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Analysis: Gasoline policy blues

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by Martin Sieff
Washington (UPI) May 2, 2008
Sens. John McCain, Hillary Clinton and Barack Obama are now arguing over how to cut record oil prices, but none of them has any credible answers.

The soaring global cost of oil and record prices per gallon at the gas station for U.S. consumers is emerging as a King Kong in the 2008 presidential election campaign. Global prices are now around an extraordinary $110 a gallon. In the past week prices in some U.S. cities reached a record $4 a gallon, and the one thing as sure as death and taxes is that things are going to get even worse.

There are already U.S. federal and state taxes on gasoline, but they are minuscule, averaging out at less than 50 cents a barrel compared with national gas taxes around four times as high in major European countries.

McCain, R-Ariz., wanted to bring shorter-term relief to drivers around the United States by declaring a short "gas tax holiday" over the summer starting on Memorial Day and ending on Labor Day -- the traditional dates when the American summer season starts and ends. Clinton, D-N.Y., agrees. But a caucus of democratic senators on Capitol Hill killed the idea stone dead this week, and its effect would have been minimal anyway.

The issue has split Democratic Party leaders. Clinton's old ally, House Speaker Nancy Pelosi, D-Calif., a passionate environmentalist from San Francisco, has blasted the idea as far too little and ineffectual. Obama, D-Ill., eager to take the campaign spotlight off his 20-year association with the Rev. Jeremiah Wright, opposed it, too. He wants to tax the profits of oil-producing companies. But all that idea has ever done is cut oil production, driving prices at the pump even higher.

Soaring U.S. domestic gasoline costs are hammering the domestic U.S. economy and making prices soar. Lots of economists and European policymakers want to raise taxes on gasoline for domestic users. That would raise urgently needed money for a federal government that under President Bush has run up a record annual operating deficit and has been given a no longer perfect international credit rating for the first time in well over a century.

Supporters of the tax say it would also impose economic rationality on the American public and its policymakers and force them to take the crucial action that they argue is necessary to restructure the domestic U.S. transportation system, which is the main structural cause of America's ravenous hunger for imported oil.

The U.S. election campaign rows and confusion over imposing a federal gasoline tax are already big and will get bigger. There are strong arguments for imposing such a tax and other strong ones not to do so.

The last American leader to even hint at changing the structural lifestyles of the American people was President Carter in the late 1970s. But all he produced was economic stagflation and widespread revulsion at the generational humiliations and drift Americans perceived under his leadership.

Carter's successor, President Reagan, through a complex interlocking series of international and domestic policies still not properly understood by both conservative and liberal pundits to this day, brought international investment into the United States and brought global oil prices cascading downward. But the solutions Reagan found for the 1980s were for a different time, and for different problems, than U.S policymakers face in the 21st century.

India and China have been industrializing rapidly and adding their hunger to the global oil market. Russia has emerged as the world's No. 2 oil exporter, and its No. 1 gas and oil combined exporter.

Climate change is now a huge national concern. U.S. policymakers are now turning back toward re-embracing nuclear-fueled power-generating stations for the first time since the Three Mile Island accident and crisis in 1979. The hostility of environmental Greens with their huge clout in the Democratic Party against coal mining is now vastly greater than it ever was 30 years ago.

The current debate of the "Big Three" presidential candidates over McCain's "gas tax holiday" proposal is like the first skirmishes of a huge political, economic and even philosophical battle that will last years before it is finally resolved.

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