- The Washington Times - Friday, June 23, 2000

President Clinton engaged in more hand-wringing over skyrocketing gas prices yesterday, saying he sees no justification for them. He once again criticized the oil companies for profiteering.

"This is a big problem because there are a lot of Americans who have to drive to make a living," Mr. Clinton said. "If this thing can't be moderated … this is going to rifle through our economy."

But the Clinton administration has many tools it could use to at least temporarily help drivers in Chicago and Milwaukee and ease what many are predicting will be tight supplies and high prices for the foreseeable future.

The administration already has tried some of the measures, including investigating whether foul play by oil companies has driven up prices and tapping into the Strategic Petroleum Reserve to avert a gasoline shortage on the East Coast.

Environmental Protection Agency Administrator Carol M. Browner contends that the investigation into oil company collusion that she referred to the Federal Trade Commission June 15 already has caused a dramatic 25-cent drop in the price of wholesale gasoline in the Midwest.

The FTC which could disgorge any ill-gotten profits and return them to consumers or to the U.S. Treasury will not report its findings for another month. Many observers say the administration could take actions that would help now. They suggest:

• Tapping into the Strategic Petroleum Reserve to replenish tight crude oil supplies around the country and drive down prices.

• Suspending or amending clean-fuel regulations to allow gas stations in Chicago and Milwaukee to use stocks of older ethanol-blended fuels or scarce, newly reformulated gasoline supplies that the EPA required drivers to use starting June 1 under Clean Air Act regulations.

• Opening areas of the outer continental shelf, the Rocky Mountain states and the Alaska National Wildlife Refuge to oil and gas drilling to boost production of domestic oil and reduce reliance on oil supplied by the international cartel Organization of the Petroleum Exporting Countries.

• Working with Congress to fashion tax breaks and other government policies that encourage production in the lower 48 states where marginal oil wells were abandoned when prices collapsed in 1998;

• Working with Congress to temporarily suspend all or portions of the 18.3-cent federal gasoline tax until the price spike abates.

The measures, which were much in favor on Capitol Hill yesterday, focus on increasing production to alleviate gas shortages and high prices. The administration's proposals, by contrast, concentrate on encouraging the conservation of fossil fuels by offering incentives for alternative energy sources and developing cars that don't use gas.

Mr. Clinton also has asked Congress to reauthorize the Strategic Petroleum Reserve and enable him to set up a special reserve of home heating oil supplies to prevent shortages like the one that drove up prices in New England last winter. He asked Congress again yesterday to pass those measures, saying delays could create "serious problems" for the Northeast again this winter.

But many members of Congress say today's tight markets could have been avoided if Mr. Clinton had taken more aggressive action in past years to maintain and increase domestic oil production.

"We need to open up areas that are now closed, like [the Alaska wildlife refuge]," said Senate Majority Leader Trent Lott. "We need to have incentives to get … oil wells that are now capped and so-called marginal wells back in production.

"We have a large supply of natural gas, and it's clean-burning. And yet, there is no incentive to make that conversion," the Mississippi Republican said. "I just don't understand that."

Mr. Lott added that the administration has put up roadblocks to using coal and nuclear power. He called on the EPA to immediately act to relieve the price situation in the Midwest.

Some lawmakers have other ideas to help the administration, such as empowering the FTC and the Justice Department to sue OPEC for price-fixing a plan promoted by Sen. Mike DeWine, Ohio Republican, and Sen. Herb Kohl, Wisconsin Democrat.

Other legislators called for more aggressive diplomacy to get OPEC to pump more oil. Many were disappointed that after weeks of cajoling by the United States, OPEC agreed to only a modest production increase Wednesday and did not even approve a previously floated plan to increase production automatically when crude oil prices rise above $28 a barrel. They stand around $33 today.

"This administration needs to work overtime with OPEC and use the tool it has the Strategic Petroleum Reserve," said Rep. Christopher Shays, Connecticut Republican, one of several northeastern Republicans who want to work with the White House to approve the home heating oil reserve.

Ron Gold, oil analyst with PIRA Energy Group in New York, said the incentives for domestic oil production are badly needed to avoid similar problems in the future, though they would do little to immediately ease today's high prices.

"The administration has not focused on domestic production and we are vulnerable. It doesn't take much to drive up prices," he said.

But he gave the administration credit for its well-timed dip into the petroleum reserve last week. "That was clearly a step in the national interest and a very sound use of the reserves," he said.

Mr. Gold favored a temporary waiver from the EPA regulations to ease the Midwest situation earlier this month, but now he says it's too late to do any good.

With wholesale gas prices dropping, prices at the pump will follow suit within days, he said. The waiver may no longer be needed, and it would unfairly punish gas stations that complied with the regulations if it were implemented now, he said.

The EPA should take warning from this incident, however, to be more flexible in regulating in the future, since the agency has a full slate of increasingly stringent rules in the works, he said.

With gas supplies tight for the foreseeable future, new EPA regulations and other developments are likely to drive up prices again and cause another round of unhappiness for consumers, he said.

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