Growth in the U.S. economy depends on access to affordable energy. Every sector of the U.S. economy relies on energy to transport its goods and services, power its facilities, or manufacture consumer goods. For the manufacturing, transportation, and agriculture industry – energy is the biggest single expense, sometimes eclipsing labor costs.
Even slight increases in the price of fuel translate to higher costs for goods and services as transporters and manufacturers are forced to pass along some of the higher fuel costs that cannot be absorbed. To illustrate, the trucking industry alone consumes more than 36 billion gallons of diesel fuel annually. The sector pays an additional $350 to $370 million a year in fuel expenses if diesel prices increase just one-cent. Similarly, for every dollar-per-barrel increase in the cost of oil, the airline industry’s fuel bill increases by $420 million, according to Airlines for America.
Public policy that limits access to energy resources harms our nation’s fuel consumers and, more broadly, the entire U.S. economy. In each recession in the last forty years, high oil prices precipitated contraction of the U.S. economy. According to IHS Global Insight a 10 percent increase in gasoline prices lowers consumer confidence by about 1.5 percent.
Electricity consumers face a similar problem. Particularly energy-intensive manufacturers and low-income families, a slight rate increases can translate into higher bills. Nucor Steel recently noted at Consumer Energy Alliance event in Tennessee that it costs the company $200 million for every one cent per kilowatt-hour increase in their electricity rates.
You will find a similar relationship at the individual consumer level. For vulnerable populations including low-income families, utility bills can account for upwards of 30% of a family’s income. Rising energy prices limit the economic opportunity of families and businesses, creating a vicious cycle of economic stagnation.
The consequences of high energy costs are real. Families living paycheck to paycheck cannot be forced to absorb higher costs in the name of bad public policy. Every single piece of legislation, every proposed rule, every action undertaken at the federal and state levels that affects energy production and utilization should be weighed against its economic impact on energy consumers. After all, they are paying the bills.
