- The Washington Times - Sunday, October 30, 2005

The gas price roller-coaster is proving to be a little too much for some to handle.

While gas prices drop precipitously — I paid $3.39 a gallon in the immediate aftermath of Hurricane Katrina but $2.59 a gallon this week in the Washington, D.C. area — the New York Times wants Congress to raise gas taxes.

Anticipating a week full of announcements of higher oil company profits, congressional Republicans want to tell oil companies how to spend their profits. Congressional Democrats want simply to confiscate oil company profits in the form of a “windfall profits” tax.

None of these ideas will help consumers or lower gas prices.

In an Oct. 24 editorial, the New York Times equated terrorism and global warming as “two major crises of our time” and blamed America’s oil consumption for both. The Times’ solution? Put a “dent in gas guzzling behavior” by “increasing the federal gasoline tax in order to keep the price of gas near its post-Katrina highs of $3-plus a gallon.”

And what would the Times do with the tax receipts? Its suggestion was to either redistribute the income to low-income households through tax breaks or — get this —have the government “use some of the revenue to buy back SUVs … so that owners could more quickly upgrade to less-polluting cars.”

High gas taxes were adopted long ago by Western European countries, no doubt much to the chagrin of their consumers who struggle in economies that have stagnated over the last 15 years.

Although the pre-tax price of gasoline is now virtually the same in Western Europe as in the U.S.— around $3 a gallon, according to the Energy Information Administration — the price of gas including taxes soars to more than $5 a gallon in Spain and Luxembourg; more than $6 a gallon in France, Italy, Belgium, Germany and the United Kingdom; and more than $7/gallon in the Netherlands.

And there’s a larger price to pay than just the one at the pump for the Europeans.

According to a June 2004 report from the Swedish think tank Timbro, U.S. gross domestic product (the measure of the value of the goods and services produced by a country in a given year), was 17 percent higher than the nearest European country (Switzerland). While the report did not look specifically at the impact if gasoline taxes, it did lay blame for Europe’s economic lag on a culture of high taxes used to pay for Europe’s extensive welfare systems.

New York Times publisher and limousine liberal Arthur Ochs Sulzberger, Jr. might not mind paying European-style prices for gasoline so the government can buy back my SUV with your money, but then he probably won’t bear the brunt of the ensuing economic malaise, either.

Congressional action on oil company profits is also nonsensical.

Sen. Byron Dorgan, North Dakota Democrat, introduced a windfall profits tax that would take 50 percent of the profits on every barrel of oil sold for more than $40.

But we tried the windfall profits tax approach in the 1980s — and rejected it. In addition to the moral repugnancy of the government confiscating legitimately earned money because the amount is politically incorrect, the policy simply didn’t work to improve our energy situation.

According to a 1990 report by the Congressional Research Service, the tax reduced domestic oil production by 3-6 percent, and increased oil imports by 8-16 percent. “This made the U.S. more dependent upon imported oil,” stated the report.

The 1988 repeal of the windfall profits tax helped to increase oil and gas supplies, and to reduce prices to the super-low levels that we enjoyed during the 1990s.

House Speaker Dennis Hastert, Illinois Republican, said at an Oct. 24 press conference that “Big Oil needs to do its part” and build more oil refineries.

But if Mr. Hastert wants more oil refineries, he ought to start by looking in the mirror or at least at the other 434 House members.

A major barrier to oil refinery construction and expansion — and, hence, to increased supplies of domestically produced gasoline — is the Environmental Protection Agency.

The EPA’s Clinton-era air quality rules, which lack a scientific basis and so aren’t likely to produce any significant or even measurable public health or environmental benefit — act as an economic disincentive to expansion of refining capability.

Congress eased the gasoline supply crunch in the immediate aftermath of Hurricane Katrina by relaxing EPA rules requiring different blends of gasoline for different geographic regions. Congress needs to continue relaxing unnecessarily burdensome EPA rules to encourage refinery expansion.

Our nation’s energy problem is not the energy industry or its profits. The problem is our tolerance of environmental extremism. Anti-development eco-activists have labored for decades to get their hands around our energy throat.

Well, their hands are in place and they’re starting to squeeze. As we start to gasp, the question is, will President Bush and Congress have the political courage to save us?

Steven Milloy is the publisher of JunkScience.com an adjunct scholar at the Cato Institute.

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