Gas proposals may not help prices at pump

McALLEN - Gasoline's cost at the pump is creeping toward $4.

And lawmakers are scrambling for ideas to bring the price back down.

This week, Congress overwhelmingly passed a law to stop pumping oil into the U.S. Strategic Petroleum Reserve - not long after two presidential candidates floated an idea to temporarily halt the federal gasoline tax.

"We need to do something to provide some relief to drivers," said U.S. Rep Henry Cuellar, D-Laredo, whose district covers Starr and western Hidalgo counties. He voted to suspend filling the U.S. reserve until the end of the year, along with U.S. Rep. Rubén Hinojosa, D-Mercedes.

Bush is expected to sign the bill, White House officials said Thursday.

But analysts warn the move doesn't actually lower the pain at the pump.

Even suspending the federal gas tax wouldn't help, they say.

"I don't think you'll find any economists that say they agree with either of the plans," said Eric Smith, a fuel expert with the Entergy Institute at Tulane University in New Orleans. "It's a ridiculous idea."

The oil reserve proposal diverts about 70,000 barrels of oil from underground oil tanks in Louisiana and Texas. Supporters of the bill say it will lower fuel prices by anywhere between 5 and 25 cents by loosening demand in the global marketplace.

But oil going into the reserve only accounts for about one-tenth of a percent of the worldwide supply, Smith said, or about a third of a cent a gallon.

As for the gas tax cut presidential candidates U.S. Sens. John McCain, R-Ariz., and Hillary Clinton, D-NY, each proposed for the summer - when gas is traditionally more expensive - a group of 200 economists across the country have sent a letter to the candidates opposing the plan.

"The more we lower prices, the more gas people are going to buy," said Smith, who was not one of the economists behind the letter. "Some people say if we really want to fix the demand problem, Congress should add a $5 tax for every gallon of gas."

Cuellar said suspending the federal 18.4 cent per gallon fuel tax could actually take valuable tax dollars away from federal and state road systems.

U.S. demand for fuel has dropped by about 61,000 barrels a day since one year ago, according to the Energy Information Administration. At this time last year, gasoline was about 62 cents cheaper.

____

Kyle Arnold covers business, the economy and general assignments for The Monitor. You can reach him at (956) 683-4410.