion of dollars to the Department of Energy’s loan guarantee program, and allowed them to give it to alternative energy companies. But his plan failed miserably because many companies went bankrupt. Federal government should not waste taxpayer’s money in such useless projects. Sixthly, Banking on Electric cars like Chevy Volt that is a central part of Obama’s policy with subsidies on production and purchase, is totally wastage of money because it needs electricity to get charged. If these electric cars save fuel, they still cost high. So it’s not a worthy plan, just another way to waste money. Seventhly, Domestic energy productions have been decreased since 2010 to 2011 and reason is, either administration canceled them, delayed or withdrew of lease sales for development and exploration. Limitations or delays in oil and gas productions led to unavailability, plus decrease in job opportunities, economic growth, etc. This is a major issue that US should drill out its own reserves because “U. S. Oil Discovery- Largest Reserve in the World. Hidden 1,000 feet beneath the surface of the Rocky Mountains lays the largest untapped oil reserve in the world. It is more than 2 TRILLION barrels. On August 8, 2005 President Bush mandated its extraction. In three and a half years of high oil prices none has been extracted. With this mother lode of oil why are we still fighting over off-shore drilling? (Stansberry Report Online -2006)”xv Eighthly, EPA announced a new rule to regulate CO2 emission from power plants, and it would ban new coal power plants. The result will be higher energy cost, low jobs, less progressive economy and no effective change in global environment. Cape and Trade system of energy taxes and credits established to decrease carbon emission. But it failed completely. Then President Obama proposed a Clean Energy Standard it also did not work. Both played no effective role for energy and become a burden on businesses and consumers. The Obama administration terminated the $15 billion already spent Yucce Mountain nuclear waste repository project, due to some undefined political reasons. Now option for nuclear disposal is absent which simply means that US will not expand its nuclear energy programs. On the other hand Obama dedicated a major part of stimulus towards a new “green” economy with taxpayer dollars. He also promised to create five million green jobs, which were the part of “green revolution”. Unfortunately it failed too, and net result was loss of income and jobs. US economic policies invite war through exploiting its relations with small states like Iran, which is very important for crude oil shipping through Strait of Hormuz. In contrast our energy policies give money to nations known for their unstable or unfriendly approaches for US, including some states blamed for their support to terrorist organizations i.e. Saudi Arab.xvi So we can say that US is facing the problems which are the result of her confusing policies somewhere, sometime. Now in concluding section I would like to say that “Fuel prices remain high due to energy policies of United States” is a true fact because US doesn’t have a clear policy regarding energy production. It should seriously focus on the other ways of energy productions. I have mentioned some policies of Obama Administration and tried to dig out some points where he is lacking, but mainly criticized point is why not focusing on production at home? The answer is: it will take a huge amount and government has already debited to meet the expenditures of Afghan war and some other foreign issues. Energy policy needs proper planning and investment, for that US has to stop war in Afghanistan and stop funding unnecessary projects abroad plus stop wasting taxpayer dollars on unproductive projects. It should subsidies the projects which give benefits to a common man rather than some businessmen. America is famous for its democratic system, so people should realize their power and take a stand on high fuel prices and openly criticize United State’s confusing Energy Policy. Through intelligent energy policy US can be a world’s leading economy and it can protect its nation from bearing high prices of fuel. But a terrible reality is it increasing prices of fuel is not only an issue for US; it is now become a problem of the world all over. Administrations after administrations in US; are unable to solve the problem because countries upon which US is dependent for oil, have their own interests and they do not want low profit especially in the field of Oil. So US should focus on its own abilities and formulate effective and efficient energy policies to give relief to a common man of America. Works Cited 1. Anderson, Rocky. “Solution: Clean Energy Economy.” See:http://www.voterocky.org/clean_energy_economy 2. Bomberger, Robert. "CRS Report for Congress 2004”. See: http://digital.library.unt.edu/ark:/67531/metacrs7840/ 3. "Crisis of Confidence Speech 1979". Cartercenter.org. Retrieved 2012-03-30. 4. "Energy in the United States: 1635-2000 – Total Energy". United States Department of Energy. Retrieved 2007-07-04. 5. Graetz, Michael J. “The End of Energy”. See: http://www.worldfinancialreview.com/?p=745 6. Hamilton, James D. Historical Oil Shocks. 2010. http://dss.ucsd.edu/~jhamilto/oil_history.pdf 7. Klare, Michael “Bush-Cheney Energy Strategy: Procuring the Rest of the World’s Oil.” See: http://www.commondreams.org/views04/0113-01.htm 8. Peak, Chris Nelder. “Oil Consequences of Bushs Failed Energy Policies.” See: http://www.energyandcapital.com/articles/oil+prices-bush-peak+oil/696 9. Relyea, Harold. Thomas P. Carr (2003). “The executive branch, creation and reorganization.” Nova Publishers. pp. 29. 10. The American Heritage: Science Dictionary. Published: Houghton Mifflin Company. 2005. See: http://www.thefreedictionary.com/fuel 11. US has more Oil then Saudi Arab. See: http://www.squidoo.com/usa-has-more-oil-than-saudi-arabia#module148587249 12. 1970′s Oil Crisis: NOVEMBER 1973 – MARCH 1975 (16 months). See: http://recession.org/history/1970s-oil-crisis/ 13. http://en.wikipedia.org/wiki/Energy_policy_of_the_United_States#General_legislative_policy.2C_legislation_and_plans 14. http://www.trumanproject.org/files/papers/Oil_Addiction_-_Fueling_Our_Enemies_FINAL.pdfc Read More