Gas Price Spikes Have Consumers Wondering, When Will We Be Energy Independent?

By Brent Erickson

The United States is beginning a domestic energy boom and could become a net energy exporter within the next two decades. But U.S. consumers don’t expect to see a benefit – they still plan to cut back on driving and other spending as gas prices continue to spike.

A recent poll by Fuels America found that more than half (55%) of Americans would sacrifice visiting friends and family this summer if gas prices remain high. Among military families in the poll, two-thirds said they would forego visits to friends and family. Other top consumer choices for handling high gas prices included cutting back on clothes shopping and eating out at restaurants.

But how much more belt tightening can Americans do?

U.S. consumers have already cut back on driving due to the high cost of fuels and its impact on family budgets, and this has slowed consumer spending and job creation in other areas. In 2012, the average U.S. household spent $257 more to fuel the family car than one year earlier, even while using far fewer gallons. Americans even spent more of their household budget on fuel in 2012 than in 2008, when oil prices topped $140 per barrel. According to the chief U.S. economist at Barclays Capital, every $10 increase in the price of oil shaves about two-tenths of a percentage point off America’s growth rate and raises unemployment by one-tenth of a percentage point. It’s a real shame that American consumers appear to be getting used to high fuel prices and the loss of freedom and mobility.

Other responses to high fuel prices don’t appear to be viable options for most consumers. Only 8 percent of respondents to the Fuels America poll said they would buy a more fuel efficient car. And only 13 percent said they would be able to turn to public transportation. Nearly three in four Americans (73%) support the current Renewable Fuel Standard, according to the poll. More (78%) believe that reducing our over-reliance on imported oil and using more renewable fuel will benefit the environment. And two-thirds (65%) believe that renewable fuels will save consumers at the pump.

The wallet factor

Consumers measure energy independence by its impact on their wallets. So, energy independence can only be achieved when we can prevent oil price spikes from negatively impacting consumer confidence and economic growth. But to be truly energy independent, we also must be able to protect our national security interests and our environmental health.

Just like military families, the U.S. Department of Defense is paying more for fuel and trying to find ways to cut back spending in other areas to make up for it. The DoD is the single largest fuel consumer in the United States. For every $1 increase in the price of oil, DoD’s fuel costs rise by $30 million. Rising fuel prices could cost the U.S. military an extra $1 billion this year. Already in 2013, the Pentagon has asked Congress for authority to reallocate taxpayer dollars to deal with higher fuel costs.

Our military leaders recognize that reliance on a single source of fuel puts the military in a vulnerable position. They’ve made developing alternatives a key part of achieving energy security for our troops. But energy independence should also improve the environmental health of U.S. citizens.

The Clean Priority

Petroleum contains air pollutants like sulfur and toxic aromatics, such as benzene, that are inherently unhealthy. Biofuels are by their nature cleaner– they do not contain these ingredients. Eliminating sulfur and aromatics from gasoline – which can be done by increasing the use of biofuels – would save Americans $8 billion in annual healthcare costs associated with asthma and other respiratory ailments by 2030. Among those surveyed in the Fuels America poll, 84 percent said the environment should be a priority for Congress. But even more – 91 percent – said that healthcare should be a priority, with three out of four saying it is a “very important” priority.

Slowing America’s growth in use of biofuels now would actually leave us worse off over time. In fact, the U.S. Energy Information Administration recently projected that the nation would increase reliance on imported oil through 2040 if we decreased domestic renewable fuel production. So America’s approach to energy independence must achieve more than just a temporary reduction in oil imports. Continuing the RFS is the right thing to do.

Brent Erickson is executive vice president in charge of the industrial and environmental section at the Biotechnology Industry Organization, a biotech trade association based in Washington, D.C.