Monday, April 28, 2008

Gas Prices

This seems terrifically circular. Hillary Clinton's proposal to deal with high gas prices involves "Imposing a windfall profits tax on oil companies and using the money to suspend the gas tax for the peak summer months". Under the McCain plan, the oil companies can be anticipated to raise prices to take in part (perhaps all) of the "tax break" as profits. Under the Clinton plan, the oil companies can be anticipated to raise prices to recoup the money they pay under the "windfall profits tax". (And are we really supposed to believe that a "windfall profits tax" on oil companies would survive Bush's veto pen?)

Clinton also proposes "Closing $7.5 billion in oil and gas loopholes and using the funds to provide assistance for lower-income families to pay their energy and grocery bills". By this, she means ending "the approximately $7.5 billion per in tax giveaways and subsidies that we continue to provide to oil and gas companies, despite their record profits." Again, even if this repeal of subsidies were to pass, how would it survive a veto? (I did suggest cutting those subsidies as an alternative to to McCain's ideas, but I'm under no illusion that McCain would embrace the idea or that it would survive a White House veto. I think, in pitching something like this as a "plan", a candidate needs to address political reality - or it's just more pandering.) I'm also curious as to whether this includes or excludes subsidies of corn ethanol - if we are entering a world where cutting the subsidies is considered realistic, let's make sure we get rid of ethanol subsidies as well. Finally, however admirable the goals, as proposed by Clinton this particular idea has nothing to do with gas prices.

Clinton's other proposals relate to crude oil,
  • Cracking down on speculation by energy traders and market manipulation in oil and gas markets that are driving up the price of oil by at least $20 a barrel;
  • Pressuring OPEC to increase oil production, including by filing a WTO complaint against OPEC countries
  • Stopping new additions to the Strategic Petroleum Reserve and standing ready to release oil to counter market spikes and reduce volatility.
Except these ideas, even if we assume them realistic, won't affect gas prices. Summer gas price spikes are "justified" by refinery capacity, not whether oil is at $90 or $120/bbl.
It's the same story every year.

Each spring, just before the summer driving season, gasoline prices skyrocket. And every year, these four words appear in news reports nationwide as a big reason for the runup: "lack of refining capacity."

Then experts call for more refineries, politicians pledge to make the dirty behemoths easier to build, but guess what? Nothing really happens. Next year, repeat story.

So why hasn't a new refinery been built in the U.S. since 1976?
That question was asked by CNN Money more than a year ago. If Clinton wishes to be taken seriously on the issue of gas prices, what's her answer?

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