Gasoline Prices

While we were on our vacation in Utah it seemed that everyone wanted to ask me about the high price of gasoline. I spent an enormous amount of time explaining basic supply and demand to people and about how the Government investigates the Oil Companies for price gouging but they contribute to the problem rather than helping it. Below is a prime example of that.

Congress is finally home on August recess but not before voting to keep gasoline prices high. The House overwhelmingly approved a resolution by Rep. Rahm Emanuel of Illinois to censure the state of Indiana for granting a permit to British Petroleum to invest $3 billion in an oil refinery expansion in Whiting, Indiana. Rep. Emanuel's resolution was pushed by Midwesterners who complained that the facility would pollute Lake Michigan.

One might think Congress would be cheering for the BP/Whiting project, the largest new investment in domestic refining capacity in decades. Existing refineries have been running at 90% to 95% capacity, prompting spikes in gas prices whenever these overworked facilities suffer maintenance outages or a recent rash of fires. As for the pollution argument, it's a red herring. Indiana has tougher clean-water statutes than even the federal Environmental Protection Agency. The state's own data show that the BP facility would contribute fewer pollutants to the lake than many communities that are already permitted to dump their wastewater into it.

Naturally, Mr. Emanuel, who runs the Democratic Congressional Campaign Committee, is always first in line to blame high gas prices on President Bush's "failed energy policy." The story gets even richer with hypocrisy because oil companies are under blistering assault from Congress and environmental groups for not producing enough gasoline. Says Charles Drevna, head of a refinery trade group: "Every time I testify, the first question I'm asked is: "Why isn't industry building more refineries?'" At a Senate hearing earlier this year, New York's Chuck Schumer accosted "big oil" for buying back shares of stock rather than investing in more domestic operations. "It seems that big oil is pumping cash, rather than petrol," he charged.

So keep in mind Mr. Emanuel's resolution next time you're pumping $3.50 gas. Rep. Mike Pence of Indiana, one of just 28 House members who voted against the anti-refinery resolution, notes that the alternative to producing more gasoline domestically is to import more from abroad. Paradoxically, he says, the House just voted overwhelmingly in favor of "higher gas prices, out-sourcing of jobs and energy insecurity."

OpinionJournal Political Diary 8-8-07