Jon Kyl, May 8, 2006

There is an old saying: For every complex problem, there is a simple-and wrong-solution. So it is with gas prices. Beware of the politicians who claim there’s a simple answer to this complex problem.

Finding credible solutions means first understanding why gas prices are so high. Experts say the single biggest factor is the price of crude oil. Over the last 15 years, fluctuations in crude oil prices explain 97 percent of fluctuations in gas prices.

And what influences crude oil prices? International events, for starters. The Iranian nuclear crisis, supply disruptions in Norway and Nigeria, and political uncertainty in Venezuela are key factors. Then, too, rising global demand, spurred in part by economic growth in China and India, decreases the global supply of crude oil and this pushes prices up for everyone.

Domestic conditions play a role, too. Continued recovery from hurricane damage, federally mandated changes to fuel specifications, limitations on U.S. oil-refinery capacity, and restrictions on new domestic oil and gas exploration, have stressed already tight fuel markets.

Bottom line: the supply of oil is limited, threatened by international events, and subject to domestic constrictions that aggravate the problem of high gas prices.

So what can be done?

First of all, the idea of issuing a $100 or a $150 “rebate” to offset high gas prices isn’t a solution, it’s a gimmick. It produces not one drop of new oil, nor does anything to bring down prices.

There are short-range and long-range things Congress can do. The governmental requirement for fuel blends -- known as “boutique fuels” -- has increased costs and strained the capacity of U.S. refineries and distribution systems. Congress ought to suspend its boutique fuel-blending requirements.

Other actions for the short term: Congress should reduce or suspend the ethanol additive mandate and repeal the 54-cent-per-gallon tariff on imported ethanol from overseas (primarily Brazil). I have introduced a bill with Democratic Senator Dianne Feinstein of California that would eliminate the import tariff. The Energy Policy Act of 2005 required refiners to increase their use of ethanol in gasoline by 7.5 billion gallons a year by 2012 (in 2006 alone, consumers will be forced to use four billion gallons nationwide). The problem is that ethanol production has not been able to meet this artificially imposed demand. As we all know, when demand outpaces supply, the price goes up.

Of course, increasing the supplies of additives to gasoline only gives a limited amount of relief, and would only have an impact in the immediate future. Unless we want to find ourselves in the same position next year, we must increase our domestic oil supply in the long term.

Deep water oil production off our coastal areas and finally recovering the available oil in Alaska are two places to start. Both can be done without damage to the environment and could substantially increase our domestic supply of oil and gas. In the case of ANWR, there are up to 16 billion barrels of recoverable oil (equal to 30 years of imports from Saudi Arabia). Had President Clinton not vetoed this action a decade ago, that oil could be flowing today and gas prices would be lower.

And some solutions are in our own hands. To help reduce demand, people now have the option of driving vehicles that yield far better fuel mileage, including hybrids. Simply taking the time to monitor tire pressure and carry out service maintenance of our existing vehicles can boost the mileage we get from our cars. And people should consider carpooling when the option is available.

While there is no single silver bullet that will reduce gas prices, the immediate and long-term measures that I’ve mentioned here can help. I’ll keep working to support sensible policies, and I solicit your ideas as well.

Senator Jon Kyl, a Republican, represents Arizona in the U.S. Senate. He serves on the Senate Judiciary Committee, the Finance Committee, and the Energy and Natural Resources Committee.