It is not rational for the Bush administration to think it can continue to do little or nothing with respect to the gas price crisis and expect to keep control of Congress.
Remember the sayings, "All politics are local" and "It's the economy, stupid?" The former was coined by Tip O'Neill, Speaker of the House when I was a member of Congress. The latter was coined in the 1992 Clinton presidential campaign by Democratic strategist James Carville.
Both insights apply to the gas crisis. The gas pump is local and hits you in the wallet once or twice a week. With gas at $3.00 or higher per gallon, a full tank can cost a driver up to $60. The connection of gas with the economy is obvious. Most individual discretionary spending is now sharply limited because, as President Bush recently publicly observed, "America is addicted to oil."
Normally, a president presiding over an economy with a low unemployment rate and high stock averages can expect hosannas. But not today when cars are a central part of our lives and are becoming so costly to operate that other expenditures must be deferred.
Not long ago, I thought the domestic issue that would dominate the next election in November of 2006 would be the lack of health care insurance coverage for 48 million Americans. Not any more. The major issue of the upcoming election, unless addressed now, will be the price of gasoline.
It is difficult to comprehend the response of the Bush administration. To put it mildly, they have a credibility problem. Both the president and vice president come from the oil business and are viewed by many, probably a majority, as friends and supporters of big oil. The avarice of the oil companies was best displayed by the nearly $400 million severance payout recently given to Lee Raymond, the former chairman of ExxonMobil. This is seen as unconscionable by the public and almost every driver paying at the pump believes he or she is directly contributing to that sum out of his or her own wallets.
What should the Bush administration do? The President by this time should have said to himself, "What would Teddy Roosevelt, Republican and the greatest trust buster ever, have done under similar circumstances if he were alive today?" In other words, what would Teddy do? I dreamt recently that I asked Teddy that very question, and this is what he recommended:
Have the U.S. attorney general bring anti-trust actions charging the oil companies and OPEC countries with a conspiracy to fix prices. Currently no matter the actual cost of imported oil, the price at the pump in the U.S. is approximately the same, varying by pennies. Yet the cost of production differs from country to country, depending on the costs of exploration and extraction. OPEC, the Organization of the Petroleum Exporting Countries, sets the cartel price and those outside of OPEC then fix their prices to equal OPEC's.
Under U.S. law, when countries are sued, they normally enjoy sovereign immunity. This does not apply when they are involved in commercial matters. Some U.S. circuit courts nevertheless have rejected such lawsuits, but there are federal courts that have not ruled on this anti-trust issue. If federal courts won't accept such cases, the Congress should immediately legislate and remove any legal impediments to federal court jurisdiction. The U.S. Attorney General should bring lawsuits to compel a breakup of the current major companies, undoing the consolidation and mergers heretofore permitted.
The president has said he will look into price gouging, but has evidenced a jaundiced outlook. He said he had never seen a case of price gouging, even after investigations had been made. That sounds like Michael Brown of FEMA.
The president should direct the IRS to exercise its power to disallow deductions for unconscionable costs (e.g., the severance and other payments made by the oil companies to officers and managers). The president should urge Congress to eliminate all of the billions in subsidies now provided to the oil and gas industry.
The president should immediately direct automobile manufacturers to meet a yearly schedule of increasing gas mileage, which the car makers have successfully fought. He has recently asked for that power. Both he and Congress should move aggressively on this issue and mandate an annual improvement in the miles per gallon standards called the Corporate Average Fuel Economy, or CAFE, standards.
The president and Congress should create a Manhattan Project to explore and generate new sources of energy as a substitute for oil. The Manhattan Project which developed the nuclear bomb cost $2 billion -- in today's dollars that would be $20 billion, a pittance compared to the hundreds of billions we are now paying for foreign oil.
We should enter into long term contracts with Canada which has developed ways to extract oil from tar sands. Oil from tar sands is only profitable when oil exceeds $35 a barrel. Today, it is more than twice that sum. However, if oil from tar sands becomes a threat to the oil companies, because they don't control the output, OPEC and other oil producers could reduce their prices below the $35 a barrel mark to destroy Canadian companies that produce oil from tar sands. The U.S. has to guarantee the tipping price with long-range contracts if we want Canada to continue to develop its tar sands resources.
We also should hire Brazilian technicians and use their technology to turn sugar cane into ethanol, which is more effective than using corn. Sugar cane produces more units of energy more efficiently than corn.
Here is the sleeper. The U.S., its European allies and Japan, all of whom are dependent on foreign oil, should explore how they can fight the oil cartels with cartels of their own. Oil producing countries generally import substantial amounts of their food from the West. We should peg the prices of those food items and other manufactured products exclusive to us through the use of a cartel using the monopoly price of oil as a benchmark until the normal rules of supply and demand apply to oil. Defenders of existing oil prices argue they are the result of supply and demand. Not true. OPEC, oil companies and brokers set artificial prices and manipulate the oil market.
Coal is a resource that we have in such abundance, with our reserves being greater than the oil reserves of Saudi Arabia and Russia. Undoubtedly ways can be found to make coal environmentally safer. In World War II, Germany had no oil available within its own borders, yet it was able to keep its military and civilian vehicles going. It almost won WWII against the forces of the U.S., England and Russia in a two-front war. German trucks during and for some time after the war used wood to fuel their engines. Necessity is still the mother of invention.
Let's stop wringing our hands and find solutions. Even more important, let's teach the oil companies they don't run the U.S. Our government should bring them to heel, beginning with making oil company profits subject to an excess profits tax. In the immortal words of Todd Beamer on United 93, "Let's roll!"
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