Will we forever be over a (Saudi) barrel at the pump?

Ross Mackenzie
Posted: Aug 13, 2004 12:00 AM

With crude prices around $40 a barrel and gasoline prices nearly $2 at the pump, the usual know-it-alls are mounting the ramparts.

They are (1) renewing calls for energy independence, (2) demanding release of oil from the salt-domed Strategic Petroleum Reserve (SPR) (with the corollary demand that the Bush administration stop putting more oil into it), and (3) reaching back to the tattered notion of raising the federal gasoline tax by 50 cents a gallon to make gas at the pump higher still.

First, let's talk facts:

- U.S. domestic petroleum consumption is up (but as a percentage of Gross Domestic Product it is down).

- Oil imports are up; domestic production is down. In 1970 the U.S. produced 20 percent of the world's crude; today the percentage stands below 10. Yet. . .

- Domestic reserves - coastal, inland, and offshore - are dramatically up.

- Since 1960, federal and state gasoline taxes have risen 300 percent. Today they account for 23 percent of a gallon of gasoline costing $1.80. That is more than everything in the $1.80 cost except the cost of the crude itself - more than the refining cost and more than the cost of marketing and distribution.

- At about $2, the average cost of a gallon of gasoline today stands almost at its peak. Yet in 1950, based on 2004 wage-adjusted prices, it cost $1 more; based on the same wage-adjusted prices, in 1980 a gallon cost $2.85. On the same scale, in 1900 crude cost $100 a barrel. Today at a convenience store, a gallon of bottled water costs well more than a gallon of gasoline.

Now let's get a few things straight.

Practically everybody agrees on the need for "energy independence" - on stuffing corks in the muzzles of the guns held to our heads by our good friends in Saudi Arabia, Venezuela, Mexico and Russia. What's lacking is the political will to tap into our own abundant petroleum while we convert to a hydrogen economy.

Late in his presidency, Bill Clinton was the last president to release oil from the SPR. He did it to help the election prospects of Al Gore. The consequence was but a few pennies saved at the pump. The Bush administration is still refilling the domes. Once again reversing course on the SPR is not a long-term answer.

Nor is higher taxation at the pump. Ask the Kerrys and the greenies how imposing a 50-cent-per-gallon tax - a regressive tax that would hurt low-income people most - would help anything, including rendering the nation less dependent on foreign crude.

What would help?

- Provide tax credits to companies researching and developing technologies for alternative fuels, particularly hydrogen.

- Provide similar credits for companies developing more cost-efficient technologies for extracting oil from coal - the U.S being, of course, the Saudi Arabia of coal.

- Lift what effectively has been a quarter-century moratorium on the construction of new nuclear plants for electric power generation; provide tax credits for companies building them, too. And finally. . .

- To ease us toward the hydrogen economy that surely is our future, develop the nation's own abundant untapped reserves of oil and natural gas.

To do that will mean doing it right while lifting some of the prohibitions the nation has imposed on itself to get the oil out of the ground. It will require going into areas declared off-limits. It will require short-term suspension of certain environmental restrictions in conjunction with advanced techniques for extracting oil in more environmentally compatible ways.

These are things we can and must do. Already the Bush administration, stymied in the Senate on its energy initiatives generally and drilling in the Arctic National Wildlife Refuge specifically, has moved to open 9 million acres to exploration and drilling on the North Slope. But that is only a meager beginning.

Continued reliance on foreign oil threatens our national security and economic growth. (Ironically, rising demand for oil from a surging U.S. economy, combined with a China and India newly on the economic march, is a major factor in driving up the price of crude.) In one key but limited area, sky-high fuel prices have put practically all the major U.S. airlines on the brink of Chapter 11.

Time's up for the League of Waltzers With Caribou, among whom John Kerry is a principal member. Since 1991 he has voted consistently against precisely the sort of domestic petroleum development that has forced our increased dependence on the likes of our friends the Saudis.