Rise in Gasoline Prices

Background

During the spring and summer of 2000 the price for gasoline rose dramatically. In some spots of the Midwest the price for regular at the pump was well over $2.00 a gallon. Since the end of the oil embargo in the 1970s Americans have enjoyed relatively inexpensive gasoline prices and there’s been a stable supply of oil. Compared to Europeans, Americans pay far less for gasoline and they are often criticized by foreigners for appearing to regard cheap gasoline as some sort of birthright.

The fact that 2000 was an election year only heightened politicians’ sensitivity to the issue. Congress held hearings so TV cameras could catch legislators grilling oil company executives. Democrats in the Congress called for investigations by the Federal Trade Commission and the Justice Department to look into the price hikes. Out on the campaign trail, presidential nominee Al Gore said "The big oil companies’ profits have gone up 500 percent in the first part of this year, just at the time when these prices are going sky-high in the Midwest."

There was no shortage of critics and no shortage of explanations as to why prices spiked upwards. What there was a shortage of, however, were politically feasible solutions. Legislators went through the motions but no one expected anything to be done. And nothing was done. By the fall when gas prices dropped back down, the issue disappeared—only to resurface the following year as rising home heating oil prices and brownouts in California once again brought energy prices into focus.

Participants

When prices jumped oil companies were immediately identified as the villains. Suspicion mounted that both the supply of crude oil and the production of gasoline by refineries were being manipulated by the major oil companies. The American Petroleum Institute, a trade association for the oil industry, took a leading role in defending oil companies from the charges leveled against them. Environmental groups, such as Friends of the Earth, used the rise in prices to highlight enduring problems that derive from the country’s dependence on fossil fuels. Automobile manufacturers were involved along with their trade groups like the Alliance of Automobile Manufacturers. They wanted to keep the environmental groups from succeeding in getting the corporate average fuel economy (CAFE) standards raised.

Many legislators became active during this short period as well. Democratic congressional leaders Tom Daschle and Richard Gephardt lobbied the White House to make some gesture on gas prices. Representative Frank Wolf (R-VA), who chaired the Appropriations subcommittee with authority over the Department of Transportation, was lobbied heavily by the automobile industry. Just offstage was OPEC, whose decisions over production directly influence the price at the pump. It was lobbied by the administration for an increase in production.

Arguments/Impediments

Proponents:

The solutions offered for the price of gasoline were all, realistically, solutions to the long-term problems of energy supply. Both critics and defenders of the oil and automobile industries proposed cures, none of which moved forward at all during this period. Since the oil and auto industries were more defensive of current policies, the environmentalists will designated as the proponents here. Environmentalists have long pushed for reduction in automobile use, cleaner gasoline, more efficient engines, and alternative sources of energy to fossil fuels as a way of coping with both pollution and the supply of energy. As one observer noted, the key is "to reduce CO2 emissions and global warming. The technology exists." When the gas price issue heated up some environmental groups saw an opportunity. Said a lobbyist for one of the leading environmental groups, "We want more federal money to go to renewable [energy] sources." She added sarcastically, "[Our effort] was something short of successful."

Opponents:

The automobile industry agrees in principle that cars and trucks need to be made more energy efficient, but they disagree sharply with the environmentalists’ solutions. For years they have been fighting efforts to increase the CAFE standards so that cars and trucks would have to get better mileage than is currently required. This is especially contentious for SUV’s and minivans, which for purposes of the CAFE standards, are classified as trucks. This makes them eligible for lower fuel efficiency requirements. A lobbyist for the automobile industry defended its stand: "what this issue is about is consumer choice." For a number of years the industry had been successful in placing a freeze on any increase in the mileage requirement. Prior to the spike in gasoline prices, car manufacturers had persuaded the Congress to require a study by the National Academy of Sciences before any further rulemaking on mileage requirements could be initiated.

The oil industry saw the problem as one of too much government regulation. An industry representative told us that people "don’t realize that the refinery that makes gasoline, the refinery that makes airplane fuel, the refinery that makes home heating oil, the refinery that makes [all the other fuels] are the same refinery. All the environmental regulations take a toll along with their benefits. There’s nothing free. The environmental protections are not free. There needs to be a substantial investment in plants for there to be change. There is a limit on the infrastructure we have: plants, pipelines."

Impediments:

The greatest impediment is that all solutions to the price of energy have high political costs. Letting the gas price rise significantly higher so that it is comparable to European prices would reduce demand, increase the appeal of high-mileage vehicles, and would reduce driving, thereby benefiting the environment and constraining gas prices. This is a dangerous option for politicians and car makers believe that smaller, more fuel efficient cars and trucks will reduce their profits since they make more money on heavier vehicles. Oil companies want more refineries but they’re hard to site because of opposition by those who would have to live near them.

One lobbyist summarized the problem succinctly, noting that "we’ve never had the political will" to solve the energy problem. "We’ve not been able to craft a policy that reduces our dependence on foreign oil or CO2 emissions." He added, "Conceivably we’ve bought enough time that technology can get us out of this."

Venues

Congress was the center ring as this issue gained traction in 2000. There was no real policymaking going on there, but legislators tried to position themselves so that they could tell constituents they were looking at the issue. The White House was tangentially involved, but essentially chose to do little. Nor was there significant agency involvement even though energy and pollution are major concerns of a number of bureaucracies. Most everyone expected that the issue would dissipate once the summer driving season ended. They were right as far as that went, but it was "déjà vu all over again" when the lights started to go out in California in the spring of 2001.

Lobbying Activities and Tactics

Since no one expected Congress or the Clinton administration to do anything on this issue, it’s not surprising that the lobbying on this issue was modest. The most energetic effort was made by the oil industry, which needed to defend itself against the liberals in Congress who were enjoying their opportunity to tell Americans that the underlying problem was corporate greed. The American Petroleum Institute vigorously defended the industry as did individual oil companies. The issue rose and fell so quickly that industry never got a broad-scale defense underway. The environmental groups did not noticeably increase the lobbying that they normally do on energy. Finally, the automobile industry had already won another stay of execution on the CAFE standards before gas prices captured everyone’s attention on the issue. The car makers engaged in watchful waiting rather than calling out the heavy artillery.