Tuesday, September 06, 2005

Bush Should Use Bully Pulpit To Push Down Gas Prices

Skyrocketing gasoline prices -- pushed to record highs because of Hurricane Katrina -- could lead the U.S. into recession, economists fear.

It's time for President Bush to do now what candidate Bush said he would back in 2000 -- use the bully pulpit of the presidency to lower gas prices. The nation's economy, still in post-9/11 recovery, cannot afford a major retraction.

Most Americans probably haven't determined the ramifications of skyrocketing gas prices -- on their checkbooks, let alone on the national economy. It's up to the Bush Administration to take a proactive leadership role, before it's too late.

The AAA motor club reported Monday that the nationwide average for a gallon of gasoline was $3.05, although prices were much higher in most major metropolitan areas. That's roughly double where gas prices stood two years ago.

For a consumer filling up a 12-gallon tank twice a week, that's a price increase of about $36.50 per week, or roughly $1,900 per year. That's a hike many consumer cannot afford, which may explain why an estimated 70 percent of gas purchases are made with credit cards.

***

Candidate Bush said that if he would bring down gasoline prices through sheer force of personality, by creating enough political good will with oil-producing nations that they would increase their supply of crude.

"I would work with our friends in OPEC to convince them to open up the spigot, to increase the supply," Bush told reporters at a June, 2000, campaign stop in Michigan. "Use the capital that my administration will earn, with the Kuwaitis or the Saudis, and convince them to open up the spigot. Ours is a nation that helped Kuwait and the Saudis, and you'd think we'd have the capital necessary to convince them to increase the crude supplies."

Candidate Bush suggested in 2000 that President Clinton "jawbone OPEC." It's advice he should take now.

But there is another step Bush should take -- show some cahones, and call for a "summit" with oil and gas producers, many of whom have long-time ties to the Bush family.

In 2004, the nine largest integrated oil companies made $87 billion in profit, with Exxon Mobil alone making $25 billion, according to an August report by the Congressional Research Service.

This year, Exxon Mobil reported profits jumped 32 percent to $7.6 billion in the second quarter compared to the same period in 2004. BP saw a profit increase of about 30 percent, totaling $5.6 billion in the second quarter, while Conoco Phillips earned $3.1 billion, a 55 percent increase in profits in the second quarter compared to the same period in 2004.

American consumers spent an additional $105 million per day in 2004 for gasoline compared to 2003, according to the congressional report.

While it flies in the face of capitalism to suggest a corporation should cut back on revenues, the current situation has all the makings of a national crisis.

"The extraordinary high price of fuel means that cost reduction has gone beyond urgent," Giovanni Bisignani, director-general and CEO of the International Air Transport Association, told Business Week. "Fuel -- the Fifth Horseman of the Apocalypse -- is the biggest factor forcing the structural change and efficiency our industry desperately needs."

Mark Cliffe, the global head of economics and strategy at ING in London, told the magazine that Katrina's effect "probably the most serious challenge we face to growth since the Iraq war." Consumers will have to steel themselves to the fact that gas prices aren't going to come down, he added.

High gas prices not only affect consumers at the pump. They also contribute to higher heating costs. Sen. Tom Harkin (D-IA) urged Bush to release $900 million for the Low Income Home Energy Assistance Program so needy people will be able to pay their heating bills this winter.

And higher gas prices affect the transportation industry -- air and trucking costs, for example -- which not only mean higher air ticket prices, but likely also higher costs for consumer items reliant on shipping.

The Senate Committee on Energy and Natural Resources will meet Tuesday to discuss gas prices and the global impact. Harkin spokesperson Maureen Knightly said the meeting was moved up from later in the week.

***

The Bush administration has opened emergency oil stockpiles -- a step Bush has previously said he would only do at a time of "national emergency." And European allies late last week pledged to send 30 million barrels of oil and gasoline from their emergency supplies to the United States to help bridge short-term supply disruptions.

But those are only short-term responses designed to prevent gas prices from surging even higher. Neither step will result in the lowering of prices. Neither will any continued discussion of opening up oil drilling in Alaska or national parks elsewhere in the U.S. -- even if such steps were taken, consumers wouldn't see the results for several years.

The only answer is for Bush to be a leader, and put the interests of the average American ahead of his OPEC and corporate friends.

15 Comments:

Anonymous greeby said...

What Bush does
And what a President should do, are mutually exclusive events, and never the twain shall meet

1:24 AM  
Anonymous kansasblue said...

I disagree. We need to...
cut consumption, improve gas mileage, and look of alternate energy sources.

1:25 AM  
Anonymous Kevin said...

I don't disagree, kansasblue. Those should be done! But, in the meantime we have to deal with what we have.

2:02 AM  
Anonymous alias: "cutiepie" johnson said...

Better gas mileage is a long-term solution (and one that I advocate). But it won't change gas prices in the short-term.

Bush needs to do something, and quickly. The effects of such high gas and fuel costs could be destructive to the economy.

2:07 AM  
Blogger Eabha the Kiwi said...

But it's the economy that has brought on Hurricane Katrina and climate chaos around the world.

It's the economy that put so many in New Orleans and around the Gulf so crippled with poverty they couldn't escape the storm.

It's the economy that has brought on the oil crisis in the name of PEAK OIL.

It's the economy that has perverted our governments to the extent between the two parties; who have now been reduced to inert symbols of the ruling elite.

The destruction of the economy would be about the greatest thing for the planet. It may reduce the standard of living in the United States; but then again the three children who die of poverty every three seconds don't get an oppinion.

2:54 AM  
Anonymous Anonymous said...

Eabha, I'm assuming you're being serious -- but c'mon?!?

Destroying the economy hurts everyone -- including the poverty-stricken. That's not in anyone's best interest.

3:00 AM  
Blogger Damned Dissenter said...

I'm a little dubious of the claim that higher gas prices will "destroy America". If that were true, then Britain, which has long averaged prices around twice what American's pay, would prove that point. Right now, Brits are paying well over $6 per gallon at the pump.

In fact there are plenty of benefits to higher gas prices: Brits drive less, and they invest more in public transport. Eabha alludes to some of the true costs to gasoline that Americans have been avoiding for so many years now. Certainly much of the political problems in the Middle East could be added to that list.

I agree that it would be painful for oiloholic America to adjust to $3 or $4 per gallon gas but that's where the government should step in and provide alternatives -- a responsibility Republicans seem allergic to.

3:50 AM  
Blogger The Libertarian Republican said...

"The destruction of the economy would be about the greatest thing for the planet." -- I should add that one to the Hall of Fame of Very Bad Ideas. Thanks everyone for not using the term "price gouging," even though Bush did. It's called supply and demand. When the demand is high, those who stand to make a profit will eventually seek to increase the supply.

http://gopliberty.blogspot.com/

10:16 AM  
Anonymous Anonymous said...

The problem is not th eprice of gas or oil, it is the shock of a sudden increase. this is what would damage the economy. the US economy is in a strange state and the recovery that has occurred could be severely undercut by these oil price shocks. it could lead to a terrible spiral where the housing market crashes and the country falls into a recession.

That said, in the long term, i believe higher prices for gas is a good thing. or better yet, lower prices but higher gas taxes. use the tax system to incentivize people to stop bying SUVs, to use hybrids, to force the auto makers to build alternative use cars etc.... you can achieve this with a series of income tax credits and a steep hike in gasoline taxes. but you will never see this with a republican congress.

11:31 AM  
Anonymous Anonymous said...

Thanks Kris. More examples of price gouging and profiteering from disaster are available at this article about Haliburton.

11:34 AM  
Anonymous Anonymous said...

There are already tax credits for buying hybrids. The problem is that Bush (following the lead of other presidents) has coddled the Big 3.

So you have Toyota out with 10 hybrids, and Honda not far behind, and the Big 3 are losing money and market share, while Bush officially says we have to "study" the issue, perhaps for another five years.

12:07 PM  
Anonymous Anonymous said...

Intentionally increasing the price of gasoline is a very regressive way to tax people: poor people often have no choice about how much gas they must use to get to work and the gas tax would be a larger proportion of their overall income, compared to the very wealthy.

I agree, though that the causality of high gas prices and a nation's poor economy is often confused. There is a (slightly outdated) chart comparing gas prices in various countries, and surprisingly, some countries paying three times what the US does have very high standards of living, while others, paying only pennies per gallon, have much lower standards of living.

12:29 PM  
Anonymous Damned Dissenter said...

It is sadly predictable that the Bush administration sees this problem and finds a different solution: lower the environmental restrictions on US oil refineries!

That's right. The answer to America's energy problems is to increase pollution.

Only a Republican could follow that logic.

3:30 PM  
Anonymous ticklebug said...

Interesting post.

"That said, in the long term, i believe higher prices for gas is a good thing. or better yet, lower prices but higher gas taxes. use the tax system to incentivize people to stop bying SUVs, to use hybrids, to force the auto makers to build alternative use cars etc.... you can achieve this with a series of income tax credits and a steep hike in gasoline taxes. but you will never see this with a republican congress."

Amen to that - I mean getting rid of the bullying SUV drivers.

I have one question, though. I heard that the battery used in Hybrids are just as hazardous, if not more, than SUV (environmentally speaking).

7:19 PM  
Blogger Eabha the Kiwi said...

No, I think you all misunderstood. By the poor I didn't mean the middle class. I meant the poor working class who can't aford to drive, those without cars at all. The ecnomony is premised on inequality. It exploits human and environmental resources. You privilaged liberals can't honestly be contesting that the poor are getting poorer as the ruling oligarchy continues to get wealthier. Pull you collective heads out of the sand. Your vision needs to be more macro in this new era.

I feel sorry for amerikans because you are systematically deprived of information, but come'on get with the new millenium; It's the economy stupid!

10:36 PM  

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