States tackle gas cost

Lawmakers consider proposals to ease the pinch of high gas prices.

Maureen Hornung's plea to her legislator about spiraling gasoline prices was to the point: "Isn't there something that can be done? Please?" asked the Marine Corps veteran from Jackson, Wis.

It's a request that's being echoed in statehouses across the nation as constituents signal they've had enough of high prices at the pump - which could become even higher as hurricane Katrina batters the refineries of the Gulf Coast. And politicians are starting to respond, discussing things such as sales-tax holidays on gas, caps on wholesale prices, and even the sale of some turnpikes, whose profits could be used to keep gas taxes in line.

The complaints already have some lawmakers scheduling fall hearings on everything from possible solutions to state funding for low-income heating programs.

Hawaii, which often has the highest gasoline prices in the nation, has already gone beyond talk: Lawmakers have mandated a moving cap on the wholesale price of gasoline - that is, the price as it leaves in-state refineries.

Although Aloha State-style regulation may not happen elsewhere, many other proposals are surfacing:

• In Massachusetts, Secretary of State William Galvin is proposing a moratorium on natural-gas price increases through the winter as well as a suspension of the state sales tax on home insulation. He's also exploring the idea of having the state use its buying power to purchase home heating oil.

• Legislators in Wisconsin, Michigan, and Missouri are talking about state sales-tax holidays on gasoline.

• New Jersey is having discussions about selling state toll roads to keep gas taxes in check.

• In Washington, Sen. Byron Dorgan (D) of North Dakota is proposing that the Federal Trade Commission begin an investigation of gasoline prices. Next week, the Senate Energy and Natural Resources Committee will hold a hearing on gasoline prices with testimony from the Bush administration, oil industry, and consumer groups.

The action is, in part, because the pleas, like the one from Ms. Hornung, are becoming more powerful by the day. Hornung is faced with either buying gas for her car so she can get to work or buying groceries. "There are many times that I literally put together some meals that I would not feed anyone else, but it's something," she said in a letter to Wisconsin state Rep. Patricia Strachota. She recounts how she can barely afford to visit her ailing father, who is in his 90s, or attend a celebration for her sister's 45th wedding anniversary.

"Many other people have it much more difficult than I do, but I can't take it anymore," Hornung says.

Last week, the price of oil hovered around $66 a barrel, at one point hitting $68. Energy analysts expect oil and gas prices to shoot to $70 a barrel quickly if there is refinery and pipeline damage from hurricane Katrina. If the price continues even higher, some politicians think it will spur major federal legislation.

"If we see $100 a barrel, Congress will reappraise everything it's doing, and very likely you will see it reevaluating its opposition to CAFE [gas mileage] standards," says Rep. Christopher Shays (R) of Connecticut.

Because prices are remaining high, some politicians are worried that they need to act sooner rather than later. "We're all suffering from the high price of gasoline, but you have no option about heating your home," says Mr. Galvin. "We need a comprehensive effort within 90 days because once heating season begins, you have to heat your house 24 hours a day."

His appeal may get some traction in Massachusetts. State Sen. Michael Morrissey, a Democrat from Quincy and chairman of the Telecommunications, Utilities, and Energy committee, says there will be hearings and possibly action. "I think there will be increased state financial assistance, as much as we can afford," he says, adding that he supports Galvin's idea of a tax holiday on winterization efforts.

So far, the most extreme effort has come from Hawaii, which this week will cap the wholesale price of gasoline at $2.74 a gallon, including taxes. The cap itself would be indexed to average wholesale prices in other parts of the United States. According to wire reports, for consumers this would mean retail prices of about $2.86 a gallon in Honolulu.

"Hawaii is an unusual market situation, an isolated market with no competition," says state Sen. Ron Menor (D), sponsor of the legislation. "Legislators generally support the free market, but Hawaii is not the free market in the traditional sense where there is lots of competition out there. The gas market is dysfunctional."

The state Public Utility Commission will oversee the Hawaii caps. However, some wonder if the PUC will have the expertise. "One of the problems with regulation is that regulators must have an in-depth knowledge of the industry they are regulating. Otherwise, they can cause much harm," says Don Mason, chairman of the gas committee of the National Association of Regulatory Utility Commissioners.

The energy industry says it has warned Hawaii against the move. "There could be a lot of unintended consequences," says John Felmy, chief economist at the American Petroleum Industry in Washington. "One of my concerns is that if Hawaii's economy continues to grow and needs to import gasoline, their price will be too low and they won't be able to get it," he says. "The last thing Hawaii needs is pictures of gasoline lines."

The sudden interest in regulating energy products harks back to the 1970s when President Nixon started wage and price controls. Gas lines blossomed as government bureaucracies tried to send gasoline to where it was needed. President Reagan finally eliminated price controls on petroleum in the early 1980s.

"Our experience then shows price controls all backfire," says Gregg Easterbrook, a fellow at the Brookings Institution. "And attempts at rationing are not the answer either."