WASHINGTON: What's up with gas prices?

Two years ago at a Texas convention, the president of a large petroleum company walked up to me and said, "I just bought gasoline for 68 cents a gallon." I asked him how he managed to get such a great price. "That's the cost before taxes are added," he said. As fuel prices rise, pushing, even passing, $2 a gallon in parts of California, politicians blame production cutbacks by Arab nations. But the primary culprits are taxes, a refusal to exploit oil sources on U.S. territory for fear of a backlash from environmentalists, and what looks suspiciously like a deal among politicians, American oil companies, and Arab oil-producing states. Late last month, angry truckers brought a convoy to Washington to protest the high fuel prices. Congress and the Clinton administration could grant immediate relief to the truckers and to consumers of heating oil in the Northeast and consumers nationwide by accepting a National Taxpayers Union recommendation to cut gas prices by 10 cents per gallon. The pre-tax price of gasoline at the pump barely changed between 1990 and 2000, actually declining from 88 cents per gallon to 86 cents as of last November. But over that same period, state and federal gasoline taxes jumped from 27 cents per gallon to 43 cents. The 1993 Omnibus Budget Reconciliation Act (read tax increase) created a 4.3 cent-per-gallon fuel surtax for "deficit reduction." This tax continues even though we supposedly have a federal budget surplus. The Congressional Budget Office estimates that the fiscal year 2000 "on budget" surplus, not including the so-called "Social Security surplus," will total $23 billion. With $34.3 billion in fuel taxes allocated to the Highway Trust Fund this year, slashing the 18.4-cent gas tax and the 24.3-cent diesel tax by 10 cents won't negatively affect any current programs and won't consume any funds set aside for Social Security "reform." The administration, which regularly claims to be looking out for the poor, could actually do something for low-income people by cutting the fuel tax by a dime. A recent study by the Tax Foundation shows that excise taxes are five times more burdensome to the poor than they are to the wealthy. Politically, everybody wins. Taxes, though, aren't the only reason for the higher prices. President Clinton sends Energy Secretary Bill Richardson to the Middle East to ask for increased production by Arab oil states. They tell him not now. Why isn't someone asking whether the fix is in with those nations that wanted to jack up prices from $10 to $30 a barrel, not only because of the cash windfall but also to allow them to increase their arms purchases? The same goes for the U.S. oil-producing companies, which are happy to get their share of increased profits, and arms manufacturers, which are delighted to sell more arms and pad their own bottom lines. Is anyone curious why neither the administration nor the Congress has criticized U.S. oil companies for running a monopoly while they have criticized and even sued Microsoft? There are many new sources of petroleum, including Mexico and Venezuela, since the Arab oil boycott of the 1970s. There would be even more if U.S. land could be further exploited in environmentally friendly ways. After the cash has filled the right pockets, look for the administration and congressional Democrats to conduct a campaign to lower gas prices, which will fall between 10 and 15 cents per gallon before the election. Democrats will claim the credit and the media will persuade the public to give it to them. There is no legal or moral reason for fuel prices to be this high, but with the money flowing faster than low-priced gasoline, don't look for anything legal or moral to be done until the possibly illegal and certainly immoral have topped-off the pockets of the greedy and the sleazy.

-© 2000, Los Angeles Times Syndicate