Controlling Oil Prices

By Andrew Goldstein

GORE'S SHORT-TERM FIX

The oil that Gore urged be released is not sold but "swapped": companies who win bids for it can sell it at current market prices, but they will have to return the same value of crude to the reserve next summer or fall. Prices will probably be lower then, so the companies will actually have to return more oil than they have taken out. Gore also proposes to ease the coming pain by giving a temporary tax credit for distributors who build up their oil stocks before winter and by asking Congress to spend $400 million to help low-income families pay for heating oil.

HOW IT MIGHT WORK

Most experts say tapping the reserve is likely to drive down the price of oil--which is determined as much by speculation as by supply--in the short term. (By the end of last week the price had already dropped to $32.65 per bbl., from $37.20 last Wednesday.) The tax credits should help lower the price of heating oil this winter, and the low-income funds will ease the burden on some families.

THE BUSH CRITIQUE

Pumping more crude oil into the system won't help since refineries are already operating at 95% capacity, and not enough crude can be turned into heating oil to make a real difference by winter. Besides, if oil-producing countries cut back supply in response to the U.S. release, they will wipe out its impact. Bush maintains the reserve should be used only in a true crisis. He agrees that the government should help low-income elderly with their heating bills, but he proposes no other short-term way of bringing down prices, other than to argue that he would be more effective than Clinton or Gore at persuading "our friends overseas" to lower oil prices.

GORE'S LONG-TERM STRATEGIES

Gore plans to devote about 3% of the budget surplus over the next 10 years--$171 billion--to reducing America's reliance on oil and gas (and to clean up the environment). His program includes tax breaks to companies that use renewable energy sources such as wind and solar power, federal investments in light rail systems and high-speed trains, grants to small businesses to develop new energy-efficient technologies and tax breaks to families that purchase energy-saving cars, homes and appliances. Gore opposes drilling in the Arctic National Wildlife Refuge.

BUSH'S LONG-TERM STRATEGIES

Bush's budget plan does not include a detailed energy policy. Last week he said he would try to persuade OPEC to increase the supply of oil by reminding "the folks over there who sent the troops on the ground." He proposes to increase oil exploration at home, expand refining capacity and drill in the Arctic refuge.

--By Andrew Goldstein

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