Markets work. Screen the various proposals about the high price of gas through that broad filter, and you'll get a pretty good view of the proposals' likely effect.
Let's use the technique to analyze some ideas that are making the Washington rounds.
Stop buying crude oil for the strategic reserve. Key Republicans and Democrats in Congress, notably Sen. Byron Dorgan, D-N.D., are for this one, saying that halting the 70,000 barrel-a-day purchases would boost supplies for motorists, among others.
The Bush administration disagrees, saying that the country's need to fill the emergency reserve outweighs any difference that could be made at the pump.
Who's right? They both are. They're just highlighting their own side of a standard trade-off. Backing off on the strategic-reserve purchases would, in fact, ease demand -- though not by much: The 70,000-barrel-a-day purchases amount to one-tenth of 1 percent of global production. Still, motorists might see gasoline prices drop by a few cents a gallon.
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For its part, the Bush administration's correct to stay that not filling the strategic reserve would mean -- well, not filling the strategic reserve. It would leave the U.S. a little less able to respond in the event of a massive disruption in oil supplies. (The reserve now holds 701 million barrels and has a full capacity of 726 million barrels, The Associated Press reports.)
Our view: Right now, Americans want relief, even if it's only a few cents a gallon worth of relief. Go ahead and temporarily suspend the purchases.
Hit oil companies with a windfall profits tax. Well, on this one, you have to ask what it is you want the tax to do. Add more money to the treasury? Yes, it will do that.
But boost oil exploration or alternative energy production in some way, as the Democrats who support the tax are hoping?
No. Taxing a product means less of that product, not more, will be produced and consumed. That's the way it works in a family's life: If Grand Forks slaps a 5 percent sales tax on all purchases, then people are going to shop less. It's as simple as that.
And that's the way it works in corporate life, too. If you slap a new tax on oil companies, you will not get more oil. You will get less, which means the price at the pump will go up.
Supporters of the tax say it would apply only to those companies that don't invest in new energy sources. But the oil companies already are looking for new sources of oil, as the boom in western North Dakota shows. Why wouldn't they be? There's big money to be made, as Bakken formation mineral-rights holders are finding out.
The profit potential of energy also is pulling money into alternative sources of power, from the Canadian tar sands to wind, solar, tidal-power and biofuel developments.
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Those things are happening right now, even without a new tax. That's the market at work; Congress simply should get out of the way.
Lift the federal gas tax for the summer, as both John McCain and Hillary Clinton are advocating. Would doing so save consumers money? Sure it would -- a fair amount of money, in contrast to the "strategic reserve" idea mentioned above. The federal gas tax is 18.4 cents a gallon; and while the price at the pump wouldn't go down by that full amount, it would go down, and far enough so that a motorists' savings quickly would be measured in dollars rather than cents.
At the same time, the federal government would lose about $9 billion in revenue for road and bridge construction. Would it be worth it?
Yes, in our view. Consumers need time to adjust to skyrocketing prices of any commodity, including oil. Easing that transition through a summer-long "gas tax holiday" seems a reasonable thing to do.
Drill in ANWR. "We cannot produce our way out of the problems we have," Senate Majority Leader Harry Reid said.
But that's transparently wrong. Of course we can ease prices by producing more oil. Aggressively tapping America's proven reserves would notably boost supply, leading inevitably to downward pressure on prices.
So, the question is not whether we can. The question is whether we want to. The basic question is this: Is drilling in the Arctic National Wildlife Refuge and offshore worth the environmental cost?
The answer continues to be no. America needs a wilderness reserve as well as a reserve of oil. The oil fuels our cars; the wild lands fuel our souls. And the price of gas should have to go a lot higher before we put that "spirit-energy" source at risk.
