The Gas Uh-Oh

You know the national energy outlook is bad when Bush is telling folks to conserve. This is an interesting article from the New York Times today that discusses the president's plea to the American people to limit their energy use by driving their cars less and avoiding unnecessary trips. It also has some insightful things to say on the impact of the gas shortage on lower-income families and gives projections for how much we may all spend on energy costs this winter. The article is subscription-only after a couple days, and until then it still requires registration. Some key snippets are below, for the full text, click here. http://www.nytimes.com/2005/09/27/business/27econ-new.html?pagewanted=1

To Conserve Gas, President Calls for Less Driving

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’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.

…

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.“”