by John M. Curtis
(310) 204-8700

Copyright May 19, 2004
All Rights Reserved.

acing reelection in 1980, President Jimmy Carter had all he could do managing the Iran-Hostage crisis, a sputtering economy and runaway inflation. Gas prices spiraled out-of-control, hitting $1.35 a U.S. gallon—a shocking amount considering prices averaged nationwide about fifty cents a gallon only a few months earlier. Rocketing gas prices spelled bad news for Carter, trying to convince voters to give him a second term. Debating Republican presidential candidate Ronald Reagan on national TV, Carter generated more anxiety urging conservation, seeing no end to runaway fuel costs. While the economy today isn't in the mess it was then, escalating pump prices leave voters with a bad taste. Unlike ordinary taxes, high gas prices punish consumers on a daily basis. When voters step into the voting booth in November, they'll ask themselves, paraphrasing Reagan, whether they're better off than they were four years ago.

      Calling the debate about energy prices “cheap political rhetoric,” White House Press Secretary Scott McClellan, skirted Bush's mounting problems heading into November. Like radioactivity, bad news is cumulative, changing an upbeat tone into one decisively more negative. “The president is, like Americans, concerned about rising gas prices,” said McClellan, dismissing remarks of presumptive Democratic nominee John F. Kerry, pushing Bush to pressure the Saudis to increase oil production. Other Democratic senators have urged Bush to release oil from the nation's Strategic Petroleum Reserve, a move designed to stabilize prices recently exceeding $41 a barrel. After falling to under $20 a barrel in 2003, the Organization of Petroleum Exporting Countries—the major oil producing cartel—scaled back production in 2003 by 1.5 million barrels, causing the current price spike.

      When President Bill Clinton tapped 30-million barrels from the reserve in 2000, it only dropped pump prices one cent. Thirty-million barrels is a drop in the bucket for a nation consuming about 50-million barrels a day. Energy Secretary Spencer Abraham, who plans to attends an international oil conference in Amsterdam in late May, promised to push OPEC to increase output to 1.5 million barrels—the exact amount the Saudis cut in 2003. Increasing oil production doesn't deal with growing demand or alleged lack of refining capacity. Nationwide prices for unleaded regular exceeded $2.00 a gallon for the first time, raising political concerns heading into the high-demand summer driving season. “It seems like gas prices go up every summer and people think it'll be a big issue in November, and then they go down in the fall,” said Charles Black, a Republican political consultant with close ties to the White House.

      Runaway diesel and gas prices feed inflation by increasing transportation costs, hurting the bottom lines of ordinarily profitable companies. Uncontrolled fuel costs levies a daily punitive tax on consumers, inhibiting spending needed for economic recovery. Oil shocks of the 1970s—including OPEC's 1975 oil embargo—caused the worst inflation in the nation's history, eventually toppling the Carter presidency. When prices are at a normal baseline, summer increases don't sow panic. But when rising prices already go through the roof, seasonal price-hikes become intolerable. Taken together with ongoing problems in Iraq, spiraling gas prices don't help the overall mood on the street. “I would say it's a problem for Bush. It's a bad thing to happen in an election year for an incumbent,” said Andrew Kohut, director of the Pew Research Center of the People and the Press.

      Like Reagan campaigning in 1980, Kerry made quick political hay of today's spiraling oil prices. Painting the president as a big Texas oilman with close ties to the Saudis, Kerry urged Bush to push the Kingdom to increase production. Playing it safe, Kerry opposes tapping the strategic petroleum reserve. “George Bush has no plan, doesn't address it, doesn't seem to care that every American family is paying more to go to work . . .” said Kerry, giving a stump speech in Portland, Ore. Kerry offered no solution other than telling Bush to exhort OPEC to increase production. Meanwhile, oil refineries continue to go off-line, causing shortages and driving prices through the roof. So far, the Department of Energy has no plans to investigate and fine refineries that deliberately stop production to lower supplies, create artificial shortages and push commodity prices into the stratosphere.

      Spiraling gas prices cause incipient inflation, induce anxiety on Wall Street and invite the Federal Reserve to hike interest rates. With the stock market—and the economy—already on shaky ground, something must be done to stabilize petroleum prices. All the promises of the Iraq war to stabilize oil reserves haven't been redeemed. Oil production at Basra and Kirkuk—the world's second largest oil fields—has neither financed the Iraq's rebuilding nor stabilized global oil markets. Despite current price hikes, the price of spot-market crude can't account for the rapid run-up in oil prices. Nor can oil companies' spin about inadequate refinery capacity account for whopping price spikes at the pump. Instead of begging OPEC to increase production, Energy Secretary Abraham should scrutinize oil companies for taking refineries off line, choking off supplies and driving prices into outer space.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

©1999-2002 Discobolos Consulting Services, Inc.
(310) 204-8300
All Rights Reserved.