Special Report

The Price of Republican Gas

The House is again to vote on opening a bit of ANWR to drilling. But do GOP members really understand the law of supply and demand?

By and 5.25.06

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At the end of this week, it's likely that the U.S. House of Representatives will vote on whether to open a tiny portion of the Arctic National Wildlife Refuge (ANWR) to oil and natural gas drilling. As both houses of Congress wring their hands over how to cut consumer gas prices, they ought at least to admit to themselves that drilling in ANWR is one of the few policy ideas that can make a difference.

At various times both the House and Senate have passed legislation to permit drilling in ANWR. However, they've never managed to synchronize their efforts. The House usually passes a "stand-alone" bill with 20-30 RINOs (Republicans-In-Name-Only) in opposition, but an equal number of pro-labor union Democrats in favor. But the Senate has never been able to muster 60 votes to overcome a predictable liberal filibuster of a stand-alone bill. Last year pro-drilling Senate Republicans succeeded in adding ANWR to the annual budget resolution, which under Senate rules requires only 51 votes to pass. But Republicans belatedly are trying to use the budget resolution to restrain spending too. That has generated a hornet's nest of opposition from Big Labor Democrats in the House who otherwise would endorse a pro-ANWR bill. When GOP House leaders jettisoned ANWR to win over RINOs as converts to budget-cutting, their deal scuttled drilling. That's too bad because increasing the oil supply is one of the few ways to be serious about cutting gas prices.

The environmentalist lobby continues to lie about ANWR's impact on gas prices. For example, Defenders of Wildlife claims:

According to the Department of Energy's own estimates in a July [2005] report, tapping oil reserves in ANWR would reduce our dependence on foreign oil from 68 percent to 64 percent, and not until 2025. Opening ANWR to drilling would reduce world oil prices by 57 cents a barrel at the peak of production in 2025, according to the report. The report also indicated the price of gasoline would drop by less than 1 cent per gallon.


What Defenders doesn't say is that the 1 cent per gallon saving is based on a Department of Energy assumption that the price of oil is just over $30 per barrel. That's laughable. Oil now trades at almost $70 a barrel. Any major new supply -- like the 1 million barrels a day that ANWR could produce -- will put a big dent in gas prices.

Lots of bad ideas on energy are circulating on Capitol Hill right now and Rep. Jack Kingston's "Fuel Choices for American Security Act" is among the worst. Kingston, a Georgia Republican, claims his "bill will drop our dependence on oil by 10 percent in a decade." He is pushing legislation to spend $50 million in taxpayer dollars every year from 2007 to 2012 on R&D for hybrid vehicles. But if hybrids are such a great idea, why won't the market generate the additional $50 million? Perhaps it's because hybrid sales have been less than stellar.

The main problem with hybrids is that they cost more than conventional vehicles. They do save money on gas, but only two models -- the Prius and Civic -- save enough over five years to offset hybrids' higher sticker price. And the amount saved -- only $300 and $400, respectively -- isn't much of a selling point.

Kingston's bill also increases to 10 percent the amount of ethanol that must be mixed with gasoline. That's a proposal that actually increases the cost of energy to consumers. Ethanol advocates like to say that a gallon of ethanol currently sells for about 30 cents less than a gallon of gasoline. What they don't admit is that it takes 1.5 gallons of ethanol to produce the same amount of energy as 1 gallon of gasoline. A car that gets 30 mpg on a gallon of gasoline will get 1/3 less gas mileage on a gallon of ethanol, or 20 mpg. Do you want to drive 300 miles? Then you will need to buy ten gallons of gasoline: At $3 dollars a gallon, it will cost you $30. But try that with ethanol in your tank and you will need to buy 15 gallons. At $2.70 a gallon, your cost to go 300 miles is $40.50. If consumers do the math, expect those new E85 vehicles to languish at dealer showrooms.

Consumers and politicians will have to learn about supply and demand if they want to cut the price of gas. Because a growing economy like ours won't reduce its demand for gas, the only real option is to increase supply. That makes drilling in ANWR one of the few good energy policy proposals before Congress. Sadly, few things are harder to get passed in Congress than good proposals.

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About the Author

David Hogberg is a senior fellow at the National Center for Public Policy Research.  Follow David Hogberg on Twitter.

About the Author

James Dellinger is a research analyst at the Capital Research Center.