Will Anything Curb Rising Gas Prices?

[CPD]

Congress passed a bill recently urging President Bush to halt purchases into the US Strategic Petroleum Reserve, and Bush has complied after prior reluctance. The real issue, however, is not the differing opinions of Congress and the President, but if this strategy will have any effect whatsoever. The Strategic Petroleum Reserve is our spare tire in case there is a problem with the import of foreign oil, but the amount of oil available in the reserve will only replace a two months' supply of our average petroleum imports. The decision to halt purchases into the reserve appears at best to be a loose fitting bandaid over a festering wound that has long gone unattended.

On his recent trip to the Middle East, President Bush spoke with the leader of Saudi Arabia, our ally, King Abdullah in order to convince him to increase oil production. The hopeful effect of this increased reduction would appear on our end in lower gas prices. The meeting? It didn't go very well:

"On Friday, Bush went to dine at Saudi King Abdullah's bizarrely opulent horse farm and pleaded for an increase in oil production, but to no avail. Bush received the same rebuff in April 2005, when oil was selling for $54 a barrel. On Tuesday, it sold for $129, and the price rise is a good measure of Saudi gratitude for the Bush family's unwavering support over past decades. Saudi Arabia's oil minister, Ali al-Naimi, couldn't have been more condescending when he turned down Bush's request with the observation that 'presidents and kings have every right, every privilege, to comment or ask or say whatever they want.' He added at a press conference, 'How much does Saudi Arabia need to do to satisfy people who are questioning our oil practices and policies?'"

So an appeal to Saudi Arabia didn't work, we have resorted to attempting a strategy that we're not certain will have any effect, and meanwhile gas prices just keep climbing as we now enter the high demand American Summer driving extravaganza. It is not, however, that our government can't come up with any good ideas, but that there just isn't a quick fix to the problem (see: Clinton and McCain's Summer Gas "Tax Holiday"). The idea that a singular policy, swiftly enacted will solve the problem of increasing gas prices is a misconception we seem to share with our leaders. In actuality, the recent upward trend in gasoline prices over the past decade is the result of many years of neglect -- that of our leaders who can't see past the next election cycle and our own willing disregard for what President Carter warned us about back in the 1970's, namely, "our addiction to foreign oil." As Thomas Friedman put it in today's column:

"Prices are what they are as a result of rising global oil demand from India, China and a rapidly growing Middle East on top of our own increasing consumption, a shortage of “sweet” crude that is used for the diesel fuel that Europe is highly dependent upon and our own neglect of effective energy policy for 30 years."

Because we are, at least in part, complicit in getting us into this predicament, the solution might have to include a part for us to play. Friedman's proposal, by way of:

"energy economist Philip Verleger Jr., is a 'price floor' for gasoline: $4 a gallon for regular unleaded, which is still half the going rate in Europe today. Washington would declare that it would never let the price fall below that level. If it does, it would increase the federal gasoline tax on a monthly basis to make up the difference between the pump price and the market price. To ease the burden on the less well-off, 'anyone earning under $80,000 a year would be compensated with a reduction in the payroll taxes,' said Verleger. Or, he suggested, the government could use the gasoline tax to buy back gas guzzlers from the public and 'crush them.'"

Whether this "price floor" policy will ever come to pass, and it is doubtful that such an unpopular but possibly necessary policy decision would be proposed in the first place, we most likely will have to live with high gas prices this Summer. So, at the very least, you can use this widget from the good people at MotorTrend magazine, to search for the least expensive gas in your area. Happy driving.