Excerpts:
Households are on pace to spend an average of $4,500 on energy
this year, up about $500 from last year and $900 more than in
2003, according to Global Insight, a research firm.
In Washington, two House committees are expected to consider
proposals this week that have been blocked in the past by
environmental objections. Beyond making it easier to build new
refineries, one proposal would allow states to opt out of
Congressional bans on coastal oil drilling, and another would
allow drilling for oil and gas in the Arctic National Wildlife
Refuge, which has been controversial for years.
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http://www.nytimes.com/2005/09/27/business/27econ-new.html?th&emc=th
September 27, 2005
President Calls for Less Driving to Conserve Gas
By DAVID LEONHARDT, JAD MOUAWAD and DAVID E. SANGER
With fears mounting that high energy costs will crimp economic
growth, President Bush called on Americans yesterday to
conserve gasoline by driving less. He also issued a directive
for all federal agencies to cut their own energy use and to
encourage employees to use public transportation.
"We can all pitch in," Mr. Bush said. "People just need to
recognize that the storms have caused disruption," he added,
and that if Americans are able to avoid going "on a trip
that's not essential, that would be helpful."
Mr. Bush promised to dip further into the government's
petroleum reserve, if necessary, and to continue relaxing
environmental and transportation rules in an effort to get
more gasoline flowing.
On Capitol Hill, senior Republicans called for new legislation
that they said would lower energy costs by increasing supply
and expanding oil refining capacity over the long run.
Even though Hurricane Rita caused much less damage to the oil
industry than feared, the two recent hurricanes have disrupted
production in the Gulf of Mexico enough to ensure that
Americans are facing a winter of sharply higher energy costs.
The price of natural gas, which most families use to heat
their homes, has climbed even more than the price of gasoline
recently.
Households are on pace to spend an average of $4,500 on energy
this year, up about $500 from last year and $900 more than in
2003, according to Global Insight, a research firm.
Mr. Bush's comments, while similar to remarks he made shortly
after the disruption from Hurricane Katrina pushed gasoline
prices sharply higher, were particularly notable because the
administration has long emphasized new production over
conservation. It has also opted not to impose higher mileage
standards on automakers.
In 2001, Vice President Dick Cheney said, "Conservation may be
a sign of personal virtue, but it cannot be the basis of a
sound energy policy." Also that year, Ari Fleischer, then Mr.
Bush's press secretary, responded to a question about reducing
American energy consumption by saying "that's a big no."
"The president believes that it's an American way of life,"
Mr. Fleischer said.
Mr. Bush, speaking yesterday after he was briefed at the
Energy Department, did not use the dour tone or
cardigan-wearing imagery that proved politically deadly for
Jimmy Carter during the oil crisis of the 1970's. Nor did Mr.
Bush propose new policies to encourage conservation. But he
was more explicit than in the past that Americans should cut
back.
Oil companies spent much of yesterday assessing the damage
from Hurricane Rita, which seemed to spare many oil and gas
facilities. Still, the gulf's entire oil output and about
four-fifths of its natural gas production remained shut
yesterday, less than a month after Katrina left the industry
stretched thin.
The Gulf of Mexico produces about 7 percent of the oil
consumed in the United States and provides 16 percent of the
nation's natural gas.
About half of the 16 refineries that were forced to shut by
Hurricane Rita have said they plan to restart production soon.
But delays in refining pushed the average price of gasoline up
again for the first time since Labor Day, to $2.80 a gallon
for regular gasoline, according to AAA.
Crude oil prices also rose yesterday on the New York
Mercantile Exchange, closing up 2.5 percent, to $65.82 a
barrel. Natural gas futures rose 12 cents, to $12.44 a
thousand cubic feet.
"We've been in a chronic situation here where supplies have
not really caught up with demand," said Dave Costello, an
analyst at the Energy Information Administration.
In response to higher energy costs, households are likely to
spend less on restaurant meals, clothing and other items. That
would slow economic growth in coming months, but economists
predicted that other forces - like a continuing housing boom
and rising corporate investments in factories and equipment -
would keep the economy growing.
"I don't think we're talking about a recession or a near
recession," said Joshua Shapiro, the chief United States
economist at MFR, a research company in New York. "I think
we're talking about growth that is slower than people
expected."
Households are now spending about $550 billion a year on
energy, up by about $150 billion since the start of last year,
according to Global Insight. Over the course of an entire
year, the increase would be equal to almost 2 percent of
overall consumer spending.
Energy costs are likely to be a particular burden on low- and
middle-income households, whose income growth has barely
matched inflation over the last few years. Wealthier
households have done better, government data show, and have
helped keep economic growth healthy with spending on second
homes, new vehicles and the like.
Although more forecasters, including Federal Reserve
officials, remain optimistic, some say that the spike in
energy costs could lead to something of a tipping point for
consumers. Families have already begun saving less money in
response to higher energy costs, and they might eventually
decide to rethink other parts of their budget.
"The best leading indicator of consumer spending is real
average hourly earnings," which have been hurt by higher
energy costs, said Joseph H. Ellis, a former Goldman Sachs
partner and the author of a forthcoming book on the business
cycle. "I think we're heading into a very difficult 2006."
In Washington, two House committees are expected to consider
proposals this week that have been blocked in the past by
environmental objections. Beyond making it easier to build new
refineries, one proposal would allow states to opt out of
Congressional bans on coastal oil drilling, and another would
allow drilling for oil and gas in the Arctic National Wildlife
Refuge, which has been controversial for years.
"Families who are paying more than $3 for a gallon of gasoline
cannot afford to watch Congress block more clean U.S. energy
production while they suffer," said Representative Richard
Pombo, Republican of California and chairman of the Resources
Committee.
The oil and gas industry supported the moves. John B. Walker,
chairman of the Independent Petroleum Association of American,
said areas now off limits offshore and in Alaska "could supply
our nation with more than 100 years of natural gas - and
save U.S. consumers upward of $500 billion."
Environmental groups said drilling advocates were trying to
take advantage of anxiety from the storms and rising gasoline
prices to push proposals that did not survive in the recently
passed energy bill.
"It is kind of sad," said Kevin Curtis, legislative director
at the National Environmental Trust. "There is nothing here
that helps the consumer at the gas pump short term."
While attention has been focused on gasoline prices, the spike
in natural gas prices has the potential to pose a bigger
economic threat.
Households that use natural gas will pay an average $1,130 to
heat their homes this winter, an increase of almost $400,
according to federal government estimates. The price of
natural gas in futures markets has more than doubled since
2000 and is six times what it was throughout the 1990's.
Copyright 2005 The New York Times Company
