• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Hot Air Can't Cut Price of Gas

Posted on: Sunday, 14 May 2006, 18:01 CDT

By Jason Stein, The Wisconsin State Journal

May 14--As the price of gas rises, so does the rhetoric.

With prices at Wisconsin pumps averaging $2.89 a gallon Friday and November's elections ahead, Wisconsin politicians are pushing different plans to deal with the issue -- from taxing oil companies' profits to passing legislation against price gouging. The proposals are already playing a role in campaigns from the governor's race to Congress and the state Legislature.

But economists are panning most of these short-term solutions, saying there's not much a state like Wisconsin can do about gas prices besides promote long-term solutions such as alternative fuels. What's more, they said, taking steps to artificially lower fuel prices may actually send consumers the wrong message -- that they can keep blithely guzzling gasoline without cutting back.

"The price of (gas), like a lot of things today, is really set in global markets, and a state of 5 million people is a pretty small part of that whole global market. So I don't think there's a lot you can do," said David J. Ward, president of NorthStar Economics in Madison.

Gov. Jim Doyle agreed, saying that even as the state's top politician there's little he can do to affect prices. But it's not hard to see why he and other politicians running for office this fall want to give the impression that they're trying.

'Important problem'

Over the last year and a half, the cost of gasoline has caught the state's attention, said analyst Wendy Scattergood of St. Norbert College in De Pere. In a poll of 400 state residents a month ago by the college, 7 percent of them named gas prices as the "most important problem facing the state," putting it at No. 6 on the list.

"Gas prices have gone from not being at all on the map to being on the second tier of important issues," along with health care and education, Scattergood said.

People such as Dawn Doran of Blanchardville and her husband are driving those numbers. She makes a 70-mile round-trip commute to work in Madison from Blanchardville with her mother, and her husband makes the same commute at a different time. Like others, they are looking to elected leaders for help.

"It does get pretty costly. It seems like you're not able to do other things on the weekend because all your money is going to gas," said Doran. "(Politicians) should step in and take control of it because . . . it's going to hurt our economy overall in other areas."

In recent months, Doyle's administration has pushed alternative fuels such as ethanol and biodiesel, publicly criticized oil company executives at a Milwaukee hearing and launched a joint Internet petition last week with the state of Michigan that urges Congress and President Bush to impose a cap on oil companies' profits.

More than 90,000 people had signed the petition as of late last week, with more than 90 percent of those from Wisconsin, Doyle spokesman Matt Canter said.

"I don't think there's that much that one state can do other than try to rally other states together to tell their president and Congress that they have to do something," Doyle said of his efforts.

Major issue

But Doyle and other state Democrats already have made clear they will make energy prices a major issue in the upcoming state and federal campaigns. They've criticized the earnings of companies such as ExxonMobil of Irving, Texas, which recently announced first- quarter profits of $8.4 billion on sales of $89 billion, a 7 percent increase over its income in the same quarter a year ago.

Doyle is also trying to link his Republican challenger in the governor's race, U.S. Rep. Mark Green of Green Bay, to what Democrats say is a failed policy of tax breaks and subsidies to the oil and natural gas industry by President Bush and the GOP Congress.

Green is responding with an energy plan of his own that includes drilling for oil in the Arctic National Wildlife Refuge and more incentives and fewer regulations for new oil refineries in the U.S., where the last new refinery was built in 1976. Green has also criticized Doyle for using money earmarked for energy conservation efforts to balance the state budget.

The oil industry has denied its earnings are excessive, noting oil prices have been driven above $70 a barrel by a combination of rising demand in markets such as India and China and concerns about supplies in countries such as Iran, Iraq and Nigeria.

The industry's overall profitability over the last several years hasn't been much greater than those of other sectors, the American Petroleum Institute reported this month. The institute said that over the last five years, oil and gas companies earned 5.9 cents of profit on every dollar of sales, compared to an average of 5.6 cents on the dollar for all U.S. industries.

Gas tax

That didn't stop the Legislature from approving a bill taking aim at price gouging. Votes driven by gas prices have included a failed mandate to require that 10 percent ethanol be blended into state gas and an attempt to repeal a required price mark-up on state gas.

Doyle and the Legislature recently did away with automatic increases for inflation in the state gas tax, which at some 30 cents a gallon is one of the nation's highest.

Ward said he thought it would be a mistake to repeal the gas tax altogether, since it would hurt the state's transportation fund and send the wrong message to consumers, namely that they shouldn't have to adapt to higher energy costs. Richard Shaten, who teaches energy economics at UW- Madison, agreed.

"Americans need to face the truth, that increasing world demand is going to put pressure on (oil) prices," said Shaten, noting that there were already signs that consumers in Wisconsin and around the country were cutting back on gas use in response to the prices.

Ward said one way to adapt is to push the use of alternative fuels such as ethanol, which can be made from corn grown in the state and, even more promisingly, from waste generated by Wisconsin's large paper industry. On this last point, he was in agreement with both Doyle and Green, who support the continued increased use of alternative fuels. The state Department of Administration reported Friday that ethanol use in Wisconsin increased 20 percent in the last year.

"I think we need to look at how we can accelerate that change," Ward said.

-----

Copyright (c) 2006, The Wisconsin State Journal

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

Source: The Wisconsin State Journal

More News in this Category