High gas prices prompt calls to drill, tap in, crack down

http://www.daytondailynews.com/business/high-gas-prices-prompt-calls-to-drill-tap-in-crack-down-1155270.html

By Jack Torry, Washington Bureau

WASHINGTON — Here are just a few of the ideas tossed out last week to combat high gas prices: Open the Outer Continental Shelf for oil exploration; tap into the 700-million barrel Strategic Petroleum Reserve; crack down on Wall Street speculators, and end billions of dollars in tax breaks for the oil industry.

Want more? Rep. Jim Jordan of Urbana and other House GOP conservatives want to repeal what they call “restrictive energy development policies enacted under’’ the Obama administration. And state Sen. Tim Grendell, R-Chesterland, wants to create a commission that would review Ohio’s regulations on gasoline supply and pricing.

As gasoline prices have roared past $4 a gallon and oil companies have reported skyrocketing profits, just about everyone seems to have a new idea every day on how to help the consumer. Just last week, House Speaker John Boehner said he was “deathly afraid’’ that climbing gasoline prices would “slow down’’ the economy.

Yet those calls for prompt action are not likely to lead to lower gasoline prices any time soon. Increased worldwide demand combined with political turmoil in the oil-rich Middle East has helped cause the price of a gallon of regular in Ohio to leap from $2.87 in May of 2010 to more than $4 last week.

“Voters, when they see $4.40 a gallon of gas, first think there is a major conspiracy going on,’’ said Ned Hill, a professor of economics and dean of the Levin College at Cleveland State University. “Then they figure out (politicians are) pandering, especially if it’s not done well.’’

The quick response from lawmakers shows they understand the peril of high gasoline prices. For most Americans, filling their cars with gasoline is a necessity, not a luxury.

“There are certain things with individuals that if they have to cut back, they will cut back,’’ said David Winston, a Republican pollster in Washington and an adviser to Boehner. “Gasoline is not one of them. What are they supposed to do? Go half way to work?’’

Republican analysts believe the politics favor them. They are convinced that voters want to expand oil exploration — both off shore and in Alaska. By contrast, GOP analysts argue, voters are less sympathetic to Obama and Democratic calls to develop alternative energies and more fuel-efficient cars.

“It’s time to get serious about moving toward energy independence,’’ said Boehner, R-West Chester Twp. “With all the new technology out there, we’ve got more oil and gas than we know what to do with.’’

“I’m for all for the green energy as well,’’ Boehner said. “But let’s not kid ourselves. Over the next 20 to 30 years while that sector is being developed, we need some kind of a bridge and that bridge is American-made oil and gas.’’

Two days after Boehner spoke, the House on Thursday handily approved a bill that would require the White House to sell offshore leases for oil production. The bill has little chance of passing the Senate and the White House has promised a veto.

“America taking a more aggressive stance on developing its own resources should have an impact on prices,’’ said Sen. Rob Portman, R-Ohio, who wants to end the ban on exploring for oil in the continental shelf.

Yet new polls suggest that voters have directed their anger at oil companies and Wall Street. A Washington Post/Pew Research Center poll released Friday shows that 30 percent of American adults blame high prices on greed, speculation and oil companies while only 5 percent say lack of drilling.

Last month, Obama asked the Justice Department to investigate whether Wall Street investors are manipulating the oil market, a call welcomed by Sen. Sherrod Brown, D-Ohio.

Meghan Dubyak, a Brown spokeswoman, said that Brown has “led the fight to step up enforcement against oil speculation — which drives up the price of gas due to investors buying and selling oil with no intention of ever using it.’’

Daniel J. Weiss, senior fellow and director of climate strategy at the Center for American Progress, a Democratic-leaning nonprofit in Washington, cited a Goldman Sachs report in March that speculation by hedge funds — while not the primary cause of higher prices — had contributed as much as $20 to the price of a barrel of oil.

“If that is accurate, that’s worth 50 cents a gallon,’’ Weiss said.

But while getting tough on oil companies and speculators may help Democrats politically, some economists are convinced that high prices are a long-term problem that can only be remedied through a combination of conservation and increased oil production.

“Speculators have very little to do with is going on,’’ said Peter Morici, a professor of business and public policy at the University of Maryland. “The Strategic Petroleum Reserve is just a Band-Aid.’’

“We have two choices – pay the Saudis for their oil or produce it ourselves,’’ Morici said. “The Democrats think the only way to get this done is to not drill in the United States. We’re not a country that is energy poor, we’re a country that has a poor energy policy.’’

Ironically, Ohio is one state that benefits in some ways from high gasoline prices. As gas prices have climbed, demand has soared for the fuel efficient Chevrolet Cruze, which is built in Lordstown, and the Honda CR-V, a crossover Sports Utility Vehicle built in East Liberty.

“High fuel prices probably tilts the playing field in favor of Ohio-built vehicles,’’ said Hill. “If you serious about this blathering about energy independence, that doesn’t happen without higher prices. So maybe as a country we should have a policy of just suck it up.’’