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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: James W. Riley who wrote (63333)	4/25/2006 8:26:32 PM
From: elmatador	Respond to of 206325

Henry Payne: Mad about gas prices? Blame government, not Big Oil Despite strong economic growth, the poll numbers of national Republicans dove this month as gasoline prices soared above $3 a gallon. As opportunistic Democrats pile on, Republicans defensively point to their passage last year of the energy bill as evidence that they are "doing something" -- reducing dependence on imported oil and encouraging greater use of ethanol in gasoline. How ironic. It is precisely the energy bill -- along with international events -- that is causing the prices to increase. "Gasoline prices are up 60 cents over last year at this time," says Dan Gilligan, president of the American Petroleum Marketers Association of America, which represents fuel distributors nationwide. "Forty-five percent of that is higher crude prices, due to reasons we have little control over: political instability in places like Iran and South America, Chinese demand, etc. "But 15 percent of that increase is due to the effect of last year's energy bill." Uncle Sam's double whammy Congress first mandated the production of 4 billion gallons of ethanol this year (increasing to 7.5 billion in 2012). This arbitrary number is to help wean America from its "oil addiction," as President Bush puts it. In reality, it is a sop to the powerful farm lobby that makes corn-based ethanol. Second, the energy bill required that ethanol replace MTBE as an additive in gasoline to meet smog rules in urban areas. Because smog is heaviest in summer, oil companies are refining their "summer blends" now. Already struggling to meet the initial 4 billion gallon mandate, the ethanol industry cannot keep up with the additional demand from the MTBE mandate, resulting in shortages and price spikes. "We asked for a more orderly, two-year transition from MTBE to ethanol. But we didn't get it," Gilligan laments. An easier transition would have required offending another powerful group: the Democrat-allied trial lawyers. They await the potential windfall from lawsuits alleging MTBE has leaked from gas tanks and tainted groundwater. As long as MTBE was federally mandated, oil firms had legal cover. But the energy bill set a May 5 deadline for the transition -- without any continuing liability protection for MTBE. Michigan's proximity to ethanol production and its own corn crop means it has never depended on MTBE. But that hasn't spared us from the gas spike. America's coasts most need the smog-compliant gasoline, taxing ethanol supplies and driving up prices everywhere. Ethanol's shipping cost Another reason coastal states opted for MTBE: Ethanol, which attracts water, is expensive to ship because it can't go by pipeline. It is hauled to coastal cities by truck or rail, causing delays and storage problems for distributors. "Someone has to pay for all this," a Texas fuel distributor spokesman told the Wall Street Journal, "and the consumer is always the one that gets to pay eventually." Foreign-made ethanol might help supplies, but Congress has protected farmers and gouged consumers by slapping a 54-cent-per-gallon tariff on imports. This situation "will all clear up by June," says Mark Griffin, president of the Michigan Petroleum Association, as the summer blend deadline passes and the refineries still off-line from Hurricane Katrina begin producing again. But now that the GOP and Democrats have recommitted government to intervening in fuel markets, price hikes will become more likely. Republicans have strayed from free-market principles and created a mother of all fuel mandates that is draining their popularity and credibility. In short, if you're upset over high gas prices, don't look at Big Oil -- look at Big Government. Henry Payne is The News' editorial cartoonist. E-mail him at hpayne@detnews.com.