Posted on March 27, 2000 in Washington Watch
OPEC may very well decide to increase oil production at its March 27 meeting, but it will be months before the political repercussions of increased gas prices die down.
During the past month, the issue of oil has steadily crept into the forefront of the U.S. political debate. After Secretary of Energy Bill Richardson’s highly publicized visits with OPEC leaders to urge them to increase production, the issue exploded. It took two forms: partisan Republican attacks on the Clinton Administration for “acting too slowly” in response to the situation, and attacks on the oil producing countries–with, of course, special focus on the Arab OPEC states.
Republicans had been looking for an economic issue to attack the Clinton Administration. With the U.S. economy in its largest economic boom in more than a generation and with almost every economic indicator moving in a positive direction, Republicans worried that they would stand little chance to find an issue before the November elections.
High gasoline prices played right into their hands. Earlier this winter, the northeastern United States faced some difficulty dealing with increased costs for home heating oil, but the President responded quickly by making federal funds available to help lower costs for some consumers. Gasoline prices, however, are not a regional issue. And while heating fuel costs are only known when monthly or quarterly bills arrive, gas prices are the most visible prices in the country.
One year ago, the average price of gasoline was $.98 per gallon. Today it is $1.53. Analysts have projected that by the end of May (the beginning of the vacation season) prices may go as high as $1.60 to $1.80 per gallon.
It is possible, in reality, to argue that gas prices are not too high. In fact a White House spokesperson made that very point, noting that “by any measure, oil prices are still low.” This is true in comparison with most other western industrial nations; and when today’s prices are compared, in real dollars with U.S. prices in 1990 and even with prices in 1972.
But in politics, perception is reality. So with each passing week as gas stations changed their signs and raised their prices, the public and politicians reacted. Last week, the Consumer Price Index (the measure of inflation) increased by .5%–small, but the largest such increase in a year–and almost all of the increase due to increases in energy costs.
The trucking industry reacted to the increases with demonstrations in Washington. And the U.S. airlines announced fare increases of $40 on domestic tickets–all due to the high cost of fuel.
Adding fuel to the fire, Alan Greenspan, the powerful head of the Federal Reserve whose every word is closely followed by investors, expressed concern that the continued increases in fuel prices would pose a danger to the U.S. economy.
Sensing that they finally had a hot issue with which to attack the President, Republicans went on the offensive. Some of their rhetoric was directed at Arab states, a convenient and familiar target.
Congressman Dana Rohrabacher (Republican, California), in rather tactless remarks, noted “We’re being screwed by the people we defended. How can we have troops in these countries, as they engage in a conspiracy to shaft our economy?”
This dangerous line was echoed by Senator John Warner (Republican,Virginia) who attacked Saudi Arabia as “ungrateful,” as did former Senator Bob Dole and Congressman Donald Manzullo (Republican, Illinois) who said “This is not the way you thank the United States. American blood was shed to protect Saudi Arabia and Kuwait from being overrun.”
These Republicans were joined by hard-line pro-Israel Democrats like Congressman Brad Sherman (Democrat, California) and Senator Charles Shumer (Democrat, New York)–who apparently did not want to miss an opportunity to Arab bash.
But the real focus of the Republican attack was on the Clinton Administration. In fact, most comments only referred to the Arabs as part of a larger attack on the Administration for poor diplomacy. For example, Speaker of the House Dennis Hastert (Republican, Illinois) stated “We’ve seen six years of laxity as far as foreign policy with countries that we help.” And Congressman Ken Calvert (Republican, California) gave Clinton a “D” grade for weak display. “We were caught napping…The Administration was unable or unwilling to convince our friends in OPEC.”
While also chiding the Clinton Administration for not being more direct with oil producing countries, Republican presidential nominee George W. Bush attempted to add to the debate by endorsing a proposed bill offered by some Republican congressmen to eliminate 4.3 cents from the federal tax on gasoline. This 4.3 cents tax was initially passed in 1993 by a 51-50 vote (with Vice President Al Gore casting the 51st vote in the Senate). The tax raises $600 million per month and is used for highway construction and repair and airport improvements. Republicans who oppose the tax have long called it the “Gore tax.”
Bush’s call to end the tax, backfired when it was not supported by a number of leading congressmen in his own party who warned that without the revenues generated by the tax, the nation’s highways and airports would suffer.
If the rhetoric was heated, so too was the legislation that was proposed to attack the problem. By now there are more than one dozen such bills. Some call for releasing oil from the strategic petroleum reserve, or opening the Arctic National Wildlife Reserve in Alaska to oil exploration. Others call for ending the moratorium on offshore drilling or requiring more use of wind and solar power.
The most controversial proposal, however, was introduced by Chairman of the House Committee on International Relations, Ben Gilman (Republican, New York). In its initial form, the bill called for the President to “reduce, suspend, or terminate any assistance under the Foreign Assistance Act of 1961, and the Arms Export Control Act to each country determined by the President to be engaged in oil price fixing to the detriment of the U.S. economy.”
The bill passed out of committee by a vote of 21-15 last week. Before the full Congress could vote on it, it was dramatically watered down after a strong lobbying effort by aerospace and defense contractors. The final, rather tame, version merely calls on the President to report to Congress on the actions of oil producing countries. It has passed in the House, but will most likely not become law and most certainly will not be implemented by the White House.
In any case, the entire situation that the legislation was designed to address may very well be on the way to resolution after the OPEC meeting. If the quotas on production are raised, after a few months we may see a gradual reduction in price.
But, even if this is the case, real damage has been done. The largely partisan debate will not subside–Republicans will continue to charge that the Administration was weak and slow to respond to the “crisis.” Even if prices do go down to pre-crisis levels by the fall, this argument will not win many voters, but it will still be used.
But damage was also done to Arabs and U.S.-Arab relations. The public utterances by some Senators and Congressmen were despicable and they should be signaled out for blame. But I would also place some fault on the Arab side, for their absence from the policy debate. The problem was not that OPEC sought to raise prices to a fair level (the $11 per barrel price of one year ago, was crippling and destabilizing)–but because they never attempted to engage the U.S. public in a discussion of why such increases were needed.
President Clinton attempted to make this case, one week ago, when he noted that it was important that prices be at a level high enough for oil producers “to run their countries and finance their budgets.” But this argument should have been made by spokesmen from Arab countries as well. An information campaign done early and effectively might have stopped the negative attacks even before they began. As it was, the absence of information from the Arab side left the door open for wild rhetoric and hurtful accusations by enemies of the U.S.-Arab relationship. In the end, we were all harmed.
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