Gasoline fever: Deja vu all over again

June 1, 2006 By    

Political pandering in Washington is rising almost as fast as the price of a gallon of gasoline. Congress is scrambling to respond to consumers’ – and angry constituents’ – concerns about price, which at the same time is fueling the flames of public fears.

 Lisa Bontempo
Lisa Bontempo

What is a Congress nearing mid-term elections to do?

Republicans responded early by considering a federal gas tax holiday and then realized that refineries collect the tax and consumers could not be certain to see the benefit. They also remembered that this money pays for road and highway improvements. Then they planned to give drivers a $100 rebate but quickly dropped the idea after realizing how expensive it would be to implement and how ineffective it would be.

Other recent Congressional measures include price-gouging protections for consumers, tax breaks for hybrid vehicles, tax breaks to expand refinery capacity and funding for alternative fuel research. Expect to see many members of Congress supporting research for anything that can be grown in Iowa as the fall approaches.

Predictably, Democrats called for investigations of oil company profits, a windfall profits tax and eliminating tax incentives for the oil and gas industry. Many Republicans joined them, demonstrating how worried they really are.

With election-year pressures mounting, the summer driving season nearly here and gasoline prices rising, long-standing partisan issues are finding a way to move forward. Examples include opening up the Arctic National Wildlife Refuge (ANWR) and raising Corporate Average Fuel Economy (CAFE) standards.

Long a rallying cry for Republicans over the past several years, ANWR efforts failed because Senate Republicans could not muster enough votes to override a filibuster. Democrats and some moderate Republicans have long been pushing to raise CAFE standards from the current 27.5 miles per gallon for passenger cars.

The House Energy and Commerce Committee recently voted to give the National Traffic Safety Administration authority to raise the mileage standard. However, an attempt to raise the passenger car standard to 33 miles per gallon by 2015 was rejected in committee.

The administration has even gotten into the game by talking about the need to raise CAFE standards and continuing to push its agenda of increased spending on alternative fuels and vehicles, opening up ANWR and expanding domestic oil refining capacity.

Timing is everything in politics. Supporters of these issues may awaken to find they need each other more than they could have ever imagined.

What may have seemed impossible in previous legislative sessions is being revived again this session. While U.S. law forbids oil and natural gas production within 150 miles of the U.S. coastlines, Senator Ted Stevens (R-AK) is preparing legislation to expand oil and natural gas drilling in the eastern Gulf of Mexico, and the House Appropriations Committee lifted a ban on offshore natural gas production covering most federal waters beyond the Gulf of Mexico.

We’ve seen long gasoline lines, wage and price controls and double-digit inflation before. But with the continued uncertainty of the politics of the Middle East, the huge and increasing energy demands of the quickly industrializing countries of China and India and our own drop in refining capacity, how worried should we be?

Is the market working? In five years, the cost of oil has jumped nearly $50 a barrel. U.S. oil companies are bumping exploration and development budgets by 30 percent. Saudi Arabia says it will increase production, and consumers are buying more efficient vehicles to conserve.

Are high prices and an increase in fuel demand the jump-start we need to spur our economy and the world to move forward for a new generation of technologies and energy efficiency?

Congressional policies often take years to work in the marketplace. Expect Republicans and Democrats in Congress to express their outrage over fuel costs on behalf of constituents, but don’t expect Congress to have all of the answers about energy independence, price and supply. The market most likely will.

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