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The Honolulu Advertiser
Posted on: Saturday, June 21, 2008

Don't expect quick fixes to ease pain at the pump

By Erin Kelly
Gannett News Service

Hawaii news photo - The Honolulu Advertiser

A driver in Pennsylvania fills up. Experts see no immediate relief from high gas prices and many proposals wouldn't have an impact for years.

GENE J. PUSKAR | Associated Press

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WASHINGTON — Will Congress do something to cut gas prices before you drive off to the beach this summer?

Not a chance, energy experts say.

The truth is that despite the flurry of bills being debated on Capitol Hill, Congress cannot control the global price of oil nor offer real help for beleaguered American drivers now or in the near future, analysts say. Many of the solutions lawmakers are proposing — from drilling in the Alaskan wilderness to boosting the use of renewable energy — would take years or even decades to have an impact.

"I wish I could say there was relief around the corner, but there isn't," said Robert Ebel, senior energy adviser at the Center for Strategic and International Studies. "Congress members don't want to tell you that, but that's the reality."

It's not that the politicians don't want to help. With their constituents screaming from pain at the pump, members of Congress facing re-election in November would like nothing better than to fix the problem and take credit for doing so, Ebel said.

But Congress has no power over the worldwide demand for oil, which is being fueled in large part by developing nations such as India and China with an insatiable hunger for energy, said Bob O'Brien, the online stocks editor at Barrons.com.

"China is undergoing this economic boom and is effectively willing to pay any price," O'Brien said. "Just by the nature of the market, the product is going to seek out the end user that is willing to pay the most. And that dynamic is not going to change anytime soon."

That hasn't stopped Congress from trying to find a quick fix.

In May, President Bush reluctantly signed bipartisan legislation that stops him from stockpiling oil in the nation's emergency reserve through the end of this year. Supporters of the bill said it would reduce gas prices by 5 cents to 25 cents a gallon by keeping 70,000 more barrels of oil a day on the market beginning July 1.

But energy analysts are skeptical.

"Increasing supply by 70,000 barrels a day when we consume 21 million barrels a day isn't going to have much effect," Ebel said. "I think it's largely a public relations effort."

Proposals by presumptive Republican presidential nominee John McCain to give Americans an immediate holiday from having to pay the 18.4 cents a gallon federal gas tax would slash prices initially. But analysts say it also would lead to increased demand, which would drive up prices again.

Attempts to impose a windfall profits tax on oil companies and invest the money in renewable energy — which the Senate tried unsuccessfully this month — also could end up hurting consumers because the oil companies would just pass on their increased costs, analysts say. Efforts to go after market speculators who bid up the price of oil also failed in the Senate, although Congress members have vowed to try again.

CALLS FOR ACTION

Before the Fourth of July holiday, the House will take up a bill aimed at closing the so-called "Enron loophole," which exempts energy speculators who trade electronically from U.S. regulation. Supporters say closing the loophole could cut oil prices by as much as a third. There also are calls for congressional investigations into possible abuses by speculators who may be trading on inside information or colluding to drive up prices.

"At this point, we just don't know the nature and extent of abuses that might be taking place in the market," O'Brien said. "A congressional investigation into the forces that are affecting this market could be a step in the right direction."

But with immediate solutions in short supply, the debate has shifted to calls by the Bush administration and Republican congressional leaders to lift the 27-year federal ban on offshore oil drilling along most of the U.S. coast and open up Alaska's Arctic National Wildlife Refuge to oil and gas exploration.

"In the short run, the American economy will continue to rely largely on oil," Bush said Wednesday. "And that means we need to increase supply, especially here at home."

Bush acknowledged his plans would "take years to have their full impact."

The U.S. Energy Information Administration recently estimated that drilling in the Arctic refuge would reduce the global price of oil between 41 cents and $1.44 per barrel and take 20 years to have much effect on the domestic oil supply. It would take about the same amount of time for offshore oil drilling to make any real difference, according to the EIA.

Democratic congressional leaders and conservationists say the plan will damage the environment and boost oil companies' already large profits without significantly decreasing Americans' dependence on foreign oil. They also say more drilling permits should not be issued when oil companies aren't drilling on about 68 million acres of land they already lease.

"Instead of opening every last corner of our country to oil drilling, we need to produce cars that go farther on a gallon of gasoline, invest in mass transit and other alternatives to driving, and develop clean renewable energy," said Anna Aurilio of Environment America.

BEHAVIORS CHANGING

But developing alternative energy also takes time. The most ambitious proposal would require the nation to get 25 percent of its energy from renewable sources within 25 years.

In the meantime, consumers are taking steps on their own to reduce their demand for oil, O'Brien said.

"If you look at the statistics over Memorial Day weekend, you'll see there was 4 percent less gas demand than in 2007," O'Brien said. "Either folks are leaving the car in the garage and spending their time off in the backyard, or they're leaving the big car in the garage and taking the smaller one."

That trend is also reflected in the kind of cars Americans are buying.

"All of a sudden, America's best-selling vehicle is no longer the Ford F-150 pickup; it's the Toyota Camry," O'Brien said. "People are changing their behaviors."

The best thing Congress could do, he said, is to give people tax incentives to change even quicker.

The House last month voted overwhelmingly to renew tax credits for Americans who buy hybrid cars or install energy-efficient windows, insulation, heaters, air conditioners or solar energy systems in their homes. However, the Senate failed this month to do the same amid a partisan dispute over how to fund the tax credits.

"Our federal leaders must now put the American people ahead of partisan politics," said Kateri Callahan, president of the nonprofit Alliance to Save Energy.