Politicians Have Little to Offer To Ease Anguish of Gas Prices
Friday, August 19, 2005
President Bush and members of Congress are facing an uncomfortable political reality this summer: They have little to offer Americans to ease their pain at the pump.
With gasoline prices nearing or topping $3 per gallon in some cities, Bush and lawmakers would be thrilled to call for steps big and small to quickly take the pressure off motorists financially -- and themselves politically. The president's advisers cite high gasoline prices as one reason for Bush's sagging approval ratings, while lawmakers home for the August break are feeling the heat from anxious constituents.
But the prices are an economic and political problem for which Washington has few, if any, policy remedies that would be effective or practical in the near term, according to many energy experts and elected officials.
"I wish I could say there is a quick fix, but there is not," said Rep. Bob Beauprez, a Colorado Republican who is expected to face a tough reelection campaign next year. "Everybody is feeling the pinch."
Sen. Charles E. Schumer (N.Y.) is one of several Democrats who support releasing oil from the U.S. strategic petroleum reserve. He warned this week that the soaring prices are "taking money out of the hands of working families." The idea is to pour U.S. oil into the world market to push down prices. But energy analysts warn that this move would draw down reserves whose stated purpose is to protect national security, not to manipulate prices. In any event, they note, the price drop would be uncertain and would perhaps amount to as little as a few cents per gallon.
"Gas prices are clearly reaching a level where it's a political problem for people," said Daniel Yergin, chairman of Cambridge Energy Research Associates, but "unless you empty [the reserve], it is a very temporary expedient. It does not affect the basic supply-and-demand problem."
Lawmakers also cannot easily suspend or reduce the 18.4-cent-per-gallon federal tax on gasoline. That money goes straight into a trust fund for covering highway and mass-transit upgrades. When gas prices climbed in the 1990s, some Republicans were quick to call for lowering the tax. This time, however, Congress has boxed itself in by passing the largest-ever transportation bill just before leaving for the August recess.
Ronald D. Utt, who studies energy issues at the Heritage Foundation, a conservative think tank, said there's "a lot of silence" on taxes "partly because everyone [in Congress] appreciates their pork barrel projects would be at risk" if gas taxes are cut.
Even if that obstacle could be surmounted, "if you roll back that tax, people have to keep in mind that may not transfer into savings for consumers," said American Automobile Association spokesman Mantill Williams. "It's not automatic [that gasoline firms] will give that discount to the consumer."
Some members of Congress -- and many editorial pages at newspapers across the country -- have proposed a perennial solution: investigate whether oil companies are fixing prices to pad profit margins. Politically, oil companies are easy targets because many are posting high profits as consumers pay more for gasoline. Rep. Vito Fossella (R-N.Y.) this week called on the government to make sure "that no price gouging is occurring" in his district.
The investigation avenue might sound good, AAA's Williams said, but every time the government has investigated, "we have not found anything."
Sen. John F. Kerry (D-Mass.) and others say Bush should take a harder line with Saudi Arabia and other oil-producing nations, and demand that they release more oil and help push down the price of oil, which hit a record $66 per barrel this week. But skeptics say that approach has not worked in the past. "We have to realize they have the oil, and it's a seller's market," Beauprez said.
Rep. Anne M. Northup (R-Ky.) said she heard from concerned constituents at every stop this month, including at a gas station in her district, where it cost her $41 to fill up her Ford Escape, one of the smaller sport-utility vehicles on the road. She said one of her messages to voters is: Pressure Washington to allow drilling in Alaska's Arctic National Wildlife Refuge. The energy policy recently passed by Congress and signed into law by Bush does not permit drilling in the refuge, but Republicans hope to open this area to drilling as part of this year's budget agreement.
It would take a long time before oil can be pumped from the ground in the refuge because oil exploration and the start of production typically take years. Though ANWR production would slightly reduce the growth in U.S. imports, experts say, its impact on prices is less clear.
Any additional supply on the world market puts downward pressure on worldwide prices. But the Organization of the Petroleum Exporting Countries could always decide to cut production to offset ANWR's output. If that happened, production in ANWR would have no impact on world prices.
The one area sparking bipartisan interest is requiring automakers to produce more fuel-efficient cars and SUVs by tightening what is known as Corporate Average Fuel Economy (CAFE) standards. In the past, lawmakers have sided with the Big Three car companies in opposing broad increases in CAFE standards, which require vehicles to get more miles from each gallon. A number of legislators are now considering plans to increase the standards.
The obvious benefit to consumers is the savings resulting from better gas mileage. But Ben Lieberman, an energy expert at the Heritage Foundation, noted: "People aren't going to drive their SUV off a cliff, and run out and buy a more economical vehicle." He added: "You are talking about something that would take a decade or more to have an effect." Others say it would take less time, but still years.
Bush, who signed into law a new energy policy earlier this year, has told audiences that the measure will not pull down prices now, but will set the stage for the United States to rely less on foreign oil in the future and more on domestically produced alternative fuels and on hybrid vehicles.
With many political strategists saying that he is getting lower-than-expected approval ratings on the economy because of gasoline prices, Bush is talking about the energy legislation at several stops this month, and administration aides are exploring possible adjustments of the CAFE standards.
Northup and others are highlighting fuel-efficient hybrid vehicles as another solution, but they come at a cost.
Consumers looking to buy a new hybrid, such as a Ford Escape that gets an estimated 36 miles per gallon in the city, will get additional assistance under the new law. Starting next year, people can claim a tax credit, ranging from $400 to $3400 depending on the model, for the purchase of a hybrid vehicle. But, as critics are quick to note, hybrids cost more than traditional vehicles, so that even with the tax credit, motorists will not gain an obvious financial benefit.
"The big problem is we did not make the right decisions 10 years ago," said Brendan Bell, an energy analyst at the Sierra Club.
In the meantime, Yergin said, the swiftest solutions will come not from Washington but from motorists themselves -- by driving less, inflating tires properly and carpooling.
Staff writer Justin Blum contributed to this report.