In the first session of the 110 th Congress, energy policy enters its eighth year as a major legislative issue. The previous Congress passed a massive energy bill, the Energy Policy Act of 2005 (EPACT, P.L. 109-58 ), but subsequent developments worked to keep crude oil and gasoline prices high and interest in legislative solutions active. EPACT was enacted on August 8, 2005. Successive hurricanes, Katrina and Rita, in late August and late September 2005, brought about the shutdown of more than 5 million barrels per day of refining capacity in Texas and Louisiana and initially shut down the 25% of U.S. crude oil production and 20% of U.S. natural gas production that comes from the Outer Continental Shelf in the Gulf of Mexico. World and domestic demand for oil has remained strong, taking up most of the world's spare production capacity. The phaseout of the gasoline additive methyl tertiary butyl ether (MTBE) and a renewable fuels mandate in EPACT have placed additional pressure on gasoline price and deliverability in the United States. In the summer of 2006, gasoline prices returned to the post-Katrina peaks of more than $3.00 per gallon and stayed there throughout the peak driving season. Nevertheless, U.S. gasoline demand reached a record high, averaging over 9.5 million barrels per day in July. During early 2007, gasoline prices were in the low- to mid-$2 range. The passage of EPACT had its roots in an unexpected jump in oil prices that began in the late spring of 1999, following a production cut by the Organization of Petroleum Exporting Countries (OPEC). In early 2003, oil prices were reaching into the mid-$30s. Prices rose even higher during 2004—exceeding $50 per barrel for a brief period—owing to growing world demand both in the United States and the Far East, inadequate refining capacity, and Hurricane Ivan, which reduced U.S. production from the Gulf of Mexico for several months. Crude oil and petroleum product prices escalated further during 2005. These increases were initially attributable to growing international demand for oil that, domestically, put a strain on U.S. and world refining capacity. Then, in August and September, hurricanes Katrina and Rita caused further supply disruption. This continuing period of volatility in fuel supplies and prices has been the fourth significant episode since 1973 to jog American awareness of the extent to which the U.S. economy and lifestyle depend on inexpensive and plentiful energy. However, this surge in price represents a departure from historic trends because the rise in the price for oil fuels and energy products has occurred for more than five years and has been sustained. Some analysts have coined the term "demand destruction" to describe price-induced reductions in consumption, but overall demand for oil has proven resilient. World demand for oil has grown from roughly 78 million barrels daily in 2001 to roughly 84 million barrels daily during 2005. An additional departure from past patterns is that, historically, increases in crude oil prices owing to supply or international issues have driven product prices as the higher cost for crude feedstock is passed on. However, crude supply and stocks in 2005—prior to the hurricanes—were adequate. Commitments by OPEC during the course of the year to maintain or boost production appeared to have little but short-term effects on crude prices. Tightness in refined products prior to the hurricanes and the accompanying rise of product prices was a function of insufficient refining capacity in the United States to meet demand for a range of summer gasoline formulations. The pressures on product prices appeared to work backwards to support higher prices for crude. The hurricanes exacerbated these dynamics, further tightening product supply owing to problems with pipeline distribution as well as refining capacity, and introducing at the same time an uncertainty about crude supply that had not been as strong a worry prior to the storms. In 2006 and 2007, a number of factors—new and old—have contributed to an especially brittle climate for energy supply and price. Whenever the United States has experienced a period marked by sharp increases in the price for energy and concern about the adequacy of essential supplies, there is widespread concern that the nation has no energy policy. However, not only does the nation have an energy policy, it has adopted several distinct policy approaches over the years. This report discusses those major policy approaches, provides a conceptual framework for categorizing energy policy proposals, and briefly describes energy issues that remain current in the debate after the enactment of EPACT. Most policymakers acknowledged that EPACT would provide negligible price relief in the short term, but they contended that it would encourage domestic production of oil and gas and further conservation and alternative fuel initiatives. At issue for Congress is whether there should be an additional policy response in the face of continued pressure on oil price and supply. In the 30 years since the Arab oil embargo, the United States has pursued a number of different energy policy courses. In the course of several episodes during this period when oil price and supply became unstable, the U.S. moved from a set of policies more reliant on the federal government, to policies more dependent upon markets. This history is briefly summarized in the section to follow. In the aftermath of the Arab oil embargo in 1973, many looked to government to solve the problem, for both the short- and long-term. By 1975, refiner acquisition costs for imported crude oil had roughly tripled, rising from an average cost of $4/barrel (bbl) in 1973 to $12.50/barrel in 1974. However, refiner acquisition costs for domestic crude did not even double—rising from $4/bbl to $7/bbl—owing to a system of federal price controls that kept the price of domestic production below the market price. This discouraged domestic production and encouraged imports. However, controls may have helped insulate consumers from some of the price increase, which was the intended effect. Automobile fuel economy standards were enacted during the late 1970's to reduce gasoline consumption in the transportation sector. At the same time, hopes were invested in government-funded research and development of conservation technologies and alternative fuels. A second supply interruption was triggered in1979 by the fall of the Shah of Iran and a greatly reduced flow of Iranian oil to world markets for several months. A phased deregulation of oil prices, enacted in 1975 in the Energy Policy and Conservation Act (EPCA, P.L. 94-163 ), was designed to enable prices to become more responsive to market conditions. But the pace of the deregulation was conceived to be gradual. At the time of the Iranian revolution, gasoline prices in the United States were still subject to some control. The result was long lines at U.S. gas pumps. Letting the market set prices, supporters of deregulation had argued in the 1975 debate, would encourage the development of additional domestic supplies of oil as well as the development of alternative energy sources. Shortly after assuming office in 1981, President Reagan accelerated the EPCA schedule for price decontrol. Energy policy, in general, became more market-oriented, and the government role was lessened. Sustained high crude oil prices contributed to a reduction in U.S. petroleum consumption from 18.8 to 15.2 million barrels per day (mbd) from 1978 to 1982; there was more substitution of other fuels for oil, more efficient consumption of oil, and price-induced conservation. Higher prices resulted in new oil production from non-OPEC nations, allowing the United States and other consuming nations to diversify their sources of supply. Faced with a loss of market share and revenue, OPEC increased its own production in the mid-1980s, thereby lowering the price for crude oil. In the course of the year from 1985 to 1986, world oil prices plunged. In the United States, refiner acquisition cost for imported oil fell from $27/barrel to $14/barrel. Prices remained depressed until a fresh round of spikes in oil prices occurred in 1990-91 following Iraq's invasion of Kuwait in early August 1990. That resulted in a cut-off of 4.3 million barrels per day (mbd) from world markets. The price of oil, which had averaged $16/bbl at the end of July 1990, exceeded $28 by late August and reached $36/bbl in September 1990. Responding to the Iraqi threat, Western and Middle Eastern nations found common ground that would have been unimaginable a decade earlier. By the late 1980s, recognition had grown of the interdependence of oil-producing and oil-consuming nations; the OPEC nations had come to recognize that long-term demand for their oil was jeopardized by any prolonged period of high oil prices. Most did not wish to repeat the cycle of the early- to mid-1980s and boosted their production to make up for some of the lost supply. Consuming nations also coordinated the release of strategic stocks of crude and products. Prices began to fall in mid-October 1990 when the United Nations approved the use of force against Iraq. Prices fell more sharply after the United States and a consortium of nations began conducting air strikes on Iraq in mid-January 1991. During all of these episodes, importance was placed on conservation, more efficient use of energy, and development of alternative energy sources. The oil shocks of the mid- and late-1970s spurred considerable spending on alternative energy—including solar, geothermal, wind, clean coal, synthetic fuels, alcohol-based fuels—and technologies to improve the efficiency of energy use. Regulations were developed to improve the efficiency of home appliances and to incorporate more energy-efficient designs in buildings. In the early 1980s, states and utilities promoted energy efficiency as one form of "demand-side management" to reduce the need for construction of new power plants. Many industries re-engineered their processes to save energy.