At this week’s G8 Summit, the cost of gasoline is one of the main topics of discussion. With the price of crude oil hovering around $136 a barrel, the industrialized world is looking for answers. But none seem to exist right now.
Some blame the skyrocketing costs on increased demand. However, the International Energy Agency does not expect the demand for diesel and heating oil to grow by much — only 0.9 % in 2008.
Others are blaming low oil reserves. OPEC says otherwise. In fact, it increased its production. Its secretary general, Abdullah al-Badri, told Reuters on Tuesday, “The situation is unbearable as far as we are concerned. I want to say, ‘there is no shortage now and in the future.’” He blamed investment banks and speculators for artificially driving up the cost of oil.
In the presidential race, both candidates seem quick to grab for bumper sticker solutions to the rising cost of crude oil and its adverse impact on customers and commerce. One candidate seeks a tax holiday and both point to “excessive” fuel company profits. Considering the enormous stakes of getting this issue right, the candidates would be wise to ponder a more market-oriented approach to energy policy.
In the long-term, America needs a comprehensive energy policy that emphasizes a homegrown approach — more domestic oil exploration and drilling, and greater emphasis on clean-burning coal and nuclear energy.
In the short-term, the nation needs to review the regulatory environment navigated by commercial transporters of goods. And, Congress should tread lightly.
The so-called Railroad Competition and Service Improvement Act currently making its way through the House and Senate does exactly the opposite. The proposed act seeks to place burdensome regulations on an important commercial transport system at exactly the wrong time.
The legislation places substantial “re-regulation” on freight transported by rail. Many industry experts believe the measure will cripple railroads. Some estimate it would cost the industry nearly $5 billion a year in lost revenue. Instead, the government should limit unnecessary regulation on American industries, especially the transportation industry.
Moreover, it is an undeserving punishment to an industry that has become so efficient that ever-increasing fuel prices may have a minimal effect on its ability to deliver low-cost transport.
According the Association of American Railroads, the railroad industry has reduced fuel consumption by 48 billion gallons since 1980 and reduced carbon dioxide emission by 538 million tons during the same period. They claim a whopping 85% improvement in fuel efficiency since 1985.