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• Gasoline : End the ouch
Gasoline : End the ouch
St. Louis Post-Dispatch — August 17, 2005
There’s a smart way and a dumb way to deal with the issue of sky-high gasoline prices. America, land of special-interest politics, is taking the dumb way.
A spate of refinery breakdowns and tensions over Iran helped send gasoline to a record $2.55 a gallon in St. Louis last Friday. But the main reason for sky-high gasoline prices is that America and the world use too much of it. With the world economy now growing at a healthy 4 percent a year, demand for oil has hit the limit of supply. So, the price of a barrel of oil is up 44 percent in the past year, to $66.15 per barrel.
The Middle East worry-meter fluctuates by the day, and our recent bad luck with refineries might not continue. The oil market is also notoriously volatile. So, it’s very possible that we could see a short-term reprieve from today’s eye-popping pump prices.
But the main factor lifting oil prices is not going away. Growing demand for oil is likely to exceed the ability to pump it, at least until the next recession rolls around. In fact, some analysts think oil could go as high as $80 or even $100 a barrel if demand keeps growing and the Iran nuclear issue turns nasty. Throw in the fact that U.S. refineries are operating at 96 percent capacity, with no margin for breakdowns, and the prospects for gas prices become scary.
The logical course would be to reduce our dependence on the stuff. Since 40 percent of our oil goes to fuel cars, SUVs and light trucks, raising federal fuel economy standards would be the most rational approach. Phase in the tighter limits gradually, giving the automakers time to adjust, and provide federal help for research into fuel-saving technology.
That’s the smart way to handle the problem. The dumb way is to do nothing and let the fickle hand of the oil market slap the nation around. Sudden oil shocks will force conservation the hard way, by draining consumers’ wallets and costing jobs.
Until now, Americans have been brushing off gasoline prices. SUV and truck sales were actually up 25 percent last month, fed by automakers’ steep price cuts.
At some level, however, higher gas prices would tank the U.S. auto industry as they did in the 1970s and early ‘80s. Gas reached an inflation-adjusted $3.03 a gallon in 1981.
That would be particularly bad news for auto plants in St. Louis, which specialize in gas guzzling SUVs, minivans and muscle-bound pickups. We’d be better off finding ways to make those vehicles guzzle less.
The energy bill recently passed by Congress was half-smart. It provides tax incentives for producing more domestic oil. It subsidizes fuel-saving hybrid vehicles, and mandates more ethanol in gasoline, which will cut oil use. That’s good as far as it goes. But we need higher fuel economy standards to lessen our oil addiction.
The Bush administration is mulling changes in fuel standards for SUVs and light trucks, but the latest news isn’t good. The New York Times reports that the White House plans to exempt Hummers and other monster SUVs from new fuel limits.
By exempting them, Mr. Bush will encourage automakers to build more, with little thought to gas savings. In a nation hooked on imported oil, that’s just dumb.
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