Can't the government help with gas prices?

John W. Schoen Senior Producer • Profile • E-mail

Higher gasoline prices are on most readers minds these days. That has many asking: why isn't the government do anything to keep them from going higher?

CAN'T GOVERNMENT HELP?
Americans living on fixed incomes cannot afford to drive. We need some sort of government help.
          Shirley B. -- St Paris, Ohio

And those who live in states with cold winters face another nasty surprise: home heating bills are expected to rise sharply — after posting big gains last year. Not only have natural gas and heating oil prices posted big gains this summer: long-range weather forecasters say it looks like the winter is going to get off to a colder-than-normal start. If that happens, you'll be buying more fuel at higher prices.

In the short-term, the government can help people who can’t afford higher heating bills. The Low Income Household Energy Assistance Program (LIHEAP) — a federal program administered by county governments and local community organizations — can help. But funding for the program hasn’t kept up with oil prices — which have doubled in the past two years. That means either more money has to be added to the program — or else some people are going to go without heat this winter.

Over the longer term, there are really only two things the government can do to help contain oil prices, and the cost of the fuels made from oil. First, it can encourage oil companies to produce more oil. The second thing it can do is to promote more efficiency and cut the growth in demand.

On that score, our government is batting .500. The Energy Policy Act of 2005 — the "energy bill" that took Congress and the White House four years to produce — provides billions of dollars in tax breaks and subsidies to oil companies to drill more oil. (And it’s not as if the oil companies are hurting for cash at the moment.)

On the demand side of the ledger, the law was a major missed opportunity. When the "oil shocks" of the 1970s sent prices soaring, big gains in efficiency actually reversed the growth in consumption: we made every barrel of oil work a lot harder. As a result, oil prices tanked in the late 1980s. This time, however, Congress failed to impose simple measures like mileage standards on cars to promote energy conservation.

Then, shortly after passing the energy bill, our Congress wrote a check for $286 billion for a transportation bill that had enough pork in it to keep pretty much every state happy. The total tab came to roughly $2 for every gallon of gasoline consumed by American drivers in a year.

Most of the money went to build new highways.

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