Demagoguing gas prices

Senate Majority Leader Bill Frist co-authored a letter to President Bush Monday from Iowa. In the letter, which was also signed by House Speaker Dennis Hastert, Mr. Frist unbecomingly begs Mr. Bush to sic the attorney general and the Federal Trade Commission upon every level of the oil industry.

In a letter that could have been written by Ted Kennedy, Messrs. Frist and Hastert beseeched the president to instruct the Justice Department and the FTC to “investigate any potential collusion, price-fixing or gouging in the sale or distribution of gasoline, petroleum distillates or ethanol in wholesale and retail markets.” We further request, they continued, “that scrutiny be directed to refining; the transportation of fuel by pipelines, marine vessels and trucks; storage and marketing activities; and retail practices.”

In perhaps the most comical request of all, these two Republican leaders want the FTC to “examine whether spot shortages of gasoline are the result of illegal efforts to manipulate prices.” Because the spot shortages that are now afflicting the East Coast and Texas (and which are expected to worsen next month) are the direct result of last year’s energy bill, which effectively banned the MTBE fuel additive by early next month, perhaps the FTC should begin its investigation of spot shortages by deposing the House speaker and the Senate majority leader.

These FTC investigations first became an American ritual in 1973 and 1974, when similarly conspiracy-minded lawmakers insisted that Big Oil’s tankers were waiting offshore for the price to rise before coming into port. Every time the price of gasoline has soared, Democratic politicians have reflexively pointed their fingers at Big Oil. We expected more from Messrs. Frist and Hastert.

Last week the market-determined price of oil jumped past the $75-per-barrel level on the New York Mercantile Exchange. As a result, the nationwide average price of regular gasoline reached $2.91 per gallon on Monday. Since 1998, when the Asian financial crisis caused the demand (and price) for oil to plummet, the worldwide balance between supply and demand has tightened considerably. Beyond the growing oil demand of India and China and a rapidly expanding world economy, other recent factors have played a role: Iraq’s oil output is down nearly 40 percent (or 900,000 barrels per day) from pre-invasion levels; Venezuela’s output remains about 700,000 barrels (more than 20 percent) below its pre-strike levels of a few years ago; strife-torn Nigeria’s daily production has recently fallen by half a million barrels; Hurricanes Katrina and Rita reduced U.S. output and refinery capacity; and the intensifying standoff over Iran’s nuclear program threatens its 4-million-barrel-per-day output. Even Saudi Arabia’s alleged unused capacity of 1.5 million barrels, if it exists at all, is not conducive to the refineries where the oil is needed.

If Congress’s bipartisan class warriors, who now apparently include Messrs. Frist and Hastert in their ranks, want to begin to seriously address the nation’s energy problem, they can open the Arctic National Wildlife Refuge to exploration and production. Last year moderate Republicans forced Mr. Hastert to exclude the ANWR-approval provision from the House’s budget-reconciliation measure, enabling Democrats to successfully filibuster the issue in the Senate. Had President Clinton not vetoed such legislation a decade ago, more than a million barrels of oil would be flowing each day to U.S. markets from ANWR by now. On the margin, those million barrels would be a big help. The Outer Continental Shelf, where oil and gas production is severely restricted off the coasts of Florida and California, contains tens of billions of barrels of recoverable reserves. Increased U.S. oil and gas output offshore and in ANWR will not solve the nation’s energy problems, but Congress’s continuing refusal to approve these commonsense measures will surely make our energy problems much worse.