Spike in gas prices ignites election-year furor

WASHINGTON - A pre-summer spike in gasoline prices has ignited an election-year furor, with President Obama mocking presumed Republican "three-point plans for $2 gas," all of which involve drilling, and Republicans claiming that Obama's energy strategy relies on algae, pond scum and chicken manure, not to mention bankrupt solar manufacturer Solyndra.

Few things send politicians to the barricades faster than rising gasoline prices. People tend to go ballistic over $4 gasoline while hardly blinking at paying as much for one cup of coffee.

With the predictability of a morality play, pro-environment Democrats are accusing oil companies of profiteering and Republicans are defending budget-busting tax subsidies to oil producers while attacking subsidies for alternative energy.

But higher gasoline prices are a proven way to encourage energy conservation, development of alternative energy, and domestic oil and gas production.

Politicians "know that's not what the public wants to hear," said Severin Borenstein, director of the University of California Energy Institute in Berkeley. "The public's upset and they think it is the president's responsibility to make sure gasoline is cheap."

House Democrats have attacked GOP plans to open the Pacific and Atlantic coasts to drilling. But in Miami recently, Obama sounded like the driller-in-chief. He claimed credit for higher domestic fossil-fuel production set in motion long before he took office.

"Under my administration, America is producing more oil today than at any time in the last eight years," Obama said, promising to open "more than 75 percent of our potential offshore oil and gas resources from Alaska to the Gulf of Mexico."

Like his predecessor, George W. Bush, who lamented in 2008 that he had no "magic wand" to reduce gas prices, Obama said he had "no silver bullet" and embraced an "all-of-the-above" energy strategy, which includes "public investments" in green energy companies, "even though some companies will fail," a tacit acknowledgement of the Solyndra bankruptcy and other green energy companies that received billions of dollars in taxpayer funds.

Obama also touted algae as a fuel source, prompting ridicule from the Republican National Committee, which recycled Obama campaign quotes from 2008 about pond scum and chicken manure.

"We're making new investments in the development of gasoline and diesel and jet fuel that's actually made from a plantlike substance -- algae," Obama said.

Biotechnology company Solazyme, which makes algae fuels, received $22 million in 2009 from the Department of Energy and contracted with the military to provide algae-based fuels.

Republicans blamed rising gas prices on Obama's blocking approval of the Keystone pipeline, which would take years to construct. On the campaign trail, GOP presidential hopeful Newt Gingrich promised a domestic drilling bonanza such that "no future president will ever bow to a Saudi king again" and everyone can buy $2.50 gas.

Higher domestic production of fossil fuels and alternative energy might reduce U.S. vulnerability to price shocks from overseas and keep more money at home, but that would have little effect on oil prices, which are set on a global market.

The boom in oil shales in North Dakota and tar sands in Canada helps increase incomes in those areas and keeps at home billions of dollars that might otherwise go abroad. But oil prices are set by "a lot of external factors that George Bush couldn't control in 2008 and Barack Obama can't control today," Borenstein said.

Gasoline prices began heading up in December and reached a new February high, driven by higher oil prices, which now top $120 per barrel. The causes include fears of supply disruptions because of hostilities with Iran and instability in Nigeria.

China's rising wealth is also putting pressure on prices, as previously impoverished Chinese now have the means to buy cars. "In five years, the number of cars on the road in China more than tripled," Obama said. "Think about how much oil that requires."

Policy analysts, as opposed to policy makers, have long recommended a higher gasoline tax or a broader tax on carbon to encourage increased energy supplies of all kinds and energy conservation, while filling the U.S. Treasury instead of the treasuries of Venezuela strong man Hugo Chavez, Saudi royalty and other dictators.

The 18.4-cents-per-gallon gas tax was last raised during the Clinton presidency, Borenstein said, and has fallen sharply when adjusted for inflation.

"We're collecting more revenue through taxing work through income taxes, and less through taxing things like gasoline," Borenstein said. "So we are discouraging work and encouraging gasoline consumption, which is not good tax policy."

(Carolyn Lochhead is the San Francisco Chronicle's Washington correspondent. Contact her at clochhead(at)sfchronicle.com.)

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)

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