President Bush finally got to sign his $14.5 billion energy bill on Monday, a day when oil prices reached historic new highs of $64 a barrel. Unfortunately, the price spike only brings into focus how little the Bush prescription will actually do to liberate America from its dependence on foreign oil.
There is plenty not to like in the new law: the tax breaks for an oil industry already awash in profits; the lavish protections for the coal and nuclear industries; the marked lack of fuel efficiency requirements for cars or mandated reductions in oil imports. Even the supposed ''green" parts of the bill don't inspire much enthusiasm.
Incentives to develop alternate energy sources are either too small or too short-lived to make much difference. Tax credits for the purchase of fuel-efficient appliances and energy-efficient new homes expire after two years, while the subsidies for oil and gas exploration go on for five or 10 years. A maximum $500 tax credit is available for a home weatherproofing and heating system replacement that might cost $15,000.
The tax breaks to encourage Americans to buy hybrid cars start to phase out after a manufacturer has sold 60,000 vehicles. Toyota alone sold 140,000 hybrid cars this year; at that rate the tax credit cap would be reached sometime in April 2006. That might encourage a quick surge of buyers at the start of the year, but it won't do much to influence the long-term production plans of car manufacturers to develop a more fuel-efficient fleet.
Despite the assurances of free-marketers, it will take more than just high prices at the pump to change consumer and corporate behavior. Nationally, gas prices have been pushed to $2.29 a gallon on average, but gasoline is still a bargain. And since most people already own their cars or homes, it can take years for ''price signals" to have an effect.
A 50 cent-a-gallon price increase, even for a relatively inefficient vehicle (one getting only 15 miles per gallon, using about 1,000 gallons a year) will cost the driver $500 extra. That sounds like a lot, but compared with the $50,000 spent on a gas-guzzling Hummer or the $500,000 on the house in Sprawlville necessitating 100-mile commutes, gasoline prices need to go a lot higher still to change consumer behavior.
What could really work? Enforceable fuel standards for cars and trucks; higher national building codes for energy efficiency; a tax on carbon emissions to fund research into promising technologies; requirements that utilities maintain a certain percentage of renewable fuels in their portfolios; and a moon-mission national focus on achieving energy independence that informs policy decisions for years to come. That's exactly what's missing from Bush's new law. And yesterday, the price of crude hit $66 a barrel.
2005 The New York Times Company