Politics of gasoline prices heat up

Wednesday's OPEC decision to cut production comes as Bush and Kerry trade barbs over prices and energy policy.

The combination of historically high gasoline prices and oil production cutbacks, announced Wednesday by OPEC, has created a high-octane mix for a presidential campaign with issues to burn.

One of Americans' most basic pocketbook concerns, the price consumers pay at the gas pump, is suddenly at the forefront of national politics - and raising the question of what policy makers can do about it.

The concerns, coming with summer driving season just around the corner, prompted both President Bush and his Democratic challenger, John Kerry, to go into attack mode on the issue Tuesday. Then, Wednesday, the Organization of Petroleum Exporting Countries agreed to cut production by 4 percent, raising concerns of a further rise in energy prices.

Jimmy Carter hasn't necessarily resurfaced in his cardigan sweater, but the era of gas being cheaper than bottled water seems to have ended with a jolt. Amid concern about rising clout for the OPEC cartel and tighter supplies looking forward, pressure could build on both President Bush and Senator Kerry to define, and defend, their energy policies. Bush, in particular, could be vulnerable.

"Presidents usually face trouble when prices go up, and gas prices in particular," says Jack Pitney, a political scientist at Claremont McKenna College in Claremont, Calif. "It doesn't matter what the actual causal link is, presidents usually get blamed."

At stake in the presidential race are two sharply contrasting strategies on energy policy. President Bush is urging opening new sources of production, including protected offshore sites and the Alaskan wilderness. John Kerry's signature environmental issue in the Senate has been energy conservation, especially raising the standards for fuel efficiency for light trucks and sport-utility vehicles.

Recent gas prices have hit levels not seen since the Department of Energy began keeping tracking at US pumps at the beginning of the 1990s.

Experts say it is not clear what the actual impact will be at the pumps of OPEC's decision to lower oil targets to 23.5 million barrels a day.

Specter of $40 per barrel

Some analysts said it could push prices above the psychologically important barrier of $40 per barrel. But Michael Lynch, president of Strategic Energy and Economic Research Inc., suspects the price of crude oil will drop to about $25 a barrel by the end of the second quarter in the US. He says world production exceeds demand by 2 million to 3 million barrels per day.

The OPEC cut amounts to about 1 million b.p.d., starting Thursday.

Several factors are key to the price, including rising demand in places such as China, plus non-OPEC supplies - such as rising production Russia and Iraq.

Also, quotas are not often respected by the OPEC's 11 members, who together account for about a third of the world's oil production. But for a president who once called on President Clinton to "jawbone" OPEC into increasing production, the move is a symbolic blow.

At a rally in San Diego - where gasoline prices hit $2.13 this week - John Kerry blasted the White House for failing the nation at the gas pump and just letting the problem "fester." He pledged to move the nation toward energy independence by adding 500,000 new jobs in renewable- energy fields in his first term in office.

"For three years, George Bush and Dick Cheney have bent over backwards to help their big contributors in the oil industry. I'm going to stand up for students and middle class families and all those who need relief at the pump," he said.

At the same time, Kerry and Democrats on Capitol Hill called on the White House to tap into the Strategic Petroleum Reserves to increase supplies and reduce the cost of driving for American families.

"The average American will now give to OPEC the $400 Bush tax rebate," says Sen. Charles Schumer (D) of New York. "What he's giving with one hand, he's letting OPEC take away with the other."

Meanwhile, the Bush campaign rolled out a fresh attack on Kerry's record on gas prices, based on his support for raising the gas tax by 50 cents in 1994. On Tuesday, the Bush-Cheney '04 campaign launched the "Kerry gas tax calculator," which gives motorists directions to destinations around the country, including how much more they would be paying if "Kerry's tax" were the law of the land.

The Kerry campaign says that Kerry never voted for a 50-cent gas tax increase, but that Gregory Mankiw, President Bush's chairman of the Council of Economic Advisers, once argued the case for a 50 cent gas tax increase in 1999.

How much can policy accomplish?

In fact, there's not much a US president can do to quickly turn around gas prices, even tapping into the nation's petroleum reserve, experts say. "It's a relatively small amount in the context of world oil supplies," says Dave Costello, an economist at the Energy Information Administration.

None of the current proposals for relief at the pumps will take hold soon, experts say. "We're just getting into the driving season now, so it's unusual to see prices as high as $1.758 nationally, says Mr. Costello. In addition, requirements to get rid of polluting gasoline additives, such as MTBE in states like New York, Connecticut, and California, will "make it harder for the product to be replaced by imports."

"We expect additional increases in gasoline prices through the spring. We do expect prices to continue to rise through the mid to late spring," he adds.

Bush and GOP leaders on Capitol Hill say the recent spike in gas prices should spur Senate Democrats into easing opposition to the GOP energy bill, which has been blocked in the Senate.

Bush called Tuesday for Congress to act on his energy plan to boost domestic production.

"As we move forward I would imagine that the American people are going to get a little bit tired of paying high prices for their energy and for their gasoline, and hopefully they can turn to understand that we have a long-term energy policy that just requires [the vote of] two senators, and John Kerry could be one of those senators," said House majority leader Tom DeLay.

The push toward the first comprehensive energy bill began on Capitol Hill after OPEC voted to raise oil prices from $3.01 per barrel to $5.12 and cut production by 5 percent in 1973. At the time, President Nixon proposed that the US aim for energy independence by 1980.

Kerry also has cited a goal of an America free of dependence on foreign oil, but has stressed development of alternative fuels rather than domestic oil and gas production as the means.

David R. Francis contributed to this report from Boston.

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