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Weather: Mostly Cloudy, 76° F




Bush, lawmakers look for ways to ease gas prices

07:49 AM CDT on Wednesday, April 30, 2008

By TODD J. GILLMAN and DAVE MICHAELS / The Dallas Morning News

WASHINGTON – Rising gas and food prices are putting pressure on President Bush and the Democratic Congress to address consumers' anguish, forcing the two parties to grapple with policies that have divided them for decades.

Video
Drivers at a Dallas gas station talk about the record high cost of gas and how high fuel prices are affecting their lifestyles. (DMN - Video: Jake Batsell / Editing: Randy Eli Grothe)
04/29/2008
Local/State Videos

So far, the parties have trotted out proposals that are popular with their base but haven't picked up enough bipartisan support. Still, lawmakers are considering ideas they might have nixed months ago, including temporarily lifting the federal gas tax and halting deposits of oil into the Strategic Petroleum Reserve.

Democrats blame purchases for that emergency stockpile for driving up oil prices by as much as 10 percent. Calling the current price environment an "extreme circumstance," Texas Sen. Kay Bailey Hutchison and 15 other Republicans broke with the White House on Tuesday to urge that deposits cease.

Mr. Bush rejected the suggestion, calling the reserve crucial to national security and saying the purchases are too small to affect world oil prices.

"You know, if there was a magic wand to wave, I'd be waving it," Mr. Bush said at a Rose Garden news conference.

Instead, Mr. Bush urged Congress to open Alaskan wilderness areas to drilling and to encourage construction of new refineries. Those ideas aren't likely to find a home in a bill that Majority Leader Harry Reid has asked Democratic senators for ideas to shape.

Democrats are also on the defensive. Sen. Dick Durbin, D-Ill., said Republicans are loath "to give us anything to point to as a record of achievement," while noting the issue is urgent.

"In this economy, facing recession and with voter anger over gasoline prices, there may be motivation" to find compromise, Mr. Durbin said.

Average regular gas prices hit a record $3.52 in Dallas on Tuesday. But the future could be worse. A new Gallup poll showed that most Americans expect to pay $4 per gallon by summer; one in five expects gas to cost $5.

Sen. John McCain, the presumptive GOP presidential nominee, has called for giving drivers a summer-long break from the 18.4 cent per gallon gasoline tax. Mr. Bush said he's open to the idea. Democratic presidential hopeful Sen. Hillary Rodham Clinton has embraced the idea – if oil companies are taxed to make up for lost revenue. Rival Sen. Barack Obama accused her and Mr. McCain of pandering.

"There is a lot of posturing going on. It is an election year," said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University.

In any event, Ms. Hutchison said Tuesday that Congress isn't seriously considering a gas-tax holiday, which Arizona Sen. Jon Kyl, the second-ranked Republican, said would "treat symptoms rather than the underlying cause" of high prices.

Energy economists doubt that a gas-tax holiday would offer real relief, because the price could still spike. Many experts don't see any short-term fix, saying the current debate is driven by political agendas.

"You've got the neocon national security agenda. You've got the greens," Amy Myers Jaffe, an energy expert at Rice University's James A. Baker III Institute for Public Policy. "Everybody comes to the table with their thing."

Some of those ideas will continue to circulate in the coming days and weeks.

Using federal land

The list of ideas includes opening federal land to drilling.

Mr. Bush said he'd "repeatedly submitted proposals to help address these problems" while Democrats "repeatedly blocked environmentally safe exploration in ANWR," referring to the Arctic National Wildlife Refuge in Alaska.

"We could produce plenty of oil," said Sen. Ted Stevens, R-Alaska. "We could meet our own needs right now if we wanted to."

Emergency stockpile

Lawmakers from both parties now want the administration to stop adding to the emergency stockpile, saying it's driving up prices. Democrats may try to force the White House's hand with amendments to an upcoming emergency spending bill, according to Sen. Byron Dorgan, D-N.D.

"Its impact on the price ought to be considered because of rapid escalation in the price of oil," Mr. Stevens said.

Mr. Bush dismissed the idea, saying the stockpile, which holds about 700 million barrels of oil in underground salt caverns along the Gulf Coast, is needed in case of national security emergencies.

Market speculation

Some Democrats blame investors and commodity traders for driving up the price of oil and hoarding supplies. Mr. Dorgan has proposed increasing the cash or other collateral that investors put up to make big, leveraged purchases on the futures market.

"The current price of oil and gas does not reflect the fundamentals of supply and demand," Mr. Dorgan said.

Targeting companies

Energy experts argue that increasing taxes on oil companies wouldn't help supply, but Mrs. Clinton said this week that a "windfall profits tax" would pay for a gas-tax holiday for consumers.

"We believe there ought to be a gas-tax holiday, but Big Oil ought to pay for it," said Sen. Charles Schumer, D-N.Y.

Pressuring OPEC

President Bush will visit King Abdullah of Saudi Arabia in two weeks during a weeklong Middle East trip. At his news conference, he sidestepped the idea of pressuring the kingdom to boost output.

"I think we better understand that there's not a lot of excess capacity in this world right now," Mr. Bush said. "That's why it's important for us to try to take the pressure off by saying we're going to start exploring here at home."

Energy analysts agree that pressuring OPEC won't have much impact.

"It's questionable whether they can produce any more at this point," Ms. Jaffe said. "Number two, they've gotten used to $100 oil now, and they like it."

tgillman@dallasnews.com ;

dmichaels@dallasnews.com

What Bush suggests

A closer look at some of President Bush's statements Tuesday:

New refineries: Blaming "the lack of refinery capacity" for high energy prices, Mr. Bush has criticized Congress for rejecting his plan to use shuttered military bases for new refinery sites. But oil companies haven't shown much interest in building refineries and have dismissed suggestions that military bases might be of use. They note that few bases are near pipelines needed to bring crude in and move finished product.

Refuge drilling: Mr. Bush chastised Congress for repeatedly blocking his plan to open the Arctic National Wildlife Refuge in Alaska to oil development. Energy experts believe accessing the refuge's likely 11 billion barrels of oil would send a signal of increased U.S. interest in domestic energy production but would probably have little impact on oil or gas prices today and in the long run.

The Associated Press

How the gas tax holiday would work

Republican John McCain and Democrat Hillary Rodham Clinton have called for a "gas tax holiday" this summer, a step that could cost the government about $10 billion in revenues. Democrat Barack Obama opposes the idea, saying consumers will derive little benefit. So who's right? Mixed reviews

Some economists say that a nationwide "gas-tax holiday" would have even less impact on gas prices than temporary state moratoriums. Leonard Burman of the Tax Policy Center, a nonpartisan research group, said gas always is in short supply during the summer, which is why prices go up. To reduce the price, he said, "you would have to increase supply, but that is difficult over the short term because the refineries cannot add capacity." Who benefits

James Hamilton, an economics professor at the University of California-San Diego, said most of the benefits from a temporary tax moratorium probably would go to producers rather than consumers. He said that states that suspend gas taxes are able to respond to rising demand more efficiently than the country as a whole because gasoline supplies can be easily moved from one state to another. The Illinois moratorium

In 2000, Illinois suspended its 5 percent sales tax on gas for six months, and Mr. Obama, then a state senator, supported the move. The moratorium was popular but economically questionable. The state lost an estimated $175 million in revenues, and gas prices reportedly fell by 3 percent. What some critics say

If the Illinois experience is a guide, there is likely to be some reduction in the price of gas, but it would fall well short of the size of the tax reduction. To pay for the tax cut, the government would have to cut back on highway construction and maintenance or find some other way of plugging the shortfall in revenues to the Highway Trust Fund.

The Washington Post