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Published: 3/7/2000

Lessons repeatedly go unlearned on need to reform petroleum use

BY HOMER BRICKEY
BLADE SENIOR BUSINESS WRITER

For all its wealth and power, the United States is sometimes a slow learner.

Now we're bracing for gasoline prices to hit $2 a gallon this summer, and lots of consumers are getting angry.

But nearly every congressman or senator is old enough to remember the warnings in the 1970s about growing dependence on foreign oil. Surely they remember long lines at filling stations, and surely they remember the economic turmoil caused by rapidly rising crude-oil and gasoline prices.

There were two wake-up calls in the '70s - the energy crunches of 1973 and 1978. Apparently we didn't learn much from either. A quarter of a century later, we are even more dependent on imported oil.

Congress really missed the boat on taxes. In the 1970s, Americans would have bought the idea of increasing taxes on petroleum products - especially after the energy scare died down.

The extra cash flow to the government could have financed mass-transit programs, research into more fuel-efficient cars and trucks, anti-pollution efforts, and better highways and railroads.

Higher gasoline taxes would have produced some other benefits. Consumers would not have been tempted to buy as many huge gas-guzzling vehicles including some sport utilities that are bigger than vans. And higher gasoline prices in general would have insulated us from later shocks, such as the one happening right now. - An extra 50 cents a gallon hits like a sledgehammer, but if consumers were accustomed to paying $2 or more a gallon, the added half a buck wouldn't seem like so much.

The oil crunches of the 1970s caused a temporary surge in small-car sales, but Americans quickly fell back into bad habits. Cars and pickup trucks became bigger, and even with some improvements in fuel economy they used more fuel than smaller models would.

Lee Iacocca proposed in 1992 that the United States raise gasoline taxes. "Talk about a no-brainer," he said, just before retiring as chairman of Chrysler Corp. "We've had a [federal gasoline tax increase] of 9 cents in 50 years, a nickel of that from Eisenhower.

". . . With oil at $22 a barrel [it's higher now, $30 or more a barrel] every country pays about 48 or 49 cents a gallon, before taxes. So why are we at 97 cents [at the pump]" while European motorists pay $4 to $5 a gallon?"

Mr. Iacocca said at the time that each penny per gallon in tax would raise $1 billion for the Treasury and would help cut pollution.

The current price spiral is being blamed on many factors, including the unusually cold winter in the Northeast, which boosted demand for heating oil. Of course, the main factor is the Organization of Petroleum Exporting Countries, which has enforced its cuts in production.

Some analysts have theorized that OPEC is punishing the United States for the Persian Gulf War almost a decade ago. Others believe OPEC is hanging together to prop up some economies, such as Iran's.

There are even conspiracy theories. Yesterday's Barron's financial newspaper suggested (facetiously, we trust) that "the upward sprint in oil prices is a grand conspiracy concocted out of a witches' brew of OPEC's greed, Mr. [Alan] Greenspan's fear, and Mr. [George W.] Bush's ambition."

Despite its jest, Barron's made a very serious point: "$30 a barrel translates into a $70 billion drag on the U.S. economy and $200 billion worldwide."

For the future, we need bullet trains, effective mass-transit systems in large cities, better highway planning, and hybrid-vehicles that combine electric and fossil-fuel power.

Instead, the more likely possibility is that Congress will, once again, watch crude-oil prices drop - and they probably will, but it's unlikely they will get back to last year $11 a barrel. And then Congress will, once again, do nothing about gasoline taxes.

And there will be another energy crisis. All too soon.

Homer Brickey is The Blade's senior business writer.



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