Finger pointing and the gas 'crisis'

In the Biblical story about the Tower of Babel, mankind spoke with one language and worked together to build an edifice that reached to heaven. The moral of that story is that human beings have to speak a common language and work together to produce great achievements.

Given the finger-pointing concerning surging gas prices, it is clear that neither the president, Congress, interest groups nor OPEC members have recently read Genesis. Or maybe they clearly understand that in order to maintain the status quo, a multitude of contradictory voices are necessary to obfuscate contemporary economic and environmental realities.

Last fall, I wrote a column in which I said a fundamental reason that oil prices were rising was the U.S. government's purchase of oil to fill the Strategic Petroleum Reserve. These sizeable purchases have taken a lot of oil off of the market and thus created an artificial scarcity. Several months ago, Rep. Bob Goodlatte, R-Roanoke, suggested that President Bush stop filling the reserve while prices were rising. The congressman also understood that filling the reserve was both a cause and effect on spiking gas prices. However, the president continues with the policy. He points to Middle East terrorism as the primary reason to continue these purchases.

But adding to the reserve is only part of the reason gas prices are rising at the pump. OPEC cut production in April fearing a glut of oil would send prices tumbling before the end of summer. Their logic seemed strange because both driving and consumption increase during the summer driving season. OPEC explained its rationale by saying there was enough oil on the world's market but a lack of gas refining capacity in the United States.

OPEC pointed the finger at environmentalists in America.

Sen. Joe Liberman, D-Connecticut, in recent hearings before the Senate Committee on Environmental and Public Works, sought to refute OPEC and conservative claims that the nation's environmental regulatory framework had a direct impact on rising gas prices. He submitted two academic papers into the record to show a strong relationship between oil refinery environmental compliance and healthy profit margins. The research shows that this relationship exists because these firms had utilized cost-effective processes to reduce emissions.

Liberman also believes that we have overlooked the most obvious culprit for higher gas costs: the giant oil companies. He noted that the oil industry has acknowledged record profits as a result of higher pump prices and asks a legitimate question: "Wouldn't it be a reasonable assumption to make that the oil industry's high profits were financed by high prices at the pump?"

The oil companies, conscious of their image, point the finger right back at the environmentalists. The American Petroleum Institute says the refining system is currently running at full capacity and there are no plans to build new refineries. In fact, there have been no new refineries built in the United States since 1980 and the industry has closed half of their refineries since 1981. Oil companies say environmental regulations have made it difficult to build new refining plants.

Shell Oil recently announced that it would close a refining facility in Bakersfield, Calif. Sen. Ron Wyden, D-Oregon, asked the Federal Trade Commission to investigate Shell's decision and said, "We have evidence that companies deliberately curtailed refining capacity [in the 1990s] as a strategy for boosting profits." Shell denies the charge and claims it makes business decisions based on what's good for the company and not how it affects the price of gasoline. So much for the public interest.

Maybe OPEC and the oil industry are actually a cabal. Or maybe environmental constraints are a real problem. Interest groups for both sides have framed the question as an either/or proposition: either we can have stable gas prices or clean air/water -- but not both.

Yet, both desirable outcomes are possible. Liberman sponsored a bill that was supported by the American Petroleum Institute, corn growers and environmental groups that would have made a uniform blend of gasoline for the country. That blend would have used ethanol to replace MTBE, an additive now known to cause water pollution. However, the bill was killed in conference because MTBE producers wanted liability protection and a phase-out of the additive.

Congress should quickly address the concerns of MTBE producers and pass this legislation into law. Congress, and state legislatures, should also begin to offer financial incentives for oil companies to increase refining and gasoline storage capacity. These legislative bodies should create tax breaks for companies to build innovative and efficient refineries as well.

Finally, the Windfall Profits Tax should be reinstated to tax a percentage of the oil companies' abnormally high profits created by the closing of refineries. Despite the business decision argument, the oil companies are involved in an anti-competitive strategy. The taxes from these manipulated "windfalls" could be earmarked for companies that increase refining capacities and meet clean air/water standards. Used in this manner, the Windfall Profits Tax would create a disincentive for oil companies to close existing refining plants and an incentive for them to build new refineries that protect the environment.

The finger-pointing by Congress, the oil industry and environmental interest groups only leads to policy paralysis. Solving the refining problem in an environmentally safe way seems to be the first step in proving stable gas prices. Let's demand that Congress take that first step in a long-term strategy designed to protect both the economy and environment.