By Phil Power - May 4, 2006
Gagging on high gas prices here? Try California's. (I can speak from personal experience; my wife, Kathy, and I just returned from a quick trip to California, where we attended a wedding.)
The lowest price we saw driving back from Monterey to San Francisco was $3.27 a gallon, and in a couple of out-of-the-way places, it was $3.45.
Well, it's nice to find some reason to be grateful we live in Michigan. But gas isn't cheap anywhere, and not surprisingly, the high gas prices in recent weeks have unleashed a blizzard of inane quick-fix ideas from a raft of politicians who should know better.
Gov. Jennifer Granholm supports the idea of capping oil industry profits as a way to reducing gas prices. It's not clear to me exactly what the economic reasoning is behind this idea (also advocated by U.S. Sen. Debbie Stabenow), but I can understand the reflex instinct to do something when Exxon Mobil Corp. announces an $8.4 billion quarterly profit, fifth-largest of any public company in history.
Not to be outdone, GOP gubernatorial candidate Dick DeVos wants the state to stop collecting the sales tax on gas whenever the price goes above $1.95 a gallon.
Now, DeVos is a businessman who ought to know something about supply and demand. Since the underlying reason for high gas prices is that the worldwide supply is insufficient to meet rising demand, DeVos needs to explain just how artificially capping the price reduces demand.
Not only that, but his suggestion would cost the state nearly $300 million in tax revenue. How would he make that up? Stop funding Michigan State University?
There were even more silly suggestions coming out of Washington. The Bush administration offered a "gas tax holiday," in which consumers would get a rebate check for $100. Democrats, predictably, want to repeal some tax breaks big oil got last year and add a windfall profits tax on the oil companies.
Naturally, both parties completely failed to explain how their schemes would reduce gas prices ... mainly because they wouldn't. Sigh.
Also last week, the president asked Congress to give it authority to raise fuel-economy standards for cars for the first time in 20 years. In the past, the auto companies have blasted the Corporate Average Fuel Economy (CAFE) standards as arbitrary and counterproductive.
But it will be a topic of conversation when the CEOs of Ford Motor Co., General Motors and DaimlerChrysler meet the president on May 18.
Don't expect any of them to have had a revelation. Chrysler President and CEO Tom LaSorda says gas prices will have to hover around $4 a gallon for at least a year for consumers to change their established buying patterns.
I have three modest reactions to all the dithering.
If we are serious about doing something about oil prices, first of all, the auto industry ought to endorse -- and the U.S. Congress should pass -- an ethanol bill that's been kicking around for years, the Fuel Choices for American Security Act.
That bill would require all new cars to be engineered to run on a mixture of ethanol and gas. Brazil has been doing just fine on ethanol for a few years now, and America ought to follow suit.
Second, although everybody recognizes that America is addicted to oil, nobody's been willing to do anything about it. Around four years ago, I joined with some pretty good economists in designing a federal laboratory -- to be located in Michigan -- to develop alternative energy supplies.
We thought it might be named to honor Congressman John Dingell's half-century in the House of Representatives, and we solicited support from the auto industry. Needless to say, it was like jogging through molasses, and the idea died stillborn.
The baby should be revived. Michigan is the home of more smart auto engineers than anyplace in the world. What both our state and nation need is a long-term, Marshall Plan- style program aimed at radically reducing our dependency on oil, imported or domestic.
It would cost a lot of money over a long period of time, but imposing a $1 per gallon "Freedom Fuel" tax would finance it.
Would the politicians go along? Don't hold your breath. One thing you can depend on is that politicians in a democracy like ours will avoid doing anything far-sighted until the crisis is hard upon us.
So we'll muddle along, awash in inanities from both the right and the left, while gas prices remain high and probably will go higher.
If -- make that when -- gas hits $4 and stays there, the people will start modifying their driving and car buying habits and we'll start doing what we should have been doing years ago.
That will be the right medicine -- but it will be far more painful and cost far more than it would if we begin now. Or as you might say, a gallon's worth of prevention is better than a barrel's cost of cure.
So think about it.



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