The People of America's Oil and Natural Gas Indusry

$4 Gasoline

Jane Van Ryan

Jane Van Ryan
Posted June 24, 2009

Perhaps you've seen API's ad in The Washington Post today. It states our position on the Waxman-Markey bill quite clearly. The sub-head reads, "If you like $4 gasoline, you'll love the House Climate Bill."

No one likes the prospect of paying $4 for a gallon of gasoline, but API economists who analyzed the bill say $4 gasoline easily could become a reality. They based on their calculations on two recent studies--the Heritage Foundation analysis of the Waxman-Markey bill, and two Congressional Budget Office (CBO) reports.

First, the economists' methodology using the Heritage study was quite simple. The Heritage Foundation found that the bill could raise gasoline prices by 74 percent. Based on the fact that today's AAA average gasoline price is $2.676, that means the bill could result in an increase of $1.98. Add the two numbers together, and the potential price per gallon of gasoline is in excess of $4.

Using the June 5th CBO analysis of the bill's potential emission allowance costs, API economists concluded that by 2019, the greenhouse gas emission allowance costs for a gallon of gasoline could be the equivalent of up to 77 cents, up to 88 cents for a gallon of diesel fuel, and up to 83 cents a gallon for jet fuel-- if CBO is correct about allowance costs when "international offsets" are not readily available. Furthermore, they discovered that the June 19 CBO study contains two overly optimistic assumptions and fails to consider the bill's potential adverse impact on the Gross Domestic Product (GDP). As a result, API economists discovered that the CBO analysis grossly underestimates the bill's potential cost on each American household.

As written, the CBO says the cost of the Waxman-Markey bill in 2020 would be "about $175 per household." When corrected, the CBO's own numbers show the impact per household could be as high as $3,342 a year. That's more than $278 a month--money that families need for food, a car payment, child care, and housing.

As Jack mentioned in an earlier blog post today, the CBO's initial "calculations give new meaning to the term 'rosy scenario.'And API isn't the only organization that's questioning the wisdom of passing this bill because of how it tackles greenhouse gas emissions.

Several libertarian and conservative bloggers are voicing their concerns about the bill, too:

"Cap and trade in any form is a tax increase, in my opinion. It doesn't even work to reduce emissions as promised and it threatens the economy." (Vulcan's Hammer, June, 24, 2009)

"Trust me, this isn't about emissions. If it were, they wouldn't treat natural gas the way they do in the legislation...After all, they're the government and they're there to help." (QandO, June 24, 2009)

"Frankly, we have not heard enough about the climate change legislation to be comfortable with the prospect of an impending vote and the commensurate belief that we are doing the right thing by passing this legislation. There deserves to be a full and fair debate on the issue...I am sure that this is a great way to run a political machine. But as always, it is worth noting that it is a really bad way to make policy." (The New Ledger, June 24, 2009)

"Cap and Trade will move profits and money around, but protect the environment, it will not." (opntalk, June 24, 2009)

Tell us what you think about the Waxman-Markey bill by commenting below.

ABOUT THE AUTHOR

Jane Van Ryan was formerly senior communications manager and new media advisor at the American Petroleum Institute (API), where she wrote blog posts and produced podcasts and videos. Before coming to API, Jane managed communications for a large science and engineering corporation, and for a top-tier research and engineering university. A few years ago, you might have seen her in your living room when she delivered the news on television. Jane officially retired from API in 2011 and now freelances as an independent communications consultant when not gardening at her farm in Virginia.