MTBE and Republican missteps

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Nonsensical, anti-Democratic party histrionics aside, Denny Pelosi has a couple of interesting things to say. Another fault line in the Republican “big tent” is becoming apparent. The problem is that too many Republicans are simply incompetent at law making, and are only good at rewarding their business friends. When even the WSJ editorial page is criticizing Republicans, yadda yadda.

Republicans can blame business all they want for high prices, but sounding like liberal Democrats won't save them in November.
Few things are less becoming in a political party than desperation, as Republicans are now demonstrating as they panic over rising oil and gas prices. If blaming private industry for Congress's own energy mistakes is the best the GOP can do, no wonder its voters may sit out the November election.

Oil prices hit $75 a barrel last week, while gas has reached a national average of about $2.85 a gallon. The Republican response has been to put on Chuck Schumer and Nancy Pelosi fright wigs and shout about corporate greed and market manipulation. House Speaker Denny Hastert and Senate Majority Leader Bill Frist fired off a letter to President Bush yesterday demanding the Federal Trade Commission and Justice Department investigate “price fixing” and “gouging.” Senator Arlen Specter wants to go further and impose stricter “antitrust” laws for oil companies, as well as a “windfall profits” tax. Mr. Hastert also delighted the class warriors in the press corps by lambasting recently retired Exxon CEO Lee Raymond's pay “unconscionable.”


WSJ.com - Denny Pelosi

There's been unconscionable behavior all right, most of it on Capitol Hill. A decent portion of the latest run-up in gas prices -- and the entire cause of recent spot shortages -- is the direct result of the energy bill Congress passed last summer. That self-serving legislation handed Congress's friends in the ethanol lobby a mandate that forces drivers to use 7.5 billion gallons annually of that oxygenate by 2012.

At the same time, Congress refused to provide liability protection to the makers of MTBE, a rival oxygenate getting hit with lawsuits. So MTBE makers are leaving the market in a rush, while overstretched ethanol producers (despite their promises) are in no way equipped to compensate for the loss of MTBE in the fuel supply. Ethanol is also difficult to ship and store outside of the Midwest, which is causing supply headaches and spot gas shortages along the East Coast and Texas.

These columns warned Republicans this would happen. As recently as last year, ethanol was selling for $1.45 a gallon. By December it had reached $2 and is now going for $2.77. So refiners are now having to buy both oil and ethanol at sky-high prices. In short, the only market manipulation has been by politicians.

For the record, the FTC has an entire crew that pores over weekly average gas prices in hundreds of cities, looking for evidence of gouging -- to no avail. Perhaps this is because no oil company controls enough of the market to exercise enough power to raise prices. The Hastert-Frist call for an investigation is nothing but short-attention-span political theater.

Beyond the ethanol fiasco, the oil markets are once again providing a tutorial in supply and demand in a global commodity market. Strong economic growth from the U.S. to China is driving up demand, even as political uncertainty in oil-producing countries such as Venezuela and Iran is leading to supply worries and some speculation. The Federal Reserve has also played a role by flooding the market with dollar liquidity that has produced higher prices across all commodity markets.

Congress could help a little in the short term if it asked the Bush Administration to end the 54-cent-a-gallon tariff on imported ethanol. That would especially help drivers in coastal states suffering from spot shortages. Naturally, however, the domestic ethanol industry is threatening retribution against any Member who suggests such a thing; so much for industry gratitude.

The GOP might also refocus its attention on legislation the House passed last year to reduce the number of “boutique fuels” to six from 17. These special gasoline blends are required in different parts of the country in the name of reducing pollution. Their primary effect, however, is to raise gas prices and make it difficult to move gas around the country during shortfalls. The Environmental Protection Agency could also ease environmental rules for those parts of the country suffering shortages....

Umm, let's not and say we didn't. Is there really a need to irrevocably destroy the environment in order to lower gasoline prices to sub-$3 levels? Are there not other options? And what's the downside to banning MTBE? Actually, in the passive-aggressive manner of Congress, MTBE wasn't even banned, they just didn't provide blanket liability protection to the makers of MTBE. Why should they?

Denny Pelosi also makes some facile suggestions that if only Alaska oil exploration would have started years ago, there wouldn't be problems at the moment, even though, from what I've read, Alaska is a very small and finite source of new oil.

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This page contains a single entry by Seth A. published on April 25, 2006 10:45 AM.

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