US political rhetoric over energy prices expected to heat up this summer

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, May 28 -- With motorists expected to pay higher gasoline prices this election year summer, US policymakers are looking to place blame.

In the Republican-controlled Congress, House leaders are mulling the idea of holding an "energy week" sometime this month as part of a media blitz to look proactive on an issue that recent polling suggest could hold some political sway on the presidential campaign trail.

Faced with gasoline prices soaring to more than $2.00/gal, most likely voters say President George W. Bush's past associations with the oil industry are hurting consumers, said a Zogby America survey paid for by The Wilderness Society.

In the survey, 57% of the voters polled said that the administration's "close ties" to the oil industry were hurting, rather than helping, consumers.

Mindful of polls, even those paid for by environmentalists, House leaders are expected to hold news conferences to showcase past efforts to encourage alternative fuels through expanded tax credits. They also will urge that domestic production be allowed to expand to off-limit areas, according to lobbyists and congressional sources.

The Senate Energy and Natural Resources Committee is also planning a hearing although the witness list had not been finalized at presstime.

Perhaps as a preview of the press campaign to come, Republicans from the House Resources Committee May 28 suggested that fuel prices might not be as high as they are today if Congress had fully endorsed the 2001 White House energy strategy plan.

"Looking back three years ago, President Bush presented a comprehensive national energy plan to Congress, urging them to act," a committee spokesman for Resources Chairman Richard Pombo (R-Calif.) said. "Since then, the average price of gasoline has skyrocketed from $1.34/gal to more than $2.00 today; the cost of home heating oil has increased by 33%; the cost of clean-burning natural gas has increased by an astounding 92%; a massive electricity blackout crippled the Northeast; and the United States has sent over $300 billion (and countless American jobs) to OPEC (Organization of Petroleum Exporting Countries) and other foreign nations to meet our energy needs at home."

An earlier House version of the stalled energy bill called for leasing a limited portion of the "1002" area of the Arctic National Wildlife Refuge (ANWR), for example. Congressional negotiators later took ANWR out because the Senate called it a deal breaker. Nevertheless, House leaders are expected to renew their call for putting ANWR back in the bill as a way to reduce foreign oil dependence.

Clean fuel issues
No one seriously believes ANWR can pass this Congress. But an issue still up for debate concerns the impact that environmental rules have on gasoline prices. Sen. Jeff Bingaman (D-NM), the ranking minority member of the Senate Energy and Natural Resources Committee, called on the White House last March to revise its low sulfur gasoline credit program.

Bingaman wanted independent importers to be allowed to carry a small deficit balance before 2005 in case they were unable to buy enough allotments; credits are increasing in value as the new rules take effect. He argued that the environmental impact would be minor, and consumers would benefit greatly by a well-supplied fuel market during the summer.
The Environmental Protection Agency (EPA) rejected the plan after an unusual coalition of environmental groups and US industry trade associations banded together to preserve the existing sulfur credit program (OGJ Online, Apr.26, 2004).

On another downstream issue, the agency remains silent regarding what it will do about petitions from California and New York to waive the existing oxygenate requirement in clean fuels. Congress and even cabinet members within President Bush's administration seem divided over the issue, with the departments of Commerce and Energy favoring a waiver and EPA leaning against it.

Ultimately, the White House will make that call, but with gasoline prices still high, none of the President's supporters wants to take action that appears to drive prices further up.

Fuel ethanol producers, who vehemently oppose a waiver because that would diminish demand for their product in some markets, are arguing that increased ethanol use has displaced gasoline volumes, making prices not as bad as they could be.

"As the summer driving season begins, ethanol use is holding down gasoline prices by more than 30¢/gal," said Renewable Fuels Association President Bob Dinneen. "US ethanol plants have produced record amounts of ethanol over the last 6 months to meet the demand for gasoline. Without ethanol, our country would be even more reliant on foreign imports of gasoline, and the pain at the pump would be much more severe."

The clean fuel debate is one of the larger obstacles blocking the bill. As part of a reformulated gasoline (RFG) reform plan now in the energy bill, most House members want the controversial clean fuel additive methyl tertiary butyl ether (MTBE) protected from product liability lawsuits.

Several key House Republican members, led by a powerful pair from the Texas delegation (House Majority Leader Tom DeLay and Energy and Commerce Chairman Joe Barton) say gasoline suppliers and MTBE producers need protection from frivolous lawsuits as they adjust their product to meet updated RFG guidelines spelled out in the bill. But enough senators objected to the provision to essentially shut down debate. The RFG reform plan would also mandate the use of fuel ethanol by at least doubling its current use in motor fuel by the end of the decade.

Outside of the fuel issue, House leaders also have serious reservations about a recent Senate action to attach nearly $19 billion in energy tax incentives to an unrelated job promotion bill.

Lobbyists say it's unclear whether all the renewed attention paid to energy issues will translate into serious negotiations between the House and Senate before the two chambers recess for good in about two months.

Industry offers explanations
Looking to dampen the rhetoric from both Democrats and Republicans, the American Petroleum Institute told Congress May 20 that while prices seem high, the highest price paid was in 1981, when adjusted for inflation, the average US price of gasoline was $2.79/gal. They also said refiners aren't simply charging higher prices to get bigger profits. At today's price, 99¢/gal of gasoline is attributable to the cost of crude oil. Another 43¢/gal goes toward local and federal taxes, API said.

The trade group also renewed its call for a comprehensive energy bill, saying the action "will encourage more supply diversity of both crude oil and natural gas and include the removal of barriers to greater domestic energy production and increased energy efficiency."

API also urged a group of Senate Democrats to stop lobbying the White House to release oil from the Strategic Petroleum Reserve, arguing that selling SPR oil would "have a negligible effect and would send the wrong message to the marketplace at exactly the wrong time."

The SPR however, represents one small area of energy policy consensus within Congress. Pro-industry Republicans, such as Barton, and Democrats, including presumptive Democratic presidential nominee Sen. John Kerry (D-Mass.), want the White House to suspend filling the SPR, at least for the short-term.

Response to API
Responding to API's report, Senate Minority Leader Tom Daschle (D-SD) May 26 told API that its members should urge the White House to consider short-term measures to moderate gasoline prices, including telling OPEC to increase production, urging President Bush to stop filling SPR, and passing the ethanol mandate portion of the energy bill called a "renewable fuels standard" because it would extend current gasoline supplies with domestically produced ethanol.

"With prices rising, we need to make more gasoline available, and none of the proposals currently on the table other than the renewable fuels standard offers any near or mid-term increase in finished gasoline supplies," Daschle noted. "Given this fact and the six-month impasse over the comprehensive energy legislation, it is time to move forward with the RFS on its own."