Too little too late to reduce oil prices

President Bush yesterday unveiled a series of energy initiatives, including building more oil refineries an nuclear plants to combat the energy problem. The proposal also includes an expansion of the president’s tax credit proposal, which currently applies to hybrid and fuel-cell vehicles, to include those using new clean diesel technology.

The president acknowledged that the efforts will do little to immediately impact soaring gas prices. Nor do these reforms go far enough.

Basic supply and demand theory dictates that oil and gas prices will not fall as long as demand stays high. While the US Department of Energy expects growth in global oil demand to slow in 2005, it is still growing. And, the DoE report points out that production is decreasing.

The Bush administration needs to strongly support new technology to reduce demand. Automobile manufacturers should be held to tougher fuel efficiency standards, the proposal for new nuclear reactors must be completely fleshed out (At the time of the announcement, administration officials were not prepared to discuss specifics relating to the president’s proposed “risk insurance,” designed to mitigate the costs of delays in the licensing of new reactors), and support research and development of alternatives to oil/gas.