President Reagan liked to say, "There are no easy answers, but there are simple ones." This principle applies to America's energy woes. Since the Democrats took control of Congress in January 2007, the price of a gallon of gas has soared from $2.33 per gallon to over $4. Furthermore, over the next two decades, global demand for oil is expected to rise by 50%, meaning that further price escalation is almost inevitable. When confronted by these facts, the energy solution - as President Reagan would say - is simple. We need more energy! We should be increasing our production of oil, natural gas, clean coal, and nuclear power – and those resources should come from America, instead of foreign dictatorships. Unfortunately, enacting this agenda won't be easy. The Democratic Leadership in Congress is determined to "punish" energy companies with new taxes, even if the greatest victim of those taxes is the American consumer.
The Democratic nominee for President, Senator Barack Obama, is eager to burden oil producers with a "windfall profits tax" - a euphemistic phrase that implies an undue or undeserved "profit." As Alan Greenspan once said, "Whatever you tax, you get less of." By raising taxes, and thereby, reducing the incentives to produce energy, the consequences of this policy are obvious: we will end up with a smaller supply of domestic energy. But don't just take my word for it; take a look at history. In 1980, Congress passed a "windfall profits tax" and the consequences were devastating. In the six years following that levy, domestic oil production dropped by 1.26 billion barrels and imports of foreign oil rose 13%. The "windfall profits tax" was an unmitigated disaster, which is precisely why it was repealed. We shouldn't make that same mistake again.
Instead of searching for scapegoats, we should be striving to create a bold, comprehensive plan for America's energy security in the 21st century. Specifically, this will require overturning literally decades of Big-Government regulations that have prevented energy companies from tapping America's bountiful natural resources. So many people in Washington have grown accustomed to the idea that we must either import oil from the Middle East or make an expensive transition toward homegrown fuels like corn-based ethanol. This is a false choice. One of the best kept secrets in politics today is that our country is one of the richest energy nations in the world, and is extremely capable of achieving energy independence - but only if we have the willpower to do it.
When investigating America's assortment of energy problems, a common theme starts to emerge: the more you look around, the more you'll find government taxes, regulations, and subsidies that distort the market, raise prices, and increase our dependence on dictators thousands of miles away.
In May I joined my Senate Republican colleagues to introduce legislation that would go a long way toward solving our energy problems. How? By increasing the supply through development of our own natural resources. Our bill, The American Energy Production Act of 2008, will remove unnecessary government barriers to domestic energy production.
The most obvious example of unnecessary federal interference is the ban on oil production in the Arctic National Wildlife Refuge. Despite its lofty name, ANWR is not all a pristine Eden. Rather, the area that would be drilled is a frozen tundra where temperatures can reach 70 degrees below zero in the winter. As even the Washington Post admitted, ANWR "is one of the bleakest, most remote places on this continent, and there is hardly any other where drilling would have less impact on the surrounding life." In 1995, the Republican Congress passed legislation to open ANWR - which is estimated to contain 10.4 billion barrels of oil - for energy production. But President Clinton vetoed our bill. If he had signed it, today America would be producing almost enough oil to replace all of our daily imports from Saudi Arabia. By consistently blocking ANWR production, we are failing to help America become less dependent on foreign imports for basic economic needs.
But the problem goes beyond ANWR. Current federal law prevents oil and gas production in the deepwaters off the Atlantic and Pacific Coasts. These laws, which were first passed in 1981 when the price of oil was $35 per barrel, were a luxury at the time, but today, given America's growing energy needs, they are indefensible. The fact is, these areas, along with another energy-rich section of the Gulf of Mexico, could contain as much as 115 billion barrels of oil - which is greater than Venezuela's current reserves - and 565 trillion cubic feet of natural gas - which is greater than the combined reserves of Iraq, China, Yemen, Oman, Nigeria, and Venezuela. Federal laws also prevent us from exploiting one trillion barrels of shale oil in Colorado, Wyoming, and Utah - an amazing amount that is three times what Saudi Arabia has on reserve. Our bill, The American Energy Production Act of 2008, would allow us to tap these resources with environmental safeguards.
As conservatives, we must unite to repeal one of the most misguided policies of the last decade - government mandates to increase the production of corn-based ethanol. These policies - which give incentives to farmers to divert their plantings from other crops to corn in order to produce ethanol - have been robbing the world of one of its most important sources of food.
Since February 2006, the shift in farming habits has caused the price of corn, wheat and soybeans to increase by more than 200%. Rising food prices are hitting the pockets of lower-income Americans and people who live on fixed incomes. Food riots are breaking out in some parts of the globe, and relief organizations are facing gaping shortfalls as the cost of food outpaces their ability to provide aid for 800 million people.
I have introduced legislation that would freeze the corn-based biofuel mandate at current levels, instead of steadily increasing it through 2015, which is the present policy. This is a commonsense measure that will reduce pressure on global food prices and restore balance to America's energy policy.
The rush to embrace corn-based biofuels stemmed from a belief that America must increase its use of alternative fuels to reduce our dependence on foreign oil. But if that's the mission - and it's a worthy one -we must embrace more economically-viable energy sources such as solar power, wind power, and especially nuclear power - which, in addition to being a reliable and affordable energy source, emits almost no carbon gasses. The best way to broaden our energy portfolio is through American ingenuity, not Washington bureaucracy.
On all of these energy-related issues - preventing tax hikes, reducing government regulations, repealing mandates, and accelerating innovation - the American people are solidly behind us. The Democrats, however, have an ace up their sleeves - or so it seems. They feel empowered to challenge plans to increase supply - instead preferring to demagogue the profits of oil companies.
In 2007, the oil industry's profit margins were 7.6 percent of revenues, which is not much higher than the 5.8 percent profit margin for all U.S. manufacturing. In fact, if you exclude the financially troubled auto industry, the oil industry actually appears less profitable than most manufacturers, which are earning 9.2 cents on every dollar of sales. America's energy problem isn't oil company profits; it's a changing global energy market - in which demand is surging while supply is remaining largely stagnant. As President Reagan might say, the simple solution is to increase the domestic energy supply to lower prices - precisely the opposite of what the Democrats are advocating.
Conservatives are well poised to lead a pro-growth energy program that could create millions of jobs and secure our economy. But wherever possible, we should look for allies across the political spectrum. We can find allies among national security Democrats who understand that energy independence is a vital component of winning the War on Terror. We could also find friends in the environmental community, where concerns over corn-based ethanol and the carbon emissions necessary to produce it have grown considerably. Respect for nuclear power has also accelerated.
This year, we will spend about $500 billion to import oil. All of those dollars should stay here in America, instead of being sent to corrupt regimes that are hostile to our interests. We need energy for Americans by Americans, and we need it now. At a time when conservatives are playing defense on so many issues, energy is one issue where we can go on offense and win. Victory would be good for our party, and better yet, it would be good for our country.