Today’s Chart of the Day notes the rising price of oil:

Over the last seven weeks, the average US price for a gallon of unleaded has shot up 52 cents per gallon. When adjusted for inflation, gasoline prices are not far off the inflation-adjusted peak of $3.18 that occurred back in 1981.

The difference, of course, it that the last time gas spiked this high it was because OPEC was squeezing us by the cajones, limiting supply. There were gas lines around the block and you hoped that you got your tank filled before the station ran dry.

This time, it’s because we can’t devise a decent energy policy that allows us to drill in Alaska or the Gulf (although Mexico is having all kinds of luck there) nor build a new refinery on American soil.

When gas prices are high, consumers actually pay attention to politics. So when gas prices spiked last September, I called for Bill Frist to show some leadership and ram some highly visible energy legislation through the Senate (the House won’t be a problem). I repeat my plea:

1. Establish a moratorium on federal taxes for everything petroleum for a period of one year.

   The first federal moter fuels tax was initially set at 1.5 cents per gallon in 1950 and has risen steadily to the current rate of 18.4 cents per gallon (24.4 cents for diesel). While the elimination of this won’t do much for a gallon of gas costing four dollars or more, the federal government imposes 43 different direct and indirect taxes on the production and distribution of gasoline.

   The American economy has been growing while Europe’s sputters. A contributing factor is the price of energy (Norway is predicting prices at the pump of $8.84/gal). High energy and transportation costs will certainly slow economic growth. Consumers are having to tighten their belts, and so should the government!

   It is possible that some states would even follow suit, as measures are stalled in Colorado and Rhode Island. State taxes add an average of 27.5 cents per gallon and many counties and cities add taxes of their own.

   This, of course, is merely a temporary stopgap designed to ease the burden on consumers while more comprehensive measures take effect.

2. Create incentives for companies to build refineries and for states to allow them to be built.

   The last new refinery built in this country was in 1976. (We would have had another one in Virginia but after nine years of court battles brought by environmentalists and local residents and an equally wearying nine years of facing state and federal regulators, the company just gave up.)

   Worse yet, over half of the existing refineries have closed down over those twenty five years (308 in 1979 to 146 today) due to the prohibitive costs of meeting ever-more-stringent government regulations. This trend is expected to continue, especially among the smaller facilities.

   Our refineries are old, inefficient and possibly dangerous. They are certainly running at near-capacity (although total U.S. crude oil processing capacity peaked at 18.6 million barrels a day in 1981, it is estimated that our refineries are running at 90 to 95% capacity). The situation has worsened as some refineries knocked out by Katrina are still not operating.

   With the decrease in competition and soaring demand, the existing refineries are making a killing. It takes a two to four billion dollar investment to build a new refinery, but with profits up it shouldn’t be hard to encourage new construction.

   Then maybe we can keep up with Canada, Thailand, China, India, Kuwait, Nigeria, and Iran — all of which are expanding crude oil processing capacity.

3. Using the Interstate Commerce Clause of the federal constitution, create a national standard for gasoline formulation and require every state to honor it — even California.

   State and federal regulations force manufacturers to produce over 40 different fuel blends (boutique fuels), with different blends required between summer and winter. The burdonsome need to meet custom fuel specifications has cost consumers $47 billion over the last ten years and made it impossible to meet supply demands with excesses in other parts of the country.

   Some refineries overseas have stopped shipping gasoline to the United States because they don’t want the headache of changing processes nor risk getting stuck with excess supplies when out of season.

   Create one formulation for the entire nation and stick to it.

4. Simplify clean-air regulations.

   The Environmental Protection Agency has made a considerable difference in the stewardship of our natural resources but it has come at a high cost. Since its inception in 1970, the EPA has issued a steady stream of confusing regulations that represents one-third of all federal laws and regulations. In the first two decades alone, EPA regulations cost American taxpayers and businesses $1.4 trillion, with over $1.6 trillion in the 1990s. And that doesn’t count the hidden costs to American consumers in the form of higher prices and fewer choices.

   EPA Clean Air regulations are costly (more here), flawed (more here), politically motivated (more here) and arguably hurt our poor and minority population more than any other segment.

   The EPA itself routinely overreaches its authority. Now that President Bush has proven that our environment can continue to improve even after business-friendly reforms have been put into place, it is time to slap the EPA down and make a stand for the American consumer.

   Clean air and a healthy environment at a resonable cost. The EPA would have us pay any cost, even when it doesn’t make sense.

With consumer attention focused on gas prices, it is time for Bill Frist to show some leadership and pass legislation to address the real problems. Then maybe Dems like Schumer will stop wasting our valuable time by calling for useless investigations of the big, bad oil companies that he is accusing of holding back on gas production to jack up prices.

Hey Charlie, I got news for ya. When you stifle competition through over regulation, this is what happens. Fix the problem, not the symptom.

Technorati Tags: Energy,
Energy Policy,
Gas Prices,
Crude Oil Prices,
Gas Tax,
Taxes,
Environment,
Environment Protection Agency,
EPA,
Refinery Capacity,
Charles Schumer.