Paying for the Energy Bill
Created on June 21, 2007
Energy Bill Pumps Up Gas
Congress wants to give our national energy policy a tune-up. But
the proposal being debated in the Senate could leave motorists
paying more than twice as much at the gas pump within 10 years.
An analysis of the upbeat-sounding Renewable Fuels, Consumer
Protection and Energy Efficiency Act by The Heritage Foundation
concludes the bill would hike the price of regular unleaded to a
national average of $6.41 per gallon by 2016.
In some states -- California, Illinois, Michigan, Oregon and
Washington among them -- the price could close on $7 a gallon.
Lawmakers crafted the bill with a worthy goal in mind -- to slow
and eventually reverse the rise in carbon emissions from
But they've gone at it by requiring producers to add more
ethanol and other renewable fuels to gasoline. Ethanol is more
expensive to make than regular gasoline and delivers less mileage
And although the bill doesn't provide any significant steps
toward expanding the nation's petroleum supply, it includes price
caps to prevent "price gouging" and tax increases for gasoline
producers that will boomerang on consumers.
Here's a simple economic truth: High prices spur producers to
increase supply, which ultimately lowers prices for consumers.
History shows that price controls actually, if unintentionally,
reduce supply and drive up prices. Consumer demand rises because of
capped prices, but profit-motivated producers have no incentive to
meet that demand. Rationing often follows.
Consumers also will take it in the pocketbook as producers pass
along the cost of the bill's industry-specific tax hikes --
including smaller tax credits and deductions and new taxes on
finished gasoline and U.S.-produced gas sold abroad.
Result: Drivers can expect to pay up to $3.79 a gallon next year
if the Senate energy bill becomes law -- and could be on the road
to paying $6.41 a gallon on average and $1,594 more a year for gas
More information on gas prices and the energy bill (S. 1419,
H.R. 6), including a state-by-state forecast of price
increases, may be found at heritage.org.