Kerry and high fuel prices

While scoring a few rhetorical points by demagoging the price of gasoline, John Kerry, the Democrats’ presumptive presidential nominee, has offered no serious policy proposals to resolve current energy problems. In fact, we rather doubt that Mr. Kerry is truly offended by high gasoline prices. Like all excessively green thinkers, deep in his heart he loves sky-high fossil-fuel prices. Were there no political payoff to be pocketed by boisterously exploiting the current run-up in gasoline prices, Mr. Kerry — if his past is any guide — would be silently welcoming the upward trend.

In 1994, the price of oil hovered around $15 per barrel and the price of gasoline averaged $1.11 per gallon. Like today, the federal budget deficit in 2004 was projected to be above 4 percent of gross domestic product. What was Mr. Kerry’s avowed policy prescription for both addressing the 1994 deficit and dealing with the U.S. energy market? He strongly advocated raising the federal gasoline tax by 50 cents per gallon. How strongly? Well, Mr. Kerry lambasted the deficit-fighting Concord Coalition for giving him a low score. Mr. Kerry, visibly angry (according to the Boston Globe), called the group’s scorecard “irresponsible.” He complained that it failed to reflect “my support for a 50-cent increase in the gas tax.”

Mr. Kerry’s 50-cent tax increase would have raised the price of gasoline to $1.61 per gallon in 1994. Adjusted for inflation since then, that price translates into $2.03 per gallon today.

Thus, Mr. Kerry was strongly supporting gas prices, measured in today’s dollars, that were above $2 per gallon a decade ago. Now, given that there are 42 gallons in a barrel of oil, a 50-cent-per-gallon tax increase translates into $20.80 per barrel. In terms of the pass-through cost to the consumer, Mr. Kerry’s 50-cent-per-gallon tax hike would have produced the same effect as if OPEC had increased the price of a barrel of oil by $20.80 from $15 to $35.80. Adjusted for inflation, a 1994 price of $35.80 per barrel of oil translates into more than $45 per barrel today.

Mr. Kerry was ahead of his time. Ten years ago, he embraced the equivalent of today’s $2-per-gallon gasoline. Moreover, to the extent that Mr. Kerry is truly offended by today’s projected budget deficit, why should voters believe that he would not attempt to pursue the same policy he advocated 10 years ago?

Mr. Kerry offers two essentially worthless short-term prescriptions for today’s high gas prices. He proposes to divert the 105,000 barrels per day of oil that go into the Strategic Petroleum Reserve (SPR) this month and the 33,000 barrels per day that are planned for June. With worldwide oil demand at 80 million barrels per day, this amounts to less than one-tenth of 1 percent. Mr. Kerry also suggests that we jawbone OPEC. But not so long ago, he strongly supported gas prices that would have been generated by the equivalent of OPEC oil prices of more than $45 per barrel, which is about $5 per barrel above the current world price. In his heart, Mr. Kerry knows what he truly wants. And he is getting it today.