Tuesday, April 25, 2006

That pesky oil addiction

So President Bush makes has made a statement:

President George W. Bush pressured profit-rich oil companies to invest in new refineries on Tuesday and announced steps against any price gouging to contain gas prices that have soared while his popularity plummets.

He directed the Environmental Protection Agency to suspend federal clean-burning gasoline rules this summer that are forcing consumers to buy expensive new gasoline blends.

Bush temporarily halted shipments to the Strategic Petroleum Reserve as a way to get more oil on the market and try to combat prices that have soared above $3 a gallon.
But he acknowledged that Americans are in for a tough summer on the road.

"Energy experts predict gas prices are going to remain high throughout the summer. And that's going to be a continued strain on the American people," he told the Renewable Fuels Association, a group advocating expanded use of ethanol as an alternative fuel source.

Bush, his own popularity hitting a new low, is under pressure to do something about soaring gasoline prices in hopes of staving off a potential election-year problem for Republicans trying to hang on to control of the U.S. Congress.

A former Texas oil man who in recent months has advocating curing America of its addiction to oil, Bush was unusually blunt with oil companies enjoying record profits. He said they should use some of their largesse to invest in new refineries and researching alternative fuel sources.

"We expect there to be strong reinvestment to help us with our economic security needs and our national security needs," he said.

He also said he wanted Congress to take away from the oil companies about $2 billion in tax breaks over 10 years, such as subsidizing research into deepwater drilling. He said the tax breaks are unnecessary at a time of "record oil prices and large cash flows."

"Taxpayers don't need to be paying for certain of these expenses on behalf of the energy companies," Bush said.

Bush said Congress should find a way to approve permits to build new refineries a year after they are filed.

The fact that no new refineries have been built in 30 years is frequently cited as a reason contributing to soaring gas prices.

[ . . .]

Before the speech, the White House released a letter in which the federal government urged state attorneys general to vigorously enforce laws against price gouging that may have contributed to rising gasoline prices. [Steve Holland, Reuters]
I read this, and all I have are questions. What about the environmentalists who work to block the construction of new refiners? What about the environmentalists who block oil drilling in California or in Alaska’s ANWR? How is the suspension of a tax credit (effectively a tax increase) going to lower the price of gas? What about all the tax gouging that takes place when local sales taxes are levied upon gasoline? And how, if high prices and high profits are an incentive for existing firms to increase capacity and for new companies to enter into a market, does threatening these profits achieve lower gas prices?

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