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Federal Policies to Blame for High Gas Prices
By Mark Brnovich, The Goldwater Institute
06 April 2004

There are three things that must be changed in federal policy to resolve the gas crisis - and by Congress, not through an independent federal investigation.

Gas prices are climbing and Americans want to know why.

Various elected leaders have written letters demanding answers from federal officials. Arizona's governor Janet Napolitano is asking President Bush and Attorney General Ashcroft to launch a federal investigation into rising gas prices. Arizona Attorney General Terry Goddard has written a letter to Energy Secretary Spencer Abraham asking him to investigate.

Napolitano and Goddard are correct to seek answers from the federal government, because Arizona’s high gas prices have their roots in federal policies. However, bringing down prices doesn’t require federal investigations. Instead, they should be asking Congress to take three steps to provide immediate relief for gas consumers in Arizona and in other parts of the country.

First, Congress should rescind the federal gas tax, which amounts to 18.4 cents a gallon. The tax was originally enacted in 1956 to support construction of the interstate highway system, but has long outlived its usefulness. The highway system is complete, and funds are now used to support various pork-barrel spending projects throughout the country. If Arizona’s elected officials want to conduct an investigation, they should demand to know why taxpayers in places like Arizona and California are paying for local projects in places like West Virginia and Massachusetts. Eliminating the gas tax would save the average driver hundreds of dollars each year, and maintenance of the highway system could be turned over to the states, where we can keep a better eye on spending.

Second, Congress should eliminate federal rules and regulations mandating the use of specialized fuels in the Phoenix area. The Environmental Protection Agency, backed by the threat of withheld transportation funding, forces Arizona to use reformulated blends of gasoline. These reformulated fuels are scarcer than other kinds of gasoline and therefore more expensive. As Goddard wrote in his letter to Secretary Abraham, fuel prices rise each year as refineries are forced to switch over from winter blends to reformulated summer blends.

Instead of mandating the use of special fuels, Congress and the EPA should let Arizona solve its air quality problems. One way is to target the relatively few super-emitting automobiles that cause the most pollution. Options include a vehicle license surcharge for high-polluting vehicles, modified emissions fees, retrofitting of older vehicles with catalytic converters, accelerated retirement of older vehicles, and mobile emissions enforcement.

Third, as a long-term measure, Congress should consider legislation allowing drilling for oil in Alaska’s Arctic National Wildlife Refuge (ANWR). In accordance with the laws of supply and demand, gas prices rise when there is a disruption in supply or an increase in demand. Production of more oil would result in an increased supply of gasoline and lower gas prices for consumers. Increased domestic production would also serve to insulate Americans against supply disruptions initiated by the Oil Producing and Exporting Countries (OPEC). Of course, precautions should be taken to ensure that drilling produces a minimal environmental impact on ANWR, but as drilling and oil exploration in other parts of Alaska have proven, there are environmentally safe ways to increase oil production.

Unfortunately, the letters by the governor and attorney general to the federal government don’t address the real causes of high gas prices. The letters reflect an attitude that only further federal government intervention can solve local problems. Rather than asking for federal investigations, we should be demanding that Congress take positive steps to free up the gas supply.

Mark Brnovich is director of the Goldwater Institute's Center for Constitutional Government.

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