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No quick fix to soaring fuel costs, lawmakers say

09:24 AM EDT on Friday, May 2, 2008

BY JOHN E. MULLIGAN
Journal Washington Bureau

WASHINGTON — Rhode Island’s congressional delegation holds out hope for more federal dollars to ease the plight of poor families unable to pay last winter’s heating bills, but the lawmakers don’t foresee much in the way of swift or direct government relief from the soaring price of gasoline and other oil products.

The legislators said in recent days that they seek short-term steps — such as a suspension of new oil purchases for the Strategic Petroleum Reserve, or regulations to discourage oil market speculation –– that might restrain prices in an indirect way. The rest of their prescriptions for lower energy costs tend toward long-term federal programs –– conservation, for example, or developing alternatives to oil –– that won’t soon affect prices at the gasoline pump.

In fact, the peak summer driving season will probably bring higher prices, Sen. Jack Reed said. He noted that the U.S. government can’t readily change the forces behind the price hikes, including wartime instability in the oil-producing Middle East, the weakness of the dollar, and the fast rising demand for energy in China and India.

The all-Democratic delegation is skeptical about the idea of a summer “holiday” from the 18.4-cent-per-gallon federal tax on gasoline. Sen. Sheldon Whitehouse dismissed it as “election-year theatrics.”

None of the four mentioned expanded nuclear power, exploration for more domestic supplies of oil and gas, or new U.S. refining and storage capacity — long-term actions that Mr. Bush called for again this week.

Some were emphatic in assessing blame for the price of petroleum products.

“It is infuriating that we are spending hundreds of billions of dollars plowing our American families’ money into tyrant regimes abroad, rather than investing in green jobs here at home,” said Whitehouse. He declined to specify which regimes he meant. But Whitehouse said his message is “a very hard message to get through to George Bush and Dick Cheney, who are both oil men.”

Reed said that “eight years of bad energy policy” and the Bush administration’s decision to invade Iraq have exacerbated the underlying liability of U.S. dependence on oil imports.

Rep. Patrick J. Kennedy called for a windfall profits tax on oil companies. Even though such a tax is unlikely to pass this Congress, Kennedy said it would have “populist appeal” as a platform plank for the eventual Democratic presidential nominee. Kennedy said a windfall profits tax plank would underline how “Democrats have been for the consumer and Republicans have been on the side of big oil.”

Rep. James R. Langevin said unnecessary tax breaks for oil companies should be scrapped, while tax breaks should be created for the development and purchase of wind and solar power devices and of more efficient automobiles and appliances. All four members of Congress sounded variations on that proposal. The delegation also supports more federal spending for public transportation.

Reed said restraint of oil market speculation — the loosely-regulated gambles of investors on how high prices will climb — is one short-term course of action that could curb the price spiral. Reed said the executive and legislative branches of government might chill market manipulation simply by making clear that scrutiny and tighter regulation of the practice is at hand. Reed said the creation of a federal task force of regulators would send such a signal.

Langevin, Whitehouse and Kennedy called for a halt on the purchase of oil to fill the Strategic Petroleum Reserve — huge underground caverns near the Gulf Coast that hold supplies for emergency use. Langevin cited estimates that such a suspension could indirectly trigger cuts in gasoline prices of somewhere between 5 and 24 cents a gallon. The legislators stopped short of calling for the government to try to depress market prices by selling oil from the massive reserve.

Whitehouse said he is flatly opposed to a proposed gas tax holiday. “Letting our roads and bridges decay just doesn’t seem to be real smart public policy,” he said. Reed, Kennedy and Langevin also cautioned against depleting the federal highway construction fund that relies on gas tax revenues. But they expressed some openness to the idea of a summer suspension of the federal gasoline tax under certain conditions. Reed said the tax break “might make some sense,” but only if linked to a mechanism to pay for federal road and bridge projects, plus a provision to ensure that the tax cut translates into a cut in prices at the pump.

Kennedy echoed those concerns and said, “We rely on tourism in Rhode Island so we have a great deal to gain from people getting in their cars and coming to our state.” Langevin was cooler to the gasoline tax suspension, saying he would oppose it unless it was coupled with a direct offset — higher taxes or spending cuts elsewhere in the federal budget — for the loss of the highway trust fund revenues.

Arizona Sen. John McCain, the Republican presidential candidate, and New York Sen. Hillary Rodham Clinton, a Democratic presidential candidate, have separately called for a gas tax holiday. Illinois Sen. Barack Obama, the Democratic frontrunner, opposes the idea.

jmulligan@belo-dc.com