Investigations into oil and gasoline price-gouging and a
temporary halt in deposits to the nation's strategic petroleum reserves: These
are the key provisions in President George W. Bush's response to rising
pressure to do something about gasoline prices that are exceeding $3 a gallon.
Are they enough, and will they be effective?
Probably not at the pump. There may be some marginal psychological impact
from Bush's use of the bully pulpit, but the real effect the president is
hoping for is a reversal of his plummeting approval ratings. In any case, the
for re-election, who fear Democrats will latch on to the administration's
tepid response to the rise in oil prices as a potent political weapon.
A far more significant impact on prices would come from an immediate repeal
or suspension of the stiff tariffs Congress imposed, with Bush's approval, on
imported ethanol, the additive required by federal clean-air rules to oxygenate
gasoline for summer driving. There is a severe and inexcusable shortage of
ethanol refined from corn in the United States at the moment, just as the
driving season looms. Imported ethanol, which is not made from corn, is far
cheaper. But the tariffs imposed on it - a generous giveaway to politically
significant states in the Midwest's corn-growing belt - are making the imported
additive prohibitive. Bush should move to ditch those tariffs immediately.
The other stratagems make for good public relations, but they are unlikely
to affect prices. A temporary halt to strategic-reserve additions is fine. But
the reserves are at full capacity anyway, so the effects are questionable. As
for price-gouging, until recently Bush himself blamed price hikes on a rapid
rise in global demand. He was right. Even if the price of gasoline was
manipulated at the distribution or retail level, the biggest hit has come from
the tripling of crude oil prices at the wells in the past three years, from
rising Chinese and Indian demand, and from civil conflict in oil-producing
Bush's four-part plan to address gas prices also includes promoting greater
fuel efficiency (though new federal rules have not cracked down on SUVs and
light trucks), boosting gasoline supply at home (hampered by a lack of refining
capacity due to damage from the Gulf Coast hurricanes), and aggressive
long-term investment in alternative fuels (which won't have any effect until
much later). Those are all good intentions. The road to hell is paved with them.