ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, May 1, 1996 TAG: 9605010068
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
DATELINE: WASHINGTON
TYPE: ANALYSIS
SOURCE: From Knight-Ridder/Tribune and The Associated Press
The great gasoline price spike of 1996 is probably over.
It was probably over even before Sen. Bob Dole and President Clinton ignited a political brouhaha about it, triggering a Justice Department announcement Tuesday that it will investigate why gasoline prices soared.
The price of oil on the New York futures market dropped $1.23 per 42-gallon barrel Tuesday to $21.20. That's almost $4 a barrel below the peak - which came two weeks ago, before Dole and Clinton ever got into it.
The price of gasoline scheduled for delivery at the end of May also dropped, by 4.62 cents per gallon. If these trends hold - and oil market analysts expect they will - retail gasoline prices eventually should follow the futures' prices down by summer. They always do.
Clinton may have helped drive those prices down with his Monday order to sell 12 million barrels of oil from the nation's Strategic Petroleum Reserve, industry analysts said - but if he did, his effect on the market was mainly psychological, they agreed.
Clinton's action lacked decisive effect because 12 million barrels is but a drop in the bucket of the global oil market - which consumes 70 million barrels a day - and Clinton's barrels aren't even on the market yet. Besides, futures' oil prices have been dropping for two weeks, driven down by changing fundamental conditions in the global market.
Clinton acted after Dole challenged him Friday to repeal the 4.3-cent-a-gallon federal tax increase imposed on gasoline as part of Clinton's anti-deficit package in 1993. Dole said repeal would help summer vacationers cope with rising gasoline prices, which have soared more than 10 percent in the last month to average $1.27 a gallon nationwide, according to the American Automobile Association.
But taxes didn't drive up gasoline prices, analysts say, and neither did oil industry plotting.
``The thing that drove the [gasoline prices] up was supply and demand. The extent that government can affect supply and demand is relatively limited. The [Strategic Petroleum Reserve] sale was very small ... but psychologically it sends a signal,'' said Kevin Lindemer, senior director of Cambridge Energy Research Associates.
Prices for oil and gasoline - one of many fuels refined from crude oil - have drifted up since last fall for many reasons:
World demand for oil was higher than had been projected and production was lower, partly because a hurricane shut down Mexican wells. That pinch on supplies drove up prices.
Then, a bitterly cold winter in the United States and Europe increased demand for oil more than had been anticipated. Meanwhile, global supplies slipped anew, mainly because of storm-delayed production in the North Sea around Britain.
Widespread expectations that the United Nations soon might relax sanctions against Iraq complicated the outlook. Such a deal would let Iraq pour massive new oil supplies onto the market, lowering future prices. That prospect led buyers to keep inventories lean rather than stock up with fuel whose price might soon plummet; it also made them more dependent for the short term on the spot market, where prices soared.
Energy politics can be dangerous territory for politicians, as Clinton himself learned in 1993 and as Presidents Bush, Carter and Ford did before him.
In an automobile-based society, gasoline prices
Even as Dole pressed his case for rolling back 1993's tax increase, Democrats were burning up fax lines with news releases trumpeting past Dole support for new energy taxes.
The Democratic National Committee asserted that Dole had supported 18 gas tax hikes over his 35-year congressional career.
Suspecting the oil companies of greed is an easy election year theme.
Previous investigations of the oil industry resembling the one the Justice Department announced Tuesday have failed to find collusion.
``I'm not sure anyone has the high ground on gas taxes at the moment,'' said Democratic pollster Mark Mellman, suggesting voters are smart enough to know that neither the Dole nor Clinton gestures will have much impact on gas prices.
The federal gasoline tax is now 18.3 cents a gallon. Despite the recent increases, gasoline prices in the United States remain among the lowest in the world.
House Speaker Newt Gingrich and Dole have promised a vote on the tax rollback by Memorial Day.
``We believe with the skyrocketing prices of gasoline, jet fuel and other fuels that the most certain way to give consumers relief is to repeal the gas tax,'' Dole said Tuesday.
The proposed GOP tax cut comes as the Democrats try to raise the minimum wage - an effort apparently popular with the public.
``We've discussed ... maybe even coupling these two items. Repeal the gas tax and maybe [raise] the minimum wage,'' Dole said Tuesday.
Ed Rothschild, an energy analyst for the consumer group Citizen Action, suggested Dole's proposal for the gas-tax rollback was ``a master political short-term stroke, but I think it will come back to bite them.''
``They can't guarantee that consumers will see any of this 4.3 cent reduction. The companies could just pocket it,'' Rothschild said.
LENGTH: Medium: 98 linesby CNB