Politics & Policy

Full of Hot Air

Summertime is here, and with it, the annual spectacle of our representatives in Washington competing to see who can come up with the worst solution to the problem of higher gas prices. This year, Congress has outdone itself. The energy bill wending its way through the Senate this week would do nothing to reduce the price of gasoline. But if it’s most ambitious goals are realized, it might create gas shortages and make electricity more expensive.

First, the Democrats’ bill calls for more investigations into oil-company “price-gouging.” The new bill doesn’t define precisely what constitutes price gouging, but relies instead on emotional language such as “unconscionably excessive.” Democrats and Republicans alike have long accused the oil companies of gouging without any evidence that the prices they are charging for gasoline are either unconscionable or excessive. Notably, the Federal Trade Commission has expressed its doubts about federal price-gouging legislation — understandable, given that it would have the unenviable task of enforcing laws based on such mushy language and thinking.

The Democrats’ insistence on such a provision has set up a showdown with the White House, which said in a statement that Bush would veto the bill if it contained the price-gouging measure. Anti-gouging actions against oil companies would artificially depress prices and therefore potentially drive consumption beyond what the market can supply. “These provisions could result in gasoline price controls,” the White House statement said, “and in some cases bring back long gas lines reminiscent of the 1970s.”

The bill would also legislate higher automobile-fuel-efficiency standards, a problematic idea for several reasons. First, cars that are more fuel efficient are cheaper to drive, increasing the likelihood that people will drive more and create more emissions (and more congestion).

Second, making cars more fuel efficient won’t be free. A recent National Research Council study estimates that new fuel-efficiency standards will increase the sticker price on most automobiles by anywhere from $1,000 to $3,500. Consumers might make that money back over the lifetime of the car because it is more fuel efficient, but Congress shouldn’t sell the higher standards as a free lunch.

Finally, there is the evidence that higher fuel-efficiency standards translate into more traffic fatalities. The cheapest way to make a car more fuel efficient is to make it lighter, and Robert Crandall of the Brookings Institute is just one of many scholars whose research has shown that after the first federal-fuel-efficiency standards went into effect in the 1970s, cars got lighter and traffic fatalities almost certainly increased as a result.

Senate Democrats are also pushing a measure that would require utilities to generate 15 percent of their power using solar, wind, and other renewable energy sources by 2020. The chief opponent of this provision, Sen. Pete Domenici (R, N.M.), argues that this would lead to an unacceptably high increase in the price of electricity for consumers — tantamount to a stealth tax increase — and argues for broadening the definition of “renewable” to include other sources of power like nuclear and “clean coal” technologies, which are not technically renewable but release fewer emissions into the air than traditional fossil fuels. This would help regions of the country with less access to wind and water power meet the new standards without unduly burdening consumers.

Of course, Congress could always choose not to impose any new federal regulations on the utility companies, period. Better yet, it could streamline currently existing regulations that have limited U.S. refinery capacity and prevented non-invasive oil exploration in the Arctic National Wildlife Reserve and on the continental shelves offshore. It could also undo the ridiculous ethanol mandate, backed by the Bush administration and passed into law in the 2005 energy bill, which, according to a recent Associated Press report, has had the perverse effect of increasing not only gas prices, but grocery prices as well.

It’s typical of Washington that this year’s energy bill aims to solve a problem — higher gas prices — exacerbated by the last bill. Soon enough lawmakers will, no doubt, be lamenting the perverse effects of their latest handiwork.


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