May 4, 2006

May 4, 2006 | Commentary on Political Thought

Congressional squawking won't bring fuel prices down

When a crisis strikes, Americans can count on Congress to swing into action. So as gasoline prices soared toward $3 per gallon, lawmakers did what they do best: They complained.

"We believe that federal law enforcement agencies and regulators should take every available step to ensure that all federal laws protecting American consumers from price-fixing, collusion, gouging and other anti-competitive practices are vigorously enforced," House Speaker J. Dennis Hastert and Senate Majority Leader Bill Frist wrote in a joint letter to the president.

Their colleague Sen. Ted Kennedy (D-Mass.) apparently agrees. He told NBC's "Meet the Press" on April 23, "The president should have called the head of the oil companies into the White House and started jawboning. He should have done that a week ago."

Stern calls for investigations may play well politically. But they won't accomplish anything. For one thing, an investigation -- one ordered by last year's energy bill -- is already under way. Besides, price gouging isn't the problem. The Federal Trade Commission already "tracks retail gasoline and diesel prices in some 360 cities across the nation" through daily updates from the Oil Price Information Service, a private data-collection company.

The FTC's Web page explains, "An econometric model is used to determine whether current retail and wholesale prices each week are anomalous in comparison with historical data." In other words, if someone's gouging, the feds will know about it.

As for "jawboning," there's enough of that, too. The Democratic Congressional Campaign Committee recently recommended candidates for Congress "hold an event at a gas station." Good idea -- if your goal is political gain. But it won't do a thing to lower prices at the nearby pumps.

Gasoline prices are governed by the laws of supply and demand. If we want lower prices, we must bring more gasoline to the market. And here's where policymakers actually can help. President Bush has already taken one step to provide short-term relief by temporarily suspending the environmental rules for gasoline. Congress should step up now and repeal regulations that require different blends of gasoline, at different times of the year, for different areas of the country.

Refineries must produce more than a dozen blends of gasoline and ship them out to various parts of the country on a strict schedule. That slows the supply chain and causes shortages. Lawmakers should allow gas to become a true commodity again by letting refiners make a single blend and sell it nationwide.

Meanwhile, Congress forces refiners to use ethanol in their fuel blends. A large part of the recent increase in gasoline prices has occurred because the price of ethanol has almost doubled in the last year, and logistical hurdles block its widespread use. Remove these mandates, and prices will decline.

The long-term solution to our energy woes also would require congressional action. We need to increase domestic supply and refining capacity. Tens of billions of barrels of oil are available in the United States. They're under the Arctic National Wildlife Refuge and off the coasts of California, Florida and other states. But federal law doesn't allow companies to drill for that oil. Lawmakers should change that.

Meanwhile, the president recently called on oil companies to reinvest profits in new refining technology. They probably would, if they could. But legislation and regulation have made it virtually impossible to open a new refinery; we haven't brought a new refinery online in three decades. No wonder prices are skyrocketing.

With vacation season under way, Americans can expect a long summer of accusations. "Anyone who is trying to take advantage of this situation," Hastert and Frist wrote, "should be investigated and prosecuted." Yet it's lawmakers who are taking advantage. They're using high fuel prices to score rhetorical points when they should be taking action to increase gasoline supplies. The question is, will they act? Or simply keep complaining?

Edwin Feulner is president of The Heritage Foundation (heritage.org), a Washington-based public policy research institute and co-author of the new book Getting America Right.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
Founder's Office

First Appeared in the Chicago Sun-Times