Mountain Mail Newspaper, CO
06-06-07
Congress should hold itself accountable for high gas prices
Guest Opinion
by James M. Taylor
The U.S. House of Representatives this week passed legislation that would make
it a federal crime, complete with prison sentences of as many as 10 years, for
anybody to sell gasoline at prices "unconscionably excessive" or that take "unfair
advantage" of consumers in an energy emergency.
If causing fuel to be sold at unnecessarily high prices were already a crime,
Congress would have no alternative but to throw itself in jail.
The House legislation is remarkable in that it fails to acknowledge government
responsibility for much of the problem of spiking gasoline prices. While gasoline
consumption is growing by more than 2 percent a year, U.S. refinery production
is growing by only 0.5 percent a year.
This is creating the bottleneck in U.S. supply largely responsible for recent price
increases.
The bottleneck, ironically enough, was caused in the first place by government
interference in the marketplace.
Last year, U.S. oil companies announced plans to expand refineries to add
capacity of 1.6 million to 1.8 million barrels per day. Those plans were
dramatically scaled back, however, after President George W. Bush in his
January State of the Union Address called for a dramatic increase in biofuel
production.
Bush is seeking to induce, and Congress is seeking to mandate, an increase in
annual biofuel production from roughly 6 billion gallons today to 35 billion gallons
by 2017.
With Washington politicians fighting each other to see who can require the
greatest increase in biofuel production, it makes no sense for anybody to invest
in expansion of oil refineries.
After all, why invest money to produce something the government is doing its
best to replace? Investing in additional refinery capacity has suddenly become
very risky.
In the meantime, gasoline demand continues to grow, biofuels are nowhere near
being ready to meet growing demand and government has just imposed an 800pound gorilla of a disincentive to expand refinery capacity.
The predictable end result has been sharply rising gas prices.
Still more disturbing is the hike in prices that will occur if and when government
succeeds in imposing massive increases in biofuel production on American
consumers.
Even with a 51-cent-per-gallon federal subsidy (which we all pay for, of course),
a gallon of ethanol typically sells for slightly more than a gallon of gasoline. But
ethanol is a less-efficient fuel source than gasoline, providing only 70 percent of
the miles per gallon gasoline provides.
This makes ethanol a substantially more expensive fuel than gasoline.
Ethanol prices, moreover, will rise dramatically under a government-induced
increase in ethanol production. Corn prices have already doubled since last year,
due largely to rising ethanol demand.
This is pushing up prices of both ethanol and food. According to a just-released
study by Iowa State University, growing ethanol production caused a $14
billion rise in food prices last year.
The fivefold increase in biofuel production envisioned by Congress and President
Bush will lead to still higher spikes in food and fuel prices. All of this, keep in
mind, is justified by Congress and the president as a response to gasoline prices
that have yet to approach the price of ethanol.
This brings us back to the question of who is really forcing American consumers
to pay "unconscionably excessive" fuel prices.
If Congress wants to threaten prison time for those responsible, it should at least
have the decency to make itself subject to the same laws and penalties.
James M. Taylor is senior fellow for environment policy at The Heartland
Institute, a national nonprofit research and education organization founded in
Chicago in 1984. It is not affiliated with any political party, business, or
foundation.