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Phony War on Gas
Attacks on 'price gouging' make good politics, but they don't help consumers much.

Thursday, April 27, 2006

NO DOUBT IT makes everyone feel better when the president states his concern for Americans, who are now paying more than $3 a gallon for gasoline. Unfortunately, the measures President Bush chose to announce this week to combat high prices are either meaningless or possibly dangerous in the long run, even if they do offer a bit of temporary relief. For example, just talking publicly about "price gouging" can spook gasoline providers into slightly lowering prices. And maybe it's useful to inspire state officials to start looking harder for crooks, given that price gouging is defined at the state level, not by the federal government. But in the long term, such talk encourages the public to believe that evil price gougers are responsible for higher pump prices, when the real culprits are global economic growth, increased demand and Americans' own large cars.

The president's other tactics seem no less dubious. Stopping the filling of the Strategic Petroleum Reserve won't increase supply by much, and it sets a bad precedent: The reserve, after all, is meant for national emergencies, which this is not. Temporarily waiving fuel blend or environmental requirements could help with spot shortages in a few places but won't have much effect on the long-term price. Calling for the construction of more refineries is unnecessary. Although the president is right to state that "there hasn't been a new refinery built in 30 years," it is also true that the oil companies have expanded refineries every year since 1996 and are expected to continue doing so through 2025, according to Energy Department statistics.

The president has, of course, had plenty of opportunities over the past five years to shape a more rational energy policy, one that would have provided incentives to move away from oil and toward other energy sources. He could have lobbied harder to remove the oil industry tax benefits from the energy bill he signed. He could have insisted that Congress add more tax breaks for hybrid cars, as he now says he wishes it had done. He could lift the tariffs on Brazilian ethanol, which would help address some of the ethanol shortages across the country. He could have endorsed a tax on oil and coal, which of course would not lower the price of gasoline but would, again, begin to reduce demand while encouraging investment in new technologies.

And he could have used his statutory authority to raise automobile fuel economy standards or persuaded Congress to find other ways to improve mileage per gallon of U.S. vehicles. Again, if he were completely honest, the president would tell Americans that the main reason fuel prices are higher in this country is because demand is growing -- and one reason for growing demand is that people drive inefficient cars. They drive inefficient cars because public policy, long shaped by the president and by Congress, has made it advantageous to do so. Until that changes, little else will.

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