"We need a complete approach to our energy policy," says Sen. Pete Domenici, R-N.M., ranking member of the Senate Energy and Natural Resources Committee. "That means that policies of `drill-only,' `renewables-only,' or `conserve-only' are not enough. We have to support policies that advance conservation and efficiency at home, provide for additional domestic production in an environmentally sensitive manner, and diversify the kind of fuels that power our lives."

The 2005 Energy Policy Act got it right, Domenici says. The bill included long term policies on efficiency, renewable energy and nuclear energy. It also established the first-ever renewable fuel standard, which brought renewable bio-fuels into supplies that help displace some foreign oil. Subsequent to its passage, legislation was enacted to open up areas of the Gulf of Mexico to greater oil and gas production.

It was the Senate Commerce Committee that just approved a measure that will go before the full body and one that would increase the average fuel economy standards for fleets to 35 miles per gallon by 2020. After that, cars would have to increase their gas mileage by 4 percent a year until 2030. That would be a rise of about 10 miles per gallon from the current standard that was last set in 1985.

Car manufacturers say that stricter regulations would make vehicles more expensive, hurting sales and the overall economy. The market should determine which cars are the winners and losers, they add. That argument has worked twice, in recent years, to defeat similar measures. This time may be different, given $3 a gallon gas prices and angry citizens who are giving senators an earful.

The oil industry and its Republican backers, meantime, are calling for the ability to respond to supply shortages by being able to drill more in areas thought to be rich with natural resources, particularly in the Artic National Wildlife Refuge in Alaska. "In the global petroleum market, costs are determined by total supply," says Myron Ebell, director of energy policy at the Competitive Enterprise Institute. "Congress can help expand that supply by lifting restrictions on development in the U.S."

Fuel Diversity

The Democrats draw a clear distinction, however, between their positions and those of Big Oil and the Republicans. Any effort to allow more drilling in the Artic National Wildlife Refuge would be a deal-breaker when it comes to reconciling their differences, they say. More exploratory rights are possible, they add, but not in pristine areas.

At the same time, the Dems argue that it has been nearly two decades since Congress raised fuel efficiency standards in cars. The current high prices, in combination with concerns over emissions and global warming, mean that the time to do so again is now. The American auto industry is losing out, they add, because of its insistence on building cars that have less overall appeal.

The Bush administration's favoritism toward Big Oil has hurt the development of renewable fuel alternatives, Democrats insist. Many would like to eliminate some of the tax breaks given to oil giants and then re-allocate portions of that wealth to other energy causes. Consider that ExxonMobil's first quarter profit was $8.4 billion, which if it holds throughout the year, would put the company on course to break last year's earnings record of $36 billion.

High oil prices, meantime, are affecting the cost of other fossil fuels. That is, if the value of oil increases so too does that of natural gas and coal. The demand for energy is so strong that all producers, including those in competing sectors, will charge whatever the market will bear. It is simple economics: If oil prices are at record highs, natural gas and coal producers would also choose to charge more, assuming the demand remains high.

The good news is that high fossil fuel prices are providing incentives to bring new fuel options to market, such as ethanol made from biomass, as well as coal-to-liquids and gas-to-liquids. Meanwhile, the upward pressure on traditional fuels is also giving wind and solar a lift. Developers are now motivated to invest in new technologies and infrastructure, necessitating a commitment to the business to recover their capital costs.

Well, what is government's role in all of this? It depends on who is asked. But as Senator Domenici points out, the overarching need is to encourage the expansion of a wide array of fuel sources and then to let the market work. Too much meddling will diminish initiatives to expand beyond the oil base. But ignoring other consumer demands such as the desire to be more environmentally sensitive is also unwise.

The political process is one of compromise. Congress, in the past, has approved fuel efficiency standards and just recently extended greater production rights to developers in areas offshore. Both options are open and each has possibilities. They are not mutually exclusive from one other. In fact, the two could be bundled together -- perhaps in a more comprehensive package that encourages more fuel diversity -- in an effort to give consumers cleaner air and cheaper gasoline prices.

Copyright © 1996-2006 by CyberTech, Inc. All rights reserved.