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What do lower oil prices mean for Washington?

Oil prices have fallen in recent months, and Politico asked a group of energy experts what this latest market gyration might imply for U.S. policymakers. UMEI’s John DeCicco was one of the experts queried; here’s what he had to say:

The car market and other oil-price-sensitive sectors have already adapted to higher prices. In Washington, falling fuel prices will diminish the anti-oil oratory that too often obscures the immense value that petroleum fuels provide to society. But it’s hard to say whether policymakers will use this breathing room to craft a sound energy strategy, one that prudently manages the risks that accompany large-scale commodity use, rather than continuing futile efforts to “get off oil.” 

Saudi Arabian King Faisal kicked sand in Uncle Sam’s face with the 1973 oil embargo, and the Iranian Revolution triggered an even larger price spike in 1979. Ever since then, part of the political response has been the alternative fuel follies, a series of strategies to subsidize and mandate fuels whose only qualification is being made from anything but oil. The most recent are George W. Bush’s initiatives to develop hydrogen vehicles and boost cellulosic ethanol and President Barack Obama’s pledge to put a million plug-in cars on the road by 2015. Biofuel promotion has long had bipartisan support, as now codified in the Renewable Fuel Standard. 

Oil prices wax and wane, but the need to tackle climate change rises ever in urgency. Contrary to popular belief, displacing petroleum is not scientifically necessary to mitigate CO2 emissions from gasoline and other transportation fuels. None of the alternative fuels are cost-effective for doing so, and some policies (notably the RFS) are counterproductive. Instead, we should focus on improving vehicle efficiency and increasing the net rate at which CO2 is removed from the atmosphere through photosynthesis or similar mechanisms. 

A drop in oil prices will undermine the rhetoric of misguided clean-fuel advocates, energy security hawks and other alternative-fuel interests. That will matter a lot if it enables fresh policy discussions that lead to sound solutions for the petroleum part of the climate problem and to rational ways to address oil price volatility.

See the entire story and read what others had to say on Politico.