High Gasoline Prices Highlight the Need for New Energy Policy

by Keith Cooper

From Broader View Weekly, May 23, 2008

The rising price of gasoline is more than just a political talking point. For most Americans, the pain at the pump is a tragic reality that interferes with daily life. In a move that appeared to address the gas crisis, a candidate from each major political party recently supported a proposal to temporarily suspend the federal gas tax during the summer months, as a Gas Tax Holiday. The lackluster support in Congress for such an idea made this a perfect storm for election year hype: a cheap campaign promise that the candidate has no obligation to fulfill.

Unfortunately, the suspension of this gas tax doesn’t even represent a Band-Aid solution to the existing crisis. The average American wouldn’t be able to fill a single tank with the savings generated during the “holiday”. In fact, the perception of a gas price relief might drive consumption rates higher as drivers see the opportunity to travel or make otherwise unnecessary trips, thereby increasing expense.

The gas tax also represents a source of important revenue to public services and infrastructure. Americans would be forced to choose between safe roads and bridges and other tax alternatives to make up the difference if the gas tax were suspended. Last year’s bridge collapse was a wake-up call to the consequence of ignoring the maintenance of our roads and highways.

There is also the possibility, as was widely reported, that the tax savings would not be passed on to the consumer, further lining the pockets of the oil industry profit-takers. With Exxon-Mobil recently posting another record quarter of profits, this is a legitimate concern. Oil industry corporations are certainly obligated by their charters to benefit their shareholders at the expense of the consumer.

Some fiscal conservatives would point to government regulation as the core problem contributing to the high price of gas. According to these small-government proponents, refinery regulations, intended to address the ecological damage caused by our dependence on petroleum, contribute more to the ballooning price of fuel than does corporate greed. In fact, relaxing government regulation of the oil industry would probably do little to relieve rising prices, as it’s doubtful that corporations would feel committed to passing these savings on to the consumer. An oil industry unfettered by government control would worsen global environmental crises, control already strained fuel supplies and drive up prices. Big Oil’s internal memos circulated in the mid- to late-1990s admit to a strategy of shutting down their own refineries (not government limiting of refining) in order to slow supply of gasoline and to grow profit margins.

But Big Oil is only a part of the problem. One must factor into the equation the high per-barrel price of oil. The United States’ relationship with OPEC nations has done little to offer hope of using influence to increase supply and drive down crude prices. Bush’s recent meeting with the Saudis, who have a history of ties to the Bush dynasty, was fruitless at bringing about any meaningful change. Add to the reluctance of OPEC to comply with U.S. wishes, the unrest in the region that our aggression in Iraq and Afghanistan has wrought, and it is clear that our foreign policy has done far more to contribute to the current crisis than to address it.

The plain fact is that our addiction to petroleum coupled with the dwindling supply of oil worldwide is nearing a point of collapse. It is impossible to sustain the current balance of supply and demand of oil. So much of our supply of food, goods and service is contingent on a ready supply of oil. Even when you get past the pumps, you can see the impact in rising prices at the grocery or department store.

Peak oil is the point at which oil production is not sustainable because the maximum rate of production has been reached and the point at which this rate begins its terminal decline. There is debate over whether we have, globally, already reached peak oil or if we are just near peak production. The dramatic rise in oil prices may be the result of market speculation or an indicator that peak oil has been reached. Regardless, our hunger for oil, especially in the nation responsible for the greatest consumption of oil resources, has brought us to an undeniable crisis. It is as plain as the faces and shaking heads of those we see at our local Citgo or Sunoco stations.

In my economic state, I can ill afford these rising prices – certainly, I can afford it less than many. However, the rising gas prices do have some potential positive effects. Even among the wealthy, the cost of a fill-up has taken some of the fun out of driving obnoxiously inefficient SUVs or Hummers. Higher prices have already spurred some shift to public transportation where it is available, and indicators are that a curbing of unnecessary travel has already begun. A noticeable drop in demand for oil will send a message to oil companies and OPEC that the market will not continue to bear the price. The painful shock to the pocketbook will also eventually stir the citizenry out of apathy. I have long thought that the price of gas was a catalyst and call to action of revolutionary proportions.

Frustration may be enough to engage Americans to consider their consumption of resources and carbon footprints. It may prompt calls for fuel-efficient vehicles from an auto industry that has the technology but not the will to provide cars and trucks with dramatically higher mileage ratings. Increased support of viable alternatives to petroleum may spring from economic hardship. U.S. citizens might grasp the futility of our intervention in the Middle East and its failure to “protect our interests” or control oil supplies. Whatever the impact, real change won’t come from rolling back the per-gallon tax, but from a transformation of our tolerance of the situation.

Though the federal gas tax holiday gathered little steam, the New York State Senate seized the opportunity to jump on the political bandwagon by passing a gas tax relief at the state level. While the Governor and State Assembly leaders oppose the bill, there is increasing pressure from State Senators in favor of the measure. We need to send a message to our legislators that we want a real solution to rising gasoline prices, not political gimmickry.