In The Grip of Gasoline Fever

In the grip of gasoline fever
Cynical politicians engage in a disgraceful panderfest
CHARLES KRAUTHAMMER
Washington Post Writers Group

WASHINGTON - If you thought the Dubai port deal marked a record high in Washington cynicism, think again. Nothing can match the spectacle of politicians scrambling for cover during a spike in gasoline prices. And this time, the panderfest has gone all the way to the Oval Office. President Bush has joined the braying congressional hordes by ordering the Energy and Justice departments and the FTC to launch an investigation into possible gasoline price-fixing.
What a disgrace.

Ten years ago (April 29, 1996) as gas prices reached a shocking $1.27 a gallon, President Clinton ordered his Energy and Justice departments to launch investigations to find out why. In my column that week, I offered a wild guess as to why: "Supply is down and demand is up." I offered Energy Secretary Hazel O'Leary and Attorney General Janet Reno a $100 bet that their million-dollar probes would do nothing more than confirm my hunch. No takers.
Sure enough, months later these pointless investigations discounted charges of price gouging and attributed the price hike to ... increased demand and decreased supply.

Ten years later, I'll wager again. Here's what the Bush search for price gougers and profiteers will find:

1. Demand is up.
China has come from nowhere to pass Japan as the No. 2 oil consumer in the world. China and India -- together home to eight times the U.S. population -- are industrializing and gobbling huge amounts of energy.

American demand is up. Until the mid-1980s, beginning with the oil shocks in 1973, Americans had changed appliances and cars and habits and achieved astonishing energy conservation. Energy use per dollar of gross domestic product was cut by 30 percent in little over a decade. Oil prices collapsed to about $10 a barrel.

Then amnesia set in, and we became "a country of a million Walter Mittys driving 75 mph in their gas-guzzling Bushwhack-Safari sport-utility roadsters with a moose head on the hood, a country whose crude oil production has dropped 32 percent in the last 25 years but which will not drill for oil in the Arctic National Wildlife Refuge for fear of disturbing the mating habits of caribou." I wrote that during the '96 witch hunt for price gougers. Nothing has changed, except that U.S. crude oil production dropped an additional 12.3 percent. Which brings us to:

2. Supply is down.

Start with supply disruptions in Nigeria, decreased production in Iraq and the continuing loss of 5 percent of our national refining capacity because of Katrina and Rita damage. Add to that the mischief of idiotic new regulations. Last year's energy bill mandates arbitrary increases in blended ethanol use that so exceed current ethanol production that it is causing gasoline shortages and therefore huge price spikes.

Why don't we import the missing ethanol? Brazil makes a ton of it and very cheaply. Answer: The Iowa caucuses. Iowa grows corn and chooses presidents. So we have a ridiculously high 54-cent ethanol tariff and ethanol shortages.

Other regulation requires specific gasoline blends for different cities depending on their air quality. Nice idea. But it introduces debilitating rigidities into the gasoline supply system. If Los Angeles runs short, you cannot just move supply in from Denver.

And don't get me started on the missing supply of might-have-been American crude. Arctic and Outer Continental Shelf oil that the politicians kill year after year would have provided us by now with a secure supply cushion in times of tight markets.

In March 2000, gas hit $1.80. Scandalized congressional Republicans shamelessly pushed for repeal of Bill Clinton's whopping 4.3-cent gas tax increase. Now that the president is a Republican, what do you think Senate Democrats are proposing? A 60-day suspension of the federal gas tax. It would cost $6 billion and counteract the only good thing that comes with high gas prices -- the incentive to conserve.

George Shultz once said, "Nothing ever gets settled in this town." But even Shultz, who has seen everything, must marvel at the perfect regularity, the utter predictability, of the bottomless cynicism of Washington in the grip of gasoline fever.

Charles Krauthammer
Charles Krauthammer is a syndicated columnist. Write him c/o Washington Post Writers Group, 1150 15th St. NW, Washington, DC 20071, or at letters@charleskrauthammer.com.