A Bulletin subscriber called me the other day requesting help in identifying the members of Congress who opposed the measure being proposed that would allow more off-shore oil drilling. The woman seemed convinced that failure of the measure would keep prices of gasoline traveling on its current upward spiral. Two days later there was an enterprise story in USA Today that outlined seven different strategies and their potential effect on gasoline prices and the drawbacks to following each of the plans.
Estimates are that there could be as much as 100 billion barrels of oil off the coasts of the U.S. and under the Alaskan tundra. If the numbers are accurate that would be enough oil to satisfy domestic consumption for more than 13 years. Many in the country share the readerís point of view that with the economy crumbling under the pressure of $4 gasoline we can no longer allow ourselves the luxury of feel-good gestures by avoiding any potential dangers to the environment. The dilemma is that, according to the USA Today report, it would take five years to realize any benefits at the gas pump. Even then the price reduction would only be between 2 to 7 cents per gallon if oil was still selling at current levels. That is not an excuse not to expand the drilling, it merely points out that it is not the single solution.
A proposal being discussed among the presidential candidates that would have the most impact on current pricing is a lifting of the 18.4 cents per gallon federal gasoline tax. However, the action would siphon about $9 billion from the federal Highway Trust Fund which funds needed highway construction and repairs. Opponents of the idea point out it would also send the wrong signal to American drivers, increase the demand for gasoline and let the oil companies pocket the difference and drive prices higher.
The most direct way to lower consumers gasoline bill at the pumps is something drivers can do on their own, and that is to go there less often. In our area mass transit is not really an option, but planning trips carefully, car pooling, trading in for a smaller vehicle or driving slower are options available for Texans. Gasoline consumption is already down one percent from a year ago and the U.S. Energy Department projects the first annual drop in demand in 17 years will occur this year. The Alliance to Save Energy said that driving 60 miles per hour rather than 65 lowers fuel costs by 20 cents per gallon. And increasing fuel efficiency from 20.1 miles per gallon to 21.1 would save an average driver about 29 gallons per year.
Other legislation under consideration is aimed at curbing the influence of oil speculators. There is little debate that they have helped drive up the price of gasoline and some estimate it is as much as 47 cents per gallon, others say it is much higher. Large banks and hedge funds buy and sell futures contracts for oil like other commodities. Typically, the oil is never delivered, but the sales help determine the price of actual crude oil. Michael Greenberger, a former top official at the Futures Trading Commission, said they now account for 80 percent of oil contract trades. The cost of crude oil remains the largest factor in determining the price of gasoline.
Perhaps the fastest way to cut prices at the pump would be to prop up the U.S. dollar by raising interest rates. Because oil is priced world-wide in dollars, producers raise prices when the dollar is weak to maintain profits. However, the Federal Reserve has lowered short-term interest rates seven times since last September, and it is not likely to reverse course and raise them in an anemic economy. Another quick solution would be to flood the market with oil from the Strategic Petroleum Reserve. Experts say a drawdown of 200 million barrels over the next nine months could reduce prices about 37 cents per gallon. But that is an action President Bush and the Congress is not likely to take unless there were to become a dire shortage of oil.
I could easily understand the frustration of the reader who called, but there is not a single answer or a quick fix. We have debated for three decades since the first oil crisis and the country still does not have a comprehensive and effective energy plan.
Robert Brincefield is vice president and publisher of the Brownwood Bulletin. His column appears on Sunday. He may be reached by e-mail at firstname.lastname@example.org.