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America is suffering from another oil price shock less than three years after prices hit a record of $147 per barrel in July 2008. Over the past month oil prices rose by over $20 per barrel, or more than 25 percent. This price hike reflects political instability in many oil-producing Persian Gulf nations. And Wall Street speculators have preyed upon oil users’ fears about supply interruptions to bid up the price to over $100 per barrel.
As the price of oil climbs, so too does the price for gasoline. Every $10-per-barrel increase in oil prices boosts gasoline prices by 25 cents per gallon. Many Americans do not have the option to significantly reduce their driving or easily buy more fuel-efficient new cars, so they spend more on gasoline and less on other goods and services. This slows our nation’s still shaky economic recovery and disrupts job growth. Meanwhile, our economy ships off nearly a $1 billion per day to other nations to purchase foreign oil. And higher prices due to instability and speculation inflate the profits of big oil companies while Americans’ wages remain stagnant.
It’s time to get control of volatile oil prices that are hurting our economy, our security, and the everyday budgets of American families. These measures are crucial for longterm economic growth, more jobs, and less dependence on foreign oil. They work together to reduce imports and save money.
We propose a bold “Cleaner Cars, Less Foreign Oil” plan that has four crucial elements.
- Cut foreign oil use by 5 percent annually to slash these imports in half by 2022. Importing foreign oil sends $1 billion per day to other countries instead of investing these dollars at home. Foreign oil purchases are nearly half of our trade deficit.
- Invest in 21st century clean, efficient vehicles and transportation. We need to build 21st century cars that get 60 miles per gallon by 2025, trucks with a 15 percent improvement in fuel economy, and invest in electric cars. And we need to modernize our transportation infrastructure by providing more transportation choices to consumers. The domestic manufacture of these cars and trucks of the future alongside a 21st century transportation network will dramatically cut oil use, save vehicle owners thousands of dollars, create jobs, and restore America’s manufacturing might.
- End tax loopholes for big oil. End billions of dollars of tax giveaways to big oil companies. Use these funds to support transportation choices and deficit reduction. Recover one cent of every dollar of Big Oil profits to invest in advanced vehicle technologies, such as cars with double the fuel economy, electric cars, and natural gas powered buses.
- Stop speculators from driving up oil prices. Prohibit Wall Street speculators from driving up oil prices by hiring more “cops on the beat” at the Commodity Futures Trading Commission to police oil trades. There is evidence that speculators are driving up oil prices to make a quick buck, just as there were during the record oil and gasoline prices in 2008.
President Barack Obama and Congress must act to make fundamental changes in our energy policies. These systemic changes we recommend will enable us to finally shed the chains of oil dependence after 40 years of imports, high prices, stagnant growth, and pollution. But we must act now.
Download the full memo (pdf)
John Podesta is President and CEO of the Center for American Progress. Carl Pope is the Chairman of Sierra Club. Gene Karpinski is the President of the League of Conservation Voters.