Ideas to help people ease the burden of high gas prices are swirling in Washington. Will any of them work?
about $4 a gallon, lots of people are thinking there must be something
the government can do to help.
Some things which contribute to
high gas prices are largely out of the government’s control. OPEC will
produce as little oil as it sees fit, largely independent of any U.S.
intervention. Developing nations will continue to subsidize gas prices,
helping their growing economies and keeping demand high.
Areas
where the government can help, like a big push into alternative energy,
more drilling in the United States, or a jump in fuel efficiency
standards, will take years to materialize. Even then, any price decline
is likely to be small.
As consumers scramble to adjust their
lives to deal with high gas prices, experts debate what the government
can do to help in the short term.
It’s unclear if any of
the ideas being discussed will work. Some say Americans will just have
to deal with $4 gas and learn to use less of it.
Tax oil companies more, give the money to motorists. This idea is a central part of Barack Obama’s energy platform.
The
candidate would impose a windfall profits tax on the big oil companies
whenever oil crossed the $80 a barrel mark. The cash would be given to
low income people to help them offset their energy costs.
Other
proposals in the Senate include selling rights to emit greenhouse
gasses – known as carbon credits – and giving the proceeds to all
households making under $100,000 a year.
But opponents say
raising taxes on oil companies will result in less oil production, and
ultimately lead to higher prices. If the government didn’t tax oil
companies and simply borrowed the cash, that would only hurt the dollar, and send oil prices higher.
Limit oil speculation. Many people believe oil speculators are essential to a properly functioning market.
But some say they have too much free rein and should be subject to greater restriction.
"The amount of money going into oil speculation is driving the price," said Judy Dugan, research director at Consumer Watchdog.
Dugan
is calling for increasing the amount of money oil investors need to put
up to buy contracts. She also wants more disclosure of trading
positions held in overseas or electronic markets.
Dugan may be on
to something. The Commodities Futures Trading Commission recently said
it is requiring greater disclosure, and oil prices backed off nearly $9
from recent highs.
But opponents urge caution. They say supply
and demand are driving high oil prices. Fewer speculators in the
market, they say, will just make it harder to secure contracts and make
it easier for a single player to manipulate prices.
Ease refining restrictions.
Refineries seem to be in a perpetual mess. They currently have to make
over 40 types of gasoline blends to meet clean air requirements in
different areas. They are also only running at about 85%capacity.
Easing clean air requirements or reducing the number of blends made might bring down prices.
"It’s
obviously a trade off with environmental concerns," said John Kilduff,
an energy analyst at MF Global in New York. "But it might take some of
the stress off refiners."
Dugan is also calling for more information about refiner’s profit margins, and perhaps laws requiring them to make more gas.
But
the industry says making all those different blends actually doesn’t
cost that much more money. And other analysts say refiners are barely
turning a profit running at 85% capacity, as gasoline prices have not
risen as much as the price of crude oil.
Lift the ethanol tariff. Ethanol
from places like Brazil, made with sugar cane that packs more energy
than U.S. corn-based ethanol, is currently subject to a 54-cent a gallon tariff, designed to protect the domestic ethanol industry from foreign competition.
Since ethanol is a required component in gasoline, critics of the tariff say lifting it would mean cheaper gas for everyone.
But with ethanol making up less than 10% of the nation’s gasoline supply, any drop in gas prices would likely be minimal.
Open the Strategic Petroleum Reserve.
Congress recently directed the Bush administration to stop filling the
reserve to the tune of 70,000 barrels a day, or 0.3% of the nation’s
daily oil consumption.
Analysts said the amount of oil involved
was too small to have any effect on prices. They were right: oil prices
actually rose following the directive.
Some say releasing oil
from the reserve, located in giant salt caverns along the Gulf of
Mexico and holding over 700 million barrels of oil, would send a
message to traders that the government is not willing to let oil prices
go up forever.
But others say the reserve serves an important
role as a buffer against supply disruptions from overseas, and traders
would bid up prices if the reserve were smaller.
Suspend the gas tax. This idea was roundly criticized when proposed first by John McCain and later by Hillary Clinton.
Analysts
said doing away with the 18.4 cent per gallon federal gas tax over the
summer would leave road repair dangerously underfunded, and could even
lead to higher gas prices as people drove more.
Still, the idea has it’s backers.
"I
thought it maybe wasn’t a bad idea," said Kilduff, who noted that
eliminating state taxes as well – which currently average an additional
21 cents a gallon – could translate into minor savings for motorists.
The
fact that these proposals have so many caveats, and would likely bring
prices down only moderately or not at all, leaves some analysts saying
there’s not much the government can do to lower prices.
High
gas prices are here to stay, and consumers are just going to have to
bear the burden until they figure out how to use less fuel, they say.
"Like
the president said, it’s an addiction," said Lee Schipper, a visiting
scholar at University of California Berkeley’s Transportation Center.
"There’s going to be a time when going cold turkey hurts."
Moreover, even if the government could lower prices, it might not be in everyone’s long-term interest.
"It’s
only when the price is high that people actually do things" to
conserve, said Schipper. "Gas at $2 a gallon underprices the real cost
to the environment and the nation."
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