[Mb-civic] The gas price adjustment - Robert Kuttner - Boston Globe Op-Ed

[swiggard at comcast.net]

The gas price adjustment

By Robert Kuttner  |  April 29, 2006  |  The Boston Globe

POLITICIANS of both parties, particularly Republicans, are scrambling to
deal with the voter pain of $3-a-gallon gasoline. President Bush wants a
$100 tax rebate to help consumers pay for more costly fuel and more tax
credits for people who buy (mostly Japanese-made) hybrid cars. He has
revived the recurring Republican idea of drilling in Alaska's wilderness.
He proposes to suspend federal purchases for the national petroleum
reserve. ''Every little bit helps," Bush said, rather pitifully. Next,
he'll be wearing Jimmy Carter's sweaters.

Democrats' ideas include the proposal by Senator Robert Menendez of New
Jersey to suspend temporarily the (industrial world's lowest) federal gas
tax of 18.4 cents a gallon to be offset by an excess-profits tax on oil
companies, a federal investigation of price gouging, and demands that Bush
''jawbone" his chums at the oil companies and in Saudi Arabia and Kuwait.
Senator Ron Wyden of Oregon wants oil companies to start paying
long-avoided royalties for petroleum drilled on federal lands.

The oil companies, meanwhile, are practicing damage control. Their
full-page newspaper ads show (accurately) that oil profits as a percent of
sales are modest. But wait a minute: the higher the retail price, the
higher the profit -- and the percentage stays the same. They could make the
same claim if gas went to $10 a gallon. Their profits relative to invested
capital are off the charts. ExxonMobil just released its first-quarter
profits: more than $8 billion -- its highest ever. ExxonMobil CEO Lee R.
Raymond, who recently retired, was paid $400 million last year.

The oil companies argue that the main culprit is temporary bottlenecks in
refining capacity (caused in part by those pesty environmental regulations)
and that their astronomical profits are necessary because much of their
boodle gets plowed back into oil exploration. But that's exactly the
problem. The political and financial dominance of the oil industry, and the
related premise that we mainly need more drilling, just reinforces the
national illusion that we can keep running our economy on fossil fuels.

It's salutary that the Democrats are stoking public anger at the oil
companies. But the problem goes far deeper than price-gouging that takes
advantage of temporary shortages. These shortages are destined to worsen,
because world oil reserves that can be recovered at reasonable cost are at
or near an all-time peak. Reserves are beginning a steady decline just at a
moment when 3 billion new consumers in Asia are hoping to attain something
close to Western middle-class living standards. So forget cheap gas.

The only good thing about chronically scarce petroleum and the related high
retail gas prices is that we may finally wake up and change course.

It's not as if serious people didn't see this coming. Europe, for example,
spends about half of what the United States does on energy, relative to
GDP. But Europe has entirely different policies on everything from mass
transit to building codes to gas taxes. Brazil makes more than half of its
motor fuels from domestic renewable ethanol. Japan is far ahead of the
United States in the development of efficient hybrid cars.

Had we begun adjusting to the need for a post-petroleum economy during the
first and second oil shocks, three decades ago when Jimmy Carter was
ridiculed for wearing that cardigan, or even 10 years ago when ''Ozone Al"
Gore was mocked for taking seriously the threat of global warming, we would
not be getting robbed quite so helplessly at the pump by a collusion of
Mideast sheiks, oil barons, and their Republican enablers.

It's fine that politicians of both parties want to give voters some
election-year price relief at the pump. But even if a huge windfall profits
tax were enacted and the proceeds used to lower retail gas prices, that
would be a massive policy default and a win for business as usual.

The Republicans are far more cozy and culpable on this than the Democrats
-- Republican leaders have even resisted mandating higher auto
fuel-efficiency standards. But Democrats need to display more long-term
leadership to move public opinion. Whichever party wins in November, the
risk remains that prices will temporarily stabilize, the perceived crisis
will pass, and the national denial and deferral will continue.

America needs an Apollo-scale program to shift to renewable energy and more
efficient vehicles. If the United States acts soon, it needn't lower the
standard of living; it just needs to stop donating so much of Americans'
incomes to the oil companies and to prevent them and their allies from
dictating national energy policy.

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