Wrong Cure for Gas Price Malady

It’s a familiar sight to commuters. Gasoline at the station they pass in the morning may sell for $1.61 a gallon, but when they return at the end of the day it could be 3, 4 or 5 cents higher. By the next morning it might be up again. In some places in California, gasoline is selling for $2 a gallon or more, and the rest of the state is rapidly catching up.

Two things determine fuel prices: how much is produced and how much is consumed. The OPEC oil cartel, joined by such other major exporters as Mexico and Norway, agreed at the end of 1998 to lower production to drive up prices, depressed by the Asian recession. Thanks to economic recovery in Asia and rising fuel demand in the United States--up 2% in the first six months of 1999--demand for oil has increased and prices have soared. World oil consumption currently exceeds production by about 2.5 million barrels a day.

OPEC is expected to agree later this month to begin pumping more oil. The fight within OPEC will be over how much, with hard-liners arguing that supplies should be kept below demand to maintain high prices. Even if production catches up with consumption, it will be some months before retail gasoline and other fuel prices start to come down. That points to steep prices continuing into the peak summer driving season and into the presidential campaign.

Some Republicans, smelling political opportunity in high fuel prices, have resuscitated a number of favorite energy-related proposals. One would suspend for the rest of this year the 4.3-cent-a-gallon federal gasoline surtax that the Democrats passed in 1993 as part of their deficit-reduction program. That could save motorists more than $3 billion. But easing the tax bite at the pump wouldn’t add a single gallon to oil supplies. The marginally cheaper price might even lead to increased consumption.

Moreover, as House Transportation Committee Chairman Bud Shuster (R-Pa.) warns, the reduced revenue would cut into federal highway projects in all 50 states, popular programs that have broad bipartisan support.

Other hobbyhorses too have been brought out of storage, among them opening Alaska’s Arctic National Wildlife Refuge to oil drilling and lifting the oil exploration bans that protect some environmentally fragile offshore areas. Removing these safeguards is a bad idea in any season. As an answer to the immediate supply problem they are pointless at best, and even at a potentially very high cost they couldn’t add to oil supplies for many years.

The best short-term answer to alleviating the artificially created oil shortage is to withdraw oil from the federal Strategic Petroleum Reserve, replacing it when prices fall. The best long-term response is to revive the energy conservation ethic that two decades ago led to the vastly more efficient use of fuel, meanwhile pressing on with the development of cheaper renewable energy sources. More than half the oil Americans now use is imported. The dangers of that excessive dependence can be seen wherever gasoline prices are posted.