Can Policies Affect Gas Prices?

ByKate Snow

W A S H I N G T O N, March 31, 2004 -- It's impossible for drivers to ignore.

In San Diego these days, regular unleaded gasoline is going for well over $2 a gallon. The nationwide average cost is $1.76 per gallon, up 28 cents since December.

Economists warn that high prices at the pump will ripple through the whole economy. Airlines are expecting larger losses than they'd originally predicted. The trucking industry will spend more money to ship goods, driving up prices for consumers.

As a political issue, it's a no-brainer. Both the president and his Democratic rival are promising relief.

"What we need is an energy plan so we're less dependent on foreign sources of energy," President Bush said Tuesday in Appleton, Wis.

The White House says the administration's energy bill, which has languished in Congress for three years, offers a comprehensive solution with an emphasis on growing domestic oil production.

"We continue to go from crisis to crisis when it comes to — whether it's electricity, or whether it's gas prices. We need comprehensive solutions, not patchwork crisis management," said White House spokesman Scott McClellan.

But each time the Senate has tried to pass the president's energy bill, it has been watered down. A controversial provision to allow drilling in the Alaska National Wildlife Refuge has been removed.

Analysts say without that provision, the bill doesn't do much to increase domestic oil supplies.

"If you take ANWR off the table there is not much left in there to provide any substantial growth in domestic crude oil supplies," said Robert Ebel, chairman of the Center for Strategic and International Studies' energy program.

The president's energy plan also includes tax incentives to encourage domestic oil production. But a study by the Bush administration's own Energy Department found those incentives would have little effect.

A Republican aide on the Senate Energy Committee acknowledged that without the ANWR provision, the energy bill's impact on gasoline prices would be negligible.

And even if the ANWR provision were somehow to make it through Congress, the government estimates it would take 10 years to develop those fields.

"There won't be a thimble of oil for seven to 10 years," said a spokesman for Democrats on the Senate Energy Committee.

The Energy Department also found that the amount of oil that could be produced by ANWR would represent only a tiny percentage of the amount of oil the United States consumes.

Another aide to Senate Democrats said the highest estimates put the potential output from ANWR at 1 million barrels of oil per day. But Americans consume 20 million barrels of oil per day, the aide said.

Kerry's Plans

President Bush isn't the only one making promises to voters. Democratic candidate John Kerry says he has plans as well.

"We need an energy policy that's real and honest for this country," the Massachusetts senator told voters in San Diego Tuesday.

Kerry offered a three-part plan. The first goal: Pressure OPEC to release more oil onto the world market.

But that hasn't worked for the Bush White House so far.

On Wednesday, the Organization of Petroleum Exporting Countries decided to cut oil production by four percent, despite what the White House called "constant conversations" with cartel leaders.

And twisting arms didn't work for President Clinton, whose globe-trotting energy secretary, Bill Richardson, tried to convince OPEC nations to increase output.

Kerry's second recommendation is to stop filling the nation's backup stockpile of emergency crude oil, called the strategic petroleum reserve.

In 2000, President Clinton tried something similar. He released 30 million barrels of oil from the reserve in a bid to bring gas prices down.

Gas prices did fall, but analysts say it wasn't necessarily because of Clinton's action.

"It might have had a very marginal effect, [but] what really mattered, what really brought oil prices back down, was the U.S. and the global economy was slowing down, the global demand for oil was slowing and we had a very warm winter," said James Glassman, an economist for JP Morgan.

Finally, Kerry suggests simplifying the patchwork of regulations across the country governing what goes into gasoline products. Right now the map is a jumble of different rules, varying by state and region.

But President Bush suggested the same thing in his National Energy Policy, submitted to Congress back in May of 2001, and it hasn't happened yet.

Getting state governments and oil companies to agree on new rules won't be easy.

The bottom line: There's not much any president can do to influence prices at the pump.

"I don't care whether there's a Democratic administration in place or a Republican in place," said Ebel. "There is little that can be done short term to influence gasoline prices."

That's not the message most American drivers — or voters — want to hear.

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