GASOLINE CONFUSION HURTS U.S.

The U.S. seems terminally confused about gasoline. After a decade of cheap motor fuel, the country is in a frenzy because prices jumped after Iraq invaded Kuwait Aug. 2.

The size of the increase-less than 25% so far-looks small in comparison with the doubling of crude oil costs. Nevertheless, motorists insist they're being "gouged." So politicians threaten to impose a new "windfall profit" tax and to divorce retail functions from refiners. Another antitrust investigation has begun. At the same time, Congress proposes to increase the gasoline excise and to boost product costs with overreaching Clean Air Act requirements. Apparently, it's okay for Congress to raise gasoline prices but not for the market to do so. Something is backwards here.

ACKNOWLEDGING CONFUSION

Oil companies should acknowledge the general confusion over gasoline prices and act accordingly. What, for example, must motorists think when oil company executives join revenue-hungry politicians in support of a gasoline tax hike? Sure, industry tax supporters have their reasons: lower consumption, a boost in federal revenues, a possible tradeoff for a capital gains tax cut or drilling incentives. Inescapably, however, a higher gas excise would hurt the oil industry's main consumers. That's bad business.

Why sacrifice consumer interests on the altar of lower gasoline consumption? Americans, contrary to current anxieties, haven't given up on conservation. In 1978, the peak year for gasoline use, Americans drove a total of 1.5 trillion miles and burned an average of 7.4 million b/d of gasoline in the process. Last year they used nearly as much gasoline but traveled an additional 600 billion miles. That's conservation. Consumption efficiency has sagged the past couple of years; the price jump will make needed repairs.

Lower absolute consumption is, of course, a worthy goal. The image of an America at play on jet skis and dirt bikes certainly clashes with that of soldiers suffering in the Saudi desert. But the market has ways of smoothing out such incongruities. Policy should aim at consuming less without sacrificing economic activity. Higher fuel taxes sacrifice growth in order to consume less. The distinction is subtle but important. Oil companies should make it every chance they get.

Further, they should put the price increase in perspective. American Petroleum Institute points out that the average pump price of gasoline at the end of August was almost 11/gal less than it was in 1981-the year of total gasoline price decontrol-before adjustments for inflation. Corrected for inflation and tax increases, the end-August price was 77/gal less than the price 9 years earlier. When someone declares prices too high, oil companies should ask, Relative to what?

UNFOUNDED SCOLDINGS

Companies also should begin defending U.S. motorists for the unfounded scoldings they receive because they drive more and pay lower taxes on their fuel than do motorists in Europe or Japan. The U.S. is a big place. Most of its cities are young by world standards and lack mass transit systems characteristic of their elders in the eastern U.S. and elsewhere. Americans will always be heavy drivers. And they so far have rejected nationalized medicine and other universal social programs that so many countries outside the U.S. help fund with gasoline taxes. To make Americans pay higher gasoline taxes because others do would be unfair.

Oil companies must help Americans shed their unwarranted self-regret over gasoline consumption. What Americans should regret is their chronic misunderstanding about something so vital to their way of life.