- The Washington Times - Thursday, March 30, 2000

Senate Republicans say an OPEC agreement to increase oil production will do little to ease gasoline prices, so they will move ahead today with a bill to repeal a 4.3 cent gas tax and give relief to the driving public.
Iran joined the rest of the Organization of Petroleum Exporting Countries yesterday in agreeing to increase production by 1.7 million barrels a day, more than 7 percent above the group's current limit.
OPEC's move is being heralded by President Clinton "as good news for our economy and for the American consumer." The 11-nation cartel controls 40 percent of the world oil market.
Members of both parties say production must be increased to at least 2.5 million barrels a day before prices begin to retreat.
"If it is a victory of any consequence, it appears to be relatively small," said Sen. Frank H. Murkowski, chairman of the Energy and Natural Resources Committee.
The Alaska Republican said the increase in production is for worldwide distribution not just the United States. The United States uses 27 percent of the world oil that is produced daily.
Mexico, one of the leading non-OPEC producers, also plans to increase output starting Saturday.
Sen. Charles E. Schumer, New York Democrat, agreed it was too soon to celebrate low prices.
"At best, what this means is prices will plateau or maybe go down a little bit. At worst, it means that prices with one little bump could go way back up," Mr. Schumer said.
"So the jury is still out on whether this agreement is really a watershed or not," he said.
But Clinton administration officials say they believe oil prices, which have soared to record levels in recent months, will drop over the next six weeks.
"These increases should bring lower prices, which will help to sustain economic growth here in America and also and very importantly, throughout the world," Mr. Clinton said.
"It will also bring relief to hard-pressed truckers in this country, who have been especially hard-hit, and others who have high fuel costs, by providing a greater balance between oil production and consumption," he said.
The president urged oil and gas companies to pass along savings from lower oil prices to motorists soon.
"While home-heating costs and the price at the pump are both expected to fall in the next few weeks, I urge the oil companies to do everything they can to bring the savings to consumers as quickly as possible," Mr. Clinton said at a news conference.
The Clinton administration had been lobbying for an increase of 2 million to 2.5 million barrels a day to trim gasoline prices, which have soared nationwide from less than $1 a gallon just over a year ago to an average of almost $1.59 for all grades today.
Energy Secretary Bill Richardson said prices should begin falling in six weeks and be 10 cents cheaper by midsummer.
John Llewellyn, global chief economist for the Lehman Bros. securities firm, told reporters in New York Tuesday that he expected producers to "continue or accelerate" cheating on quotas, which would bring supply up to an extra 2 million barrels a day from OPEC and non-OPEC countries. That "would bring the market back into balance."
Spot prices for oil dropped a dollar to $26.17 a barrel yesterday on the New York Mercantile Exchange. It has declined from a high of $34 a few weeks ago in anticipation of the OPEC production increases.
Some oil industry analysts have questioned whether refiners will be able to make up the dangerously low stocks of gasoline as they race to meet the growing demand that comes with each summer driving season.
With oil expensive and supplies short, refinery utilization in recent weeks has been in the 87 percent to 89 percent range, instead of the normal low 90s.
"We would like them to move into the high 90s, and they're not quite there yet," Mr. Richardson said. He planned to call in refinery industry executives to find ways to increase gasoline production.
Mr. Richardson credited U.S. diplomacy by Mr. Clinton and Vice President Al Gore as key in OPEC's decision to increase production, while critics called it "tin-cup panhandling."
"Tin-cupping to OPEC is no substitute for a real domestic energy policy," Majority Leader Dick Armey said.
"Asking OPEC to bail us out of our energy problems, while necessary, is not a policy that inspires pride," the Texas Republican said. "It only confirms that the U.S. is too dependent on foreign oil."
Mr. Armey and House whip Tom DeLay, Texas Republican, said they will bring similar legislation to eliminate the gas tax up for a vote in the House.
The Senate version, sponsored by Majority Leader Trent Lott, could be voted on as early as Tuesday, said Mr. Lott's spokesman, John Czwartacki.
If gas prices continue to rise and reach the $2 per gallon mark, Mr. Lott said he would push legislation to eliminate all remaining federal taxes of 18.4 cents for one year.
Sens. John W. Warner, Virginia Republican, Max S. Baucus, Montana Democrat, and George V. Vionovich, Ohio Republican, are opposed to eliminating the 4.3 cent tax, which funds highway and transit construction.
"Repealing the 4.3 cents will have little to no impact on the price of fuel," the senators said in a March 22 letter to Sen. Pete V. Domenici, New Mexico Republican and Budget Committee chairman.
"It will, however, severely limit all of our states' abilities to make needed surface transportation improvements," they said.
Mr. Warner yesterday also questioned whether the savings from the gas-tax repeal would be passed onto consumers.
Mr. Lott has suggested as an option using the budget surplus to replace the lost transportation funding.
This article is based in part on wire service reports.

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