President Obama has pledged to double U.S. exports by 2015. Why? Because the President understands that in order to grow our economy, goods produced in the U.S.A. must be able to compete on the world stage.

This view is correct and supported by facts—economists often note the direct correlation between exports and economic growth. For example, as exports increase, analysts note that our Gross Domestic Product (“GDP”) follows suit along nearly a 1:1 ratio. That means $100 million of U.S. exports creates approximately $100 million in U.S. domestic economic growth. By the same token, that means if we import $100 million more in foreign goods and services, our economy actually shrinks by that amount.

Ironically, many of the same politicians calling to reduce America’s trade deficit (President Obama among them) are also the ones framing “export” as a four-letter word when it comes to the Keystone XL project.

Despite claims to the contrary by those who seek to derail the pipeline, the fact that KXL would enable U.S. firms to import more crude oil from Canada, refine it, and then sell some of the finished product to other countries constitutes yet another reason to approve the pipeline. Here’s why.

When our economy lags and businesses and households cut back on energy use, U.S. refiners find demand for their product overseas, thereby increasing exports. We’ve seen this in the recent recession. From 2007 to 2010 as our economy faltered, U.S. exports of refined petroleum products (including gasoline and diesel.) increased from 1.2 million barrels a day to more than 2.0 million.

If we weren’t able to trade our products in the global energy market, U.S. refiners would be forced to layoff countless workers every time domestic fuel consumption sagged.

It is no wonder then that only yesterday, the President’s own advisors recommended building KXL as part of plans to expand domestic oil and gas production. The White House’s Jobs Council endorsed the pipeline as part of an “all in” approach for energy development.

Where does KXL fit into all of this? Long-time energy columnist Loren Steffy explains:

As for the Keystone pipeline, U.S. gasoline demand probably will have returned to pre-recession levels by the time it gets built, if it does. As domestic demand returns, exports of refined products will decline to what they were a decade ago.

The purpose for the pipeline, though, isn't to respond to short-term issues of demand. The pipeline is about securing access to long-term supply, not about short-term market reactions.

As I’ve argued for years now, our energy strategy, if we ever decide to adopt one, has to focus on oil supply, not just price. As the available pool of crude in the world market gets divided among more countries with increasing demand, controlling supply is going to be vital for the United States.

With the U.S. trade deficit widening, it’s startling that our leaders would be slow to embrace or even antagonistic toward an opportunity for our workers to add value and then sell their “Made in America” petroleum products around the globe. The fact is increasing our access to good, clean, inexpensive forms of North American fuel bolsters our competitiveness and enhances our national security.

Unfortunately, Mr. Obama has taken the path of least political resistance by opting to say “no” to KXL. Instead of embracing our nation’s ability to compete, the President’s decision panders to radical elements of his base while undermining our economy, our workforce and our security.

It’s simply political gamesmanship at the expense of working families, labor unions, energy security, jobs and economic competitiveness. (not to mention, a decision contrary to the counsel of pragmatic advisors). In short, it’s a decision against American interest.

U.S. tensions with Iran were running high in the days leading up to the recent assassination of another nuclear scientist in the rogue nation. Now, this terrorist act all but ensures that U.S. shipping access to the Persian Gulf through the Strait of Hormuz will remain contentious for the foreseeable future.

Market analysts say Iran’s threat to blockade the route has already increased U.S. gas prices by 30 cents. If the trend continues amplifying pain at the pump, you can be assured that we’ll be hearing a barrage of energy rhetoric in stump speeches heading into the November election. In fact, rising energy costs may be all it takes to establish the proposed Keystone XL pipeline as one of the central issues in this year’s presidential campaign.

On the Right, the project has come to symbolize the White House’s tendency to derail “shovel ready” oil and natural gas opportunities through red tape and higher taxes. More recently, Republicans have begun to question the judgment of an administration that won’t green-light the import of a million barrels a day from Canada in the face of threats from Middle Eastern nations to cut-off supply.

On the Left, the environmental and union bases differ in their assessment of the pipeline. For the former, XL has become a poster child of the anti-oil movement. But for labor, it’s all about jobs, and unions recognize the huge potential of the pipeline to create both long and short-term employment opportunities. President Obama’s move last November to delay decision on the project was simply a clumsy attempt at political jockeying aimed at temporarily appeasing one component of his base without explicitly snubbing the other until after the election. It didn’t work.

From a legal standpoint, Obama shouldn’t even be the one steering this decision. Executive Order 13337 delegates the President’s authority to review and approve applications for Presidential Permits in the “national interest” to the State Department. Only if internal conflict arises from disagreement by a Cabinet Head within the administration does authority return to the Oval Office to resolve the dispute.

If the decision does comes back to him, Obama risks taking a political hit if he denies the XL project. The opportunities lost, including new jobs, increased investment, higher tax revenue, and enhanced energy security, to name a few, would hang around the neck of his reelection campaign like an albatross.

But putting political rhetoric aside, the argument boils down to this: The administration should view the pipeline project in light of current and forecasted economic and geopolitical events and then weigh the potential benefits against possible costs. With Iran’s planned execution of an American veteran, the country’s unwavering commitment to enrich uranium, and a pending EU embargo on Iranian resources, oil from that region is anything but secure.

Contrast this turmoil with our other alternative: receiving affordable energy from a reliable source—our Canadian neighbors—delivered via the safest and most carefully scrutinized pipeline in our history, and built right here in America. I’d say the answer is clear—Keystone XL is America’s best bet.

There is a great deal of short-term, medium-term and long-term uncertainty in oil markets.

The short -term uncertainty includes the increasing tensions with Iran, but also includes uncertainties in Nigeria, Iraq, Kazakhstan, and more. Iran is a focus of Washington these days, but there is a lot more happening out there.

For the medium term risks, one could focus on a lot of uncertainty in certain national, regional and global economies, which could affect oil prices. The most obvious economic uncertainty is with the EU. They need to pay off hundreds of billions in national debts in the coming weeks. If they do not get this right then not only the EU economies but also the global economy is at some degree of greater risk.

Then there is China. There is a housing bubble in process. The Chinese government is working hard to keep the situation in control, but as we know here in the US, housing bubbles can get a bit out of control. If either its own internal problems, oil shocks from the Gulf or West Africa whacks the Chinese economy, etc. then most of Asia and, frankly, the world gets an economic whack.

The US economy is also at risk due to what is happening in the EU, China and more. Yes, there is lots of uncertainty out there. Oil demand is a derived demand. When the economy goes down, all else being equal, oil demand will decline.

Then there are the remaining uncertainties of the Arab Spring.

In the longer term, we have the developments of oil shale, shale oil and oil sands. This could change the shape of the US and world oil markets in a very big way. There is a chance the US could become a net oil exporter in the next 20 years or so. The amounts of these unconventional resources to be found in the US and Canada are gigantic enough to even now begin to effect markets. Just look at the nearly logarithmic growth of oil production from shale oil in North Dakota. It is now one of our biggest oil producers. The US could produce massive amounts of oil in Utah, Wyoming, and Colorado. We could produce significant amounts of oil in Tennessee, Indiana and Ohio via the shale reserves in these states.

It is amazing what could be happening in the oil markets in the US and Canada in the coming years. This has started to effect some investment decisions by oil companies and others.

So if someone were to ask me what the price of oil might be in the coming days and months what would I say? Well, it could be anything from 85 to 250 or more – or less. These are uncertain times. However, narrowing that down, I see the probability of the Iranian shutting down the Straits of Hormuz as low. They would end up cutting off their own economic lifeline. All of their oil production and export facilities are on the inside of the Straits of Hormuz. The probability of a war in the Gulf may be a different story. That is not clear. If that happens then the world economy could see a massive hit via an oil shock that could be rather damaging to the oil markets. If this happens then all bets are off on the price of oil. My most reasonable guess given the uncertainties of now and sort of an educated guesstimate would be that the price of oil would fluctuate between 90 and 120 dollars through the years – unless big events happen in the EU, China, the Gulf, Nigeria, Central Asia, and more. In addition, to leave a caveat, I could be very wrong if some black swan event occurs, such as a further spreading of the Arab Spring into more countries in the region and beyond. Keep an eye on Kazakhstan and maybe others in Central Asia. In addition, Egypt is far from certain. Libya could head south. Bahrain could fire up again. The eastern part of Saudi Arabia, where most of the oil fields are, is mostly Shia and they are not a happy lot these days in Saudi Arabia. There were further demonstrations and violence this week. Iran seems to be at work in eastern Saudi Arabia as well in stirring up some trouble. Iraq is far from certain and there are real internal problems that they need to work on. Saying this is going to be a stable state is a stretch. Iraq’s exports mostly go through a couple of facilities off their small coast in the south, ABOT being the most important and a pipeline system to Turkey. Both of these export systems could be at some risk. The Iraqi economy is mostly based on oil. Any hit to the oil revenues will be a hit to the economy, which in turn will be a hit to the country’s stability and on and on and on…

If there is any significant increase in the price of gasoline then elections might see some differences from what one might expect if the gas prices are less. It is hard to tell how right now, but high oil and gas prices have historically not helped incumbents. The most import thing on Americans’ minds these days seems to be the economy. Gas prices are just part of that. If something happens, in the EU or elsewhere, that affects our economy then even if gas prices are low voters will not be happy and may express that unhappiness at the voting booth.

How will our leadership respond to higher or lower oil prices? Most likely, there will be a further kicking of the very well kicked can down the road. The minimum will be done to help research and development in alternative ways of doing things in energy systems. There will be no comprehensive energy policies. The focus of many in leadership will be getting elected again – and then they will be off to the races to get campaign funds for the next election. Many in leadership will continue to work within their own inertial bubbles.

The energy industry, energy markets, geopolitics, and more, regionally and globally, will define the problems and solutions for all of us ---as those in Washington fiddle and spend billions on election campaigns. Did any of you ever wonder how many of the poor of this country can be housed, clothed, fed and educated with the amount our political campaigns cost? Did any of you wonder how many good ideas in energy can be financed if those billions in attack ads, mostly boring TV debates going nowhere, and more went to research and development rather than cut and parry in a mostly mediocre set of political games?

Rising energy costs have long been the impetus for new energy policies, as well as for the recognition that energy efficiency needs to be a major building block of those policies. Ranging from fuel efficiency standards to building energy codes and appliance standards, such policies have proven highly effective in reducing national energy consumption, combating rising energy prices and insulating consumers from the disruptive effects of price spikes. Investments in efficiency are not subject to the vagaries of fuel availability and energy markets.

But waiting for a crisis before taking policy action on energy efficiency makes the crisis virtually a self-fulfilling prophecy. To avoid future supply problems and price shocks, Congress must make a concerted and ongoing effort to increase energy efficiency in all sectors of the U.S. economy.

In 1973, the OPEC oil embargo prompted consumer demands for more fuel-efficient vehicles. Subsequent passage of the first Corporate Average Fuel Efficiency (CAFE) standards in 1975 helped reduce gasoline demand, which in turn curbed prices.

It was not until three decades later, in 2007, that citizens’ concerns over rising oil prices again led to tightened CAFE standards. Another oil price spike in 2008 prompted administrative action to further strengthen CAFE in 2009 and 2011 and spurred consumers to choose alternatives to driving. It also led manufacturers to develop new fuel-efficient vehicles that provide immediate savings to consumers while protecting them from future price fluctuations. Additional benefits include reduced environmental and security problems.

Clearly, CAFE standards continue to be a mainstay of smart transportation policy nearly four decades after their inception – and we need to boost them on a steady and continual basis, not wait passively for the next oil crisis to occur.

More broadly, with the prospect of rising energy prices in the year ahead, energy efficiency must be a central pillar of the nation’s energy policies and programs if we are to achieve ongoing, cost-effective, environmentally beneficial solutions to energy supply and security problems.

Iran’s threat to close the Strait of Hormuz and worsening stability in Nigeria, America’s fifth largest oil supplier, are likely to lead to higher petroleum prices in 2012, contributing to greater instability in countries facing fuel shortages and nipping at the heels of America’s economic recovery. Yet, ironically, higher oil prices could also bolster U.S. energy security in the long term by continuing to spur commercial interest in alternative biofuels that will help move America beyond oil as the dominant source of liquid fuels.

As petroleum prices climb, biofuels will continue to grow in demand, helping develop a market for the still nascent industry by making those fuels cost-competitive with conventional oil. Demand from the U.S. military has already helped significantly cut the price of biofuels in just several short years. In 2009, for example, the U.S. Navy purchased its first batch of biofuel (about 20,055 gallons) at a cost of $424 a gallon. In December 2011, Secretary of the Navy Ray Mabus announced that the U.S. Navy would purchase 450,000 gallons of biofuel at $26 a gallon, a whopping 94 percent in savings compared to its initial purchase. And although $26 a gallon is still expensive when compared to the $3 or $4 a gallon that gasoline prices are hovering around today, biofuels are still in the research and development phase. As the technology matures in 2012 and moves toward commercial scalability, prices will continue to drop. And as oil prices contribute to higher gasoline prices, biofuels will move closer to price parity with petroleum and reinforce demand for alternatives.

Increased interest from the private sector will also help move biofuel development from R&D to commercial deployment. The U.S. Navy is only one customer (albeit a large one), and its demand for biofuel is not enough to develop a robust market to compete with petroleum at today’s prices. But as oil prices rise, interest from the private sector will spur the kind of demand that will help pull alternative fuels toward commercial development. In November 2011, Continental Airlines made history when it tested a 20 percent blend of algae-derived biofuel in a Boeing 737-800. And Continental Airlines’ parent company, United Continental Holdings Inc., said it would buy 20 million gallons of algae-based biofuel a year, starting as early as 2014. Other carriers have announced similar plans to operate on a biofuel blend, and greater interest from the private sector will help biofuel companies acquire the capital investments they need to scale up development.

All of this points to cheaper biofuels on the horizon. Although 2012 won’t be the year we see $3 or $4 a gallon for biofuel, that future is not far off. Energy analysts are optimistic that the industry is just a few short years away from an inflection point that will move biofuels from R&D to commercial deployment – perhaps as early as the next decade. But getting there begins in 2012. What we need to see this year is sustained demand for biofuels from the public and private sectors. The Obama administration’s effort to drive biofuel demand by announcing that the Departments of Agriculture, Energy and Navy will match, dollar-to-dollar, up to $510 million dollars in investments from the private sector is an important initiative that will need to be sustained in 2012 and beyond.

Higher oil prices throughout 2012 will regrettably cause the same economic and political angst Americans are accustomed to, but at the same – perhaps the silver lining – higher oil prices can incentivize continued investments in biofuels, both from government and the private sector. In the long term, those investments are crucial to moving the United States away from its outsized dependence on petroleum, a move that is long overdue.

High oil/gas prices (and energy jobs) will be a significant economic policy battle of the '12 campaign, with the GOP focused on blaming regulations (both EPA and the mysterious ghost regulations that keep America from drilling oil and natural gas) and democrats largely defending Obama's record and raising the role that alternatives energy and efficiency (fuel economy) can play.

If I were running a campaign, I'd note that in 2012 America is the 3rd largest producer of oil and the 2nd largest natural gas producer. Gasoline is now our #1 export. The problem isn't that we don't produce enough - it's that our energy infrastructure was designed to accommodate access to $1/gallon gasoline, so consumers are locked in to the status quo and getting ripped off. We need to modernize our energy infrastructure to give families access to alternatives - incentives to afford rooftop solar, plug-in cars, more clean mass transit, livable communities. But big oil is intent on convincing us that we don't need to change, that we don't need innovation, that we can simply drill for more fossil fuels and that will create the jobs and reduce energy prices to bring us out of the recession. And that's simply false.

I think the "Drill Baby Drill" rhetoric is losing its effectiveness, as more Americans understand that the American Petroleum Institute's status quo campaign - otherwise known as "Vote 4 Energy" - will simply delay the needed transformation of our energy system. The longer we listen to big oil, the further behind the US falls in cleantech investment and deployment. We must work to create a domestic market for cleaner cars and transit systems and decentralized renewable energy, because these are the manufacturing jobs of the future - not oil/natural gas drilling and refining

Every year, Americans face high prices at the pump, and every year, politicians play the blame game. It's the oil companies' fault, it's the EPA's fault, it's OPEC's fault, it's the speculators' fault.

However expedient it may be to have a scapegoat, this finger-pointing fails to address the underlying problem: this nation is critically dependent on a resource we cannot control.

In this election year, as we struggle our way out of a recession, and as Iran plays a dangerous game in the Strait of Hormuz, we will no doubt hear calls from Big Oil's allies in Washington to increase domestic drilling--a solution that the Energy Information Administration says will bring down the price of gas by 3 cents a gallon…in 2030. Americans are ready for a realistic, long-term solution to our energy problems, and that means declaring our independence from oil and investing in renewable energy and new, energy-efficient technologies.

Policy makers who want to put America on the path to energy independence should be looking for ways to use less oil, not more. More than 70 percent of Americans in a recent NRDC poll said they wanted new technologies that will help them use less energy, and 60 percent thought we should end oil industry subsidies and invest in clean, renewable energy instead.

How could the $4 billion in oil subsidies be put to better use? We could ramp up production of hybrids, electric cars, alternative fuel vehicles and other fuel-efficient cars that will help us break the oil monopoly on transportation. The proposed 54.5 miles per gallon standard will help get us there, while generating an estimated $300 billion in revenues for the U.S. auto industry, and saving consumers $80 billion each year at the pump. Automakers have whole-heartedly embraced the standard, but some in Congress are attacking this money-saving measure.

Improving mileage for heavy trucks, the next biggest oil-consuming set of vehicles after passenger cars, will help ease our need for oil, too. And it's time we started to talk about a national freight plan which makes use of more efficient, high-volume ship and rail transport instead of relying heavily on trucks.

We could be investing in infrastructure improvements and public transit service, helping all Americans save time, money and gas--and get where they need to go. Boldly expanding mass transit in cities and suburbs would save us almost 4 million gallons of oil each day by 2030. And shoring up our crumbling transportation infrastructure would save trillions of dollars over the next decade, while creating thousands of American jobs, according to the American Society of Civil Engineers.

The real solution to high gas prices is clean energy innovation--more efficient cars and trucks, cleaner fuels, and more transportation options. NRDC analysis shows that investment in these areas can help us cut our oil imports in half by 2030. That's the path to energy independence, and it's well within our reach.

Every year, Americans face high prices at the pump, and every year, politicians play the blame game. It's the oil companies' fault, it's the EPA's fault, it's OPEC's fault, it's the speculators' fault.

However expedient it may be to have a scapegoat, this finger-pointing fails to address the underlying problem: this nation is critically dependent on a resource we cannot control.

In this election year, as we struggle our way out of a recession, and as Iran plays a dangerous game in the Strait of Hormuz, we will no doubt hear calls from Big Oil's allies in Washington to increase domestic drilling--a solution that the Energy Information Administration says will bring down the price of gas by 3 cents a gallon…in 2030. Americans are ready for a realistic, long-term solution to our energy problems, and that means declaring our independence from oil and investing in renewable energy and new, energy-efficient technologies.

Policy makers who want to put America on the path to energy independence should be looking for ways to use less oil, not more. More than 70 percent of Americans in a recent NRDC poll said they wanted new technologies that will help them use less energy, and 60 percent thought we should end oil industry subsidies and invest in clean, renewable energy instead.

How could the $4 billion in oil subsidies be put to better use? We could ramp up production of hybrids, electric cars, alternative fuel vehicles and other fuel-efficient cars that will help us break the oil monopoly on transportation. The proposed 54.5 miles per gallon standard will help get us there, while generating an estimated $300 billion in revenues for the U.S. auto industry, and saving consumers $80 billion each year at the pump. Automakers have whole-heartedly embraced the standard, but some in Congress are attacking this money-saving measure.

Improving mileage for heavy trucks, the next biggest oil-consuming set of vehicles after passenger cars, will help ease our need for oil, too. And it's time we started to talk about a national freight plan which makes use of more efficient, high-volume ship and rail transport instead of relying heavily on trucks.

We could be investing in infrastructure improvements and public transit service, helping all Americans save time, money and gas--and get where they need to go. Boldly expanding mass transit in cities and suburbs would save us almost 4 million gallons of oil each day by 2030. And shoring up our crumbling transportation infrastructure would save trillions of dollars over the next decade, while creating thousands of American jobs, according to the American Society of Civil Engineers.

The real solution to high gas prices is clean energy innovation--more efficient cars and trucks, cleaner fuels, and more transportation options. NRDC analysis shows that investment in these areas can help us cut our oil imports in half by 2030. That's the path to energy independence, and it's well within our reach.

Because the U.S. economy will most certainly be the number one issue for voters in the 2012 election cycle, everything that affects economic growth will take on added importance this year.

As economists are well aware, diesel powers the U.S. economy. It is the prime fuel for transporting freight, powering tractors, building roads and meeting the demands of emergency services and national defense.

In the U.S., 85 percent of all freight is moved by diesel. Worldwide, 94 percent of all global trade is transported by diesel. The diesel industry contributes more than $485 billion to the U.S. economy each year and provides over 1.25 million American jobs. Demand for diesel means a growing economy.

As such, an obscure yet highly accurate index for measuring real-time economic growth in the U.S. – the Ceridian-UCLA Pulse of Commerce Index - will very likely be closely monitored and scrutinized by both Democrat and Republican economic advisors.www.ceridianindex.com/

By tracking the real-time volume and location of diesel fuel being purchased, the Ceridian-UCLA index closely monitors the over-the-road movement of raw materials, goods-in-process and finished goods to U.S. factories, retailers and consumers.

How accurate is the index? Consider that diesel fuel use in trucks is highly correlated with Gross Domestic Product (GDP) growth, moving together 98.5 percent of the time. It’s hard to get much more accurate than that.

What gives the Ceridian-UCLA index added importance this election cycle is that it is based on real-time data that provides key information into the economy well before the monthly Federal Reserve’s Industrial Production number is issued.

So if the U.S. economy is to shows sign of recovery, it will be diesel-powered trucks and engines that fuel the growth. If the economy is heading into a decline, the decrease in diesel sales will quickly highlight this downturn.

As the Ceridian-UCLA index website notes: “As the index changes, it offers real comparisons to past performance that captures a solid picture of what has happened, while showing the direction of the overall U.S. economy. This insight is invaluable to businesses, manufacturers, retailers and municipalities as they determine business strategy, plan for growth, or prepare for and manage a downturn.”

High diesel fuel prices could have opposite effects on some new car and commercial truck buyers and in turn economic growth.

Higher diesel fuel prices may dampen enthusiasm for the purchase of more clean diesel cars, whose sales were up last year by 27 percent, while hybrids were down overall by 2.3 percent. New diesel choices for consumers this upcoming model year (Chrysler Jeep Grand Cherokee, Mazda SkyActiv, and Chevy Cruze would benefit from moderating diesel fuel prices relative to higher gasoline prices.

On the other hand, higher diesel fuel prices may drive more truckers to buy new more fuel efficient clean diesel trucks, boosting the US economy. . SInce 2010 new commercial heavy duty trucks with the new generation of clean diesel engines have posted consistent fuel economy gains of 5-8 percent- saving long-haul truckers 1,000 gallons a year and putting $4,000 in their pockets-- a very strong incentive for truckers to invest in new technology made in America.

If gasoline climbs much beyond $4/gallon, economic growth will slow even more as consumers pull back, we may return to recession and energy will become a top five issue in the presidential campaign. Even though consumers understand the president can’t control prices, this scenario will hurt President Obama. Republican candidates have done a good job drawing a clear distinction on energy and they will only increase their messaging over the next few months as prices escalate. But incumbents in Congress from both parties will also be dinged if gasoline spikes, since this has been a persistent problem. We can expect the familiar pattern of passing a litany of bills out of the House and finger pointing all around. Can the Senate pass a bill? It’s easy to be doubtful given what we saw in 2011 and the political stakes this year.

While I would much prefer enactment of an energy-climate policy for the certainty it would provide, it would be progress this year if there was a political consensus that while we should produce more oil and gas, we also need to invest in alternatives and efficiency and provide regulatory certainty to utilities. This is a major stretch given the landscape, which is too bad. With the exception of natural gas, which is not without challenges, we lack confidence in every energy source and have an aging grid. It’s especially concerning that Solyndra is tarring the idea that Washington should spend government money to develop alternative energy sources (which comes in addition to a lack of trust in the loan guarantee program, one of the few new ideas in the 2005 law courtesy of the Senate). We need seed money to develop the industries of tomorrow or we will be ceding the playing field to foreign competitors. Spending no money and letting the market work while other countries invest tens of billions isn’t a strategy for energy security. It would be refreshing to see a coherent energy plan that acknowledges this, is pennywise and offers some new ideas to speed technologies to market. It’s lot to ask for but the stakes could not be higher.

In 2012 we have already seen an escalation in the Persian Gulf between Iran and its regional adversaries that has led to increased oil prices. The question is, will this new geopolitical pressure, and the resulting increase in gas prices, translate to increased political pressure to take on energy policy during an election year?

While the conventional wisdom suggests that it will be difficult for Washington to make significant progress on big issues this year, an international event outside of our control that pushes gasoline prices to around $5 per gallon would certainly put energy policy front and center on the campaign trail, both in the Presidential race and in every Congressional and Senatorial race across the country.

One lesson that policymakers and consumers have been relearning since the first Arab Oil Embargo in the early 1970s is that once an oil price spike takes place, it’s too late for quick-fix policy remedies. Roughly half a dozen oil prices spikes have taken place during the past four decades; each one has been associated with a U.S. recession. This is why it is so critical to enact polices aimed at stopping oil price spikes before they happen.

If gas prices reach new records this summer, Congress would be wise to consider legislation aimed at breaking oil’s stranglehold on the transportation sector. In order to break the partisan deadlock between Democrats and Republicans, an expansion of oil and natural gas drilling access in federal lands and waters currently off-limits could create billions of dollars of new federal revenues, which in turn could help pay for alternative energy infrastructure such as electrification for light duty vehicles and natural gas for heavy duty vehicle.

The economic pain felt by American consumers due to high fuel costs during the past several years has been enormous. Since 2007, fully $1.4 trillion in hard earned U.S. income has been sent overseas to purchase and import crude oil. Unfortunately, 2012 is shaping up to be another year of high and volatile energy prices. Should a crisis occur, anger over high fuel prices at the pump could transfer quickly to the ballot box if Congress is seen as taking no action this year on our oil dependence. In an election year, a more robust energy policy that includes increased domestic production and support for transportation alternatives like electrification and natural gas would satisfy both parties’ core principles.

The instability we’ve witnessed over the past year in Middle Eastern and North African oil-producing nations has contributed to significant spikes in global oil prices. Volatility in oil prices should serve as a reminder that the American economy can be adversely affected by global political uncertainties. It should also refocus our attention on increasing domestic oil production in order to mitigate our susceptibility to recurring price swings.

The U.S. imports about half of the oil we consume each year. With demand expected to increase by 25 percent (14.05 Btu) by 2035, America’s heavy reliance on imports will continue. But through greater domestic production, an improved energy infrastructure, and stronger energy relationships with allies, we can ensure relative stability in future energy prices.

Let’s start by addressing what’s right under our feet. From shale gas development to offshore production, U.S. operators are dependent on government regulators for access. Existing moratoria on offshore drilling, as well as regulatory barriers to on-shore natural gas production, continue to restrict domestic production that would result in hundreds of thousands of new jobs and billions of much-needed government revenue.

A plan to phase in utilization of the country’s plentiful energy resources and to further integrate natural gas into consumer markets could be a winning strategy for the President or a presidential hopeful. But production is not the only issue. The existing energy infrastructure limits our ability to distribute oil and gas reserves. In particular, a shortage of pipeline capacity restricts the cost effectiveness of shipping West Texas Intermediate (WTI) crude—the name for much of the oil produced in North America—out of the heart of the country to the coasts. Instead, the heavily populated coasts rely on Brent Crude, a higher priced foreign source of fuel. This inflates the price of all domestic crude by pushing the national average price higher. A better pipeline infrastructure could allow WTI to put downward pressure on the price of oil. But even with more domestic pipelines, we’ll continue to need foreign oil.

This continued dependence on imported oil makes it imperative that we secure future resources from stable countries. Canada, the top supplier of oil to the U.S., is the best option for America, and the vast Canadian oil sands can offer a reliable supply for decades to come. What’s more, the Canadians are eager to ship this oil to Gulf Coast refineries that are largely dependent on Venezuelan crude at present.

Unfortunately, political pressures have delayed approval of the Keystone XL pipeline that would deliver Alberta’s oil to the Gulf Coast. Meanwhile, the Chinese are not hesitating to secure these resources, having just recently purchased full rights to one of the many oil sands projects in Alberta.

Regrettably, America lacks a realistic, domestically-focused energy strategy. Failure to maximize development of our domestic resources has helped push oil and gasoline prices up which, in turn, is hurting consumers and energy-intensive businesses. Voters need to understand that high oil and gasoline prices can be ameliorated with a different approach to energy policy.

If the President is able to put forward a realistic vision for our energy future that doesn’t rely entirely on unproven or economically unfeasible technologies, this could play to his benefit. But considering the White House’s anti-carbon track record, such an outcome seems unlikely. Consequently, high and rising energy costs may prove to be one of the President’s more vulnerable areas in the November election.

Oil prices will be at the center of our nation’s energy debate in 2012. Some will use rising prices as an opening to push for drilling in sensitive areas like the Arctic Ocean, even though the challenges of oil exploration in such a harsh, remote, and fragile place are unprecedented.

The Arctic is one of the most difficult places on Earth to mount a rescue operation or spill response. It is extremely isolated, with no major roads, ports, or airports. The nearest Coast Guard base is more than 1,000 miles away. There is no proven technology to clean up oil in broken ice. Hurricane-force winds, sub-zero temperatures, high seas, shifting sea ice, and long periods of fog and darkness are the norm and could shut down response altogether.

The Deepwater Horizon disaster in the Gulf of Mexico, plus subsequent spills off the coasts of Nigeria, Brazil, New Zealand, Scotland, and Norway, have reinforced concerns about safety and response in temperate waters, let alone Arctic waters.

Despite all of these factors, the Obama Administration is on the brink of approving plans to drill the first exploration wells in more than 20 years in the Chukchi Sea, one of the most biologically rich areas of the Arctic Ocean. This would also include the first well in the adjacent Beaufort Sea since the 2010 Gulf of Mexico tragedy. These seas are home to national treasures like walrus, polar bears, bowhead whales, and other marine mammals found nowhere else in the United States.

But there is still time to correct course. President Obama must show responsible leadership by deferring new offshore exploration in these risky waters until we fully understand the effects of drilling there.

This year’s election is an opportunity to ditch the snake oil and talk straight to voters about gas prices, an issue which keeps taking a bigger bite out of Americans' budgets. After a decade of hearing about short-term solutions that are only as good as the last price on the gas station sign, the driving public is ready for something different; putting us on the path for a real choice in the fuels we use offers that.

Calls for increasing drilling make for good talking points and sound bites, but, barring a major geopolitical event, they won’t affect the price at the pump. And barring a major geopolitical event it doesn’t make economic sense to release oil from the Strategic Petroleum Reserve.

The cause of increasing oil prices varies—from instability in the Middle East to internal politics within the OPEC cartel—but the America’s near-absolute reliance on gasoline for transportation remains the same. This is a long-term problem that requires a long-term solution—one of accelerated innovation and commercialization to give drivers a choice of how they fuel their cars and trucks. These aren’t Pollyanna pipe dreams: EV and hybrids are popping up across the country, and great strides are being made in developing natural gas and advanced biofuel vehicles.

We can do a great deal towards reducing the demand for gasoline for the long haul. The automakers can set standards for electric vehicles and build out charging stations to alleviate range anxiety, incentivize expansion of natural gas for use in fleet vehicles, and put more into research and development of advanced biofuels that don’t impact food prices.

Last February, when the Energy & Environment Expert Blog asked about spiking oil prices, the threat to international oil prices came from Libya. But the response from the oil industry was exactly the same – “if only the U.S. would stop regulating them, oil producers could drill their way to prosperity.”

U.S. crude oil and natural gas production have increased in recent years but have not brought down the cost of energy to end consumers or businesses. The United States continues to spend close to $1 billion a day on oil imports.

The fact remains that while oil prices have fluctuated (somewhat wildly) over the past few years, over the past decade or more they’ve grown steadily past the $100 per barrel level. The only downward turns in that trend have come as the result of economic recessions. Yes, prices drop when demand for fuel is down – because Americans no longer have jobs to drive to.

When Americans are concerned about the price they’ll have to pay at the pump, they curtail spending. Similarly, as manufacturers try to make forward-looking plans for growth, they have to consider the future cost of energy and natural resources – as well as whether consumers will buy their products. The result of instability in oil prices is continued economic stagnation. A forward-looking, consistent, long-term energy policy that transitions us from reliance on fossil fuels toward renewable resources is the only rational policy for future economic growth and energy security.

U.S. policymakers need to focus on creating an economic atmosphere that encourages commercialization of new technologies capable of providing stable supplies and prices for transportation fuels and all of the other products that currently come from oil. U.S. energy policy should expand the market for advanced biofuels and give clear signals to companies and investors that innovative liquid fuel technologies for alternatives will have every opportunity to succeed.

Even before threat of conflict with Iran, oil prices—and hence, gasoline prices—have been rising in recent months. In part, this upward trend stems from the higher costs of finding and producing oil in a world market. Additionally, the “risk premium” due to political instability in the Middle East accounts for another $10 of the current price of $102 a barrel.

The history of oil and gas prices is one of cycles. Low prices don’t persist and neither do high ones. There’s no reason to expect 2012 to diverge from that pattern.

The Department of Energy reported U.S. gasoline demand to hit a 10-year low of 8.77 million barrels a day in 2011 and expects the country to continue on a plateau for the foreseeable future. That makes sense considering Americans have been logging fewer miles on the roadways since the recession hit. However, our crude prices will remain robust because crude is a global commodity. In fact, amid increased domestic production of shale oil and gas along with rising energy demand in developing countries, America is on track to become a net exporter of refined petroleum products for the first time since 1949.

If the economy stages a unexpectedly strong recovery in 2012, demand for gasoline and diesel will increase and prices will surge accordingly. Current prices are already at a high for January, and analysts predict this year’s average will trump 2011. And higher prices will thrust energy policy front and center in the political debates. (Remember the calls to “drill, baby, drill” prompted by 2008’s record high of $145 a barrel.)

If Iran attempts to shut the Strait of Hormuz, prices will sky rocket. Though unlikely, such a move would also qualify as an act of war—triggering a naval conflict that would likely the pattern of the first Gulf War, which was measured in hours and days. Though short, a military conflict would send oil prices to levels not seen before. And then they’d likely fall just as fast, as they did in 1991.

Though the U.S. and our allies can do little to prevent this kind of spike, there’s much we can do to moderate it. All developed nations have stockpiles. America’s is the Strategic Petroleum Reserve, which can be used to replace the loss of oil coming through the Strait. Announcing coordinated plans for using that oil, if necessary, would have a calming effect on markets.

Longer term, the Persian Gulf’s influence on global prices will diminish as more exploration and production increases in other regions. The more oil produced elsewhere, the less influence OPEC can exert. America’s potential role in this will play a major role in the 2012 campaign.

The Americas are rich in natural resources. Canada is developing theirs, and so is Brazil. The U.S., however, faces a presidential administration hostile to domestic production of traditional fuels. Although crude oil production has been increasing and drilling has resumed in the Gulf of Mexico, we’re still underperforming. In fact, Wall Street Journal writer Ryan Tracy reported that the Obama administration is putting solar and wind projects on the fast track for approval while still slow walking oil & gas permits.

An energy policy that gave domestic production a real priority, with appropriate environmental safeguards, would lead to a significant growth in production over the remainder of this decade and beyond. There is no reason that we can’t increase production by 2 million barrels a day by the end of this decade. Yet, political obstacles continue to prevent economic benefits and job creation.

Our current incoherent, irrational, energy policy will remain so until President Obama and congressional Democrats accept the fact that fossil energy will remain the world’s dominant fuel source for decades to come. Fully developing those resources while having a robust R&D program is best way to improve our energy security and protect our economy in the long run.

There are at least three key ways that oil prices are likely to impact the events of 2012. First, we are entering a Presidential election year in which the price of this core commodity ought to be a key issue. Related to that, of course is the health of the nation’s economy, most certain to be an election issue. Politicians do not always draw the connection between the cost of fuel and the health of the economy, but they should. For millions of Americans who are unemployed, living on a fixed retirement income, or just struggling to stretch a salary, fuel prices are a major factor. As our long-awaited economic recovery finally appears to be gaining traction, we need to pursue policies that support that recovery by putting more money in the hands of ordinary Americans. And finally, in the early days of 2012 we’ve already seen signs of political tensions with a key oil-producing nation, Iran.

Of course, these three issues are all closely related. An Iranian blockade of the Straights of Hormuz would most certainly cause already high fuel prices to rise further. That, would in turn, create a lot of pain at the pump, for families, but also for retailers, manufacturers, truckers and all the other businesses for which fuel is a major expense.

When we consider how interconnected the world oil economy is with the household budgets of millions of voters, it should be clear how our elected officials – as well as those running for office – ought to approach the issue of high fuel prices. Stronger support for production of all of our vast domestic fuel resources – onshore and off – would provide a more stable source of domestic fuel that would support our fledgling economic recovery. Recent discoveries serve as further proof that the America has the resources to reduce our vulnerability to imports. But do we have the will to develop them?

The United States consumes 25% of the world’s oil and it is important to note that demand will continue to grow as the economy recovers. The U.S. is also the only country in the world that actively tries to keep its oil and gas resources off limits. To understand how a more balanced energy policy would support a stronger economy, you need to look no further than two U.S. states: California, which has severely restricted access to its fuel resources, and North Dakota, which has encouraged production. California has one of the highest rates of joblessness in the country, while shale production has created boomtowns in North Dakota.

It is clear how oil prices will affect all of us in the coming year: The question is, who will identify it as the central economic and national security issue that it is?