Winning back public trust

Jan. 21, 2007
The report by a special commission on US transportation issues offers the oil and gas industry a chance to assert its commitment to consumer interests.

The report by a special commission on US transportation issues offers the oil and gas industry a chance to assert its commitment to consumer interests. It’s a chance to rebuild trust with the American public. It’s a chance, therefore, for the industry to recover some of its lost voice in US energy politics.

The National Surface Transportation Commission, established by Congress in 2005, proposes to raise the federal gasoline tax by as much as 40¢/gal within 5 years to fund highway and bridge repair. As aggressively as it can, the industry should oppose this initiative.

Thoughtful people in the industry will see reasons to take the other position. The aging US transportation system surely needs work. The work requires money. Public safety is at stake. As a side benefit, the elevated fuel cost would help ease demand pressure now straining supply systems and lifting fuel prices. Reducing consumption would lower emissions of air pollutants and greenhouse gases.

Those arguments are appealing as far as they go. They just shouldn’t come from the oil and gas industry.

Consumer interests

The industry position should be unalloyed opposition to any policy that raises fuel prices for reasons other than market dynamics. The industry should take this position and defend it consistently for one reason: concern for the interests of its customers. Those customers are energy consumers. They pay taxes. They vote. And too many of them now thoroughly distrust the oil and gas industry.

There are other reasons to oppose the commission’s recommendations. Prominent among them is the approach: addressing public problems by raising taxes, spending money, and expanding the federal bureaucracy. The US government needs to spend less money, not more. It needs to cut taxes, not raise them.

If the government met reasonable standards of fiscal responsibility, discussion of special taxation to solve a specific problem might be in order. The government is in fact spendthrift. Its legislative branch channels huge amounts of public money to preferred constituencies through earmarks and subsidies. Until recently, its chief executive has been too reluctant to use his veto to control the damage. Until fiscal discipline makes an appearance in Washington, DC, new taxation should be out of the question.

What’s more, the main reason the industry has lost influence in energy policy-making is that much of the public blames it for painfully high prices of gasoline and other oil products. The popular assumption is that the industry controls oil prices. The assumption is false. If the industry had that much power over prices it would have bailed itself out of the troubles it endured in the latter 1980s and most of the 1990s. Markets, which the oil industry can’t control, set oil prices. Pretending otherwise to exploit antique suspicions, however, is an expedient political tactic. So opportunistic politicians perpetuate falsehood to the detriment of public trust in a crucial industry.

If it were possible for the industry to raise oil prices at will, and if doing so was by its nature evil, why would it not be just as evil for the government to effectively lift prices by hiking taxes? The effect on consumers is the same. A different way of asking the question, grounded more firmly in how things really work, is this: Why should consumers (who also pay taxes and vote) find fuel-cost increases acceptable when they’re instigated by the government but not when they result from changes in markets, which no one controls and about which no one can do much except adapt?

Regaining stature

While these are sound objections to a bad idea, the oil and gas industry shouldn’t bother making them. It should confine its response to the pain energy consumers would sustain from the proposed hike in gasoline taxes. And it should begin now to approach every energy issue from the same perspective.

Opposing a gasoline tax hike on the basis of consumer interest can help the industry win back public trust. That’s essential if the industry is to regain the stature it deserves in the making of energy policy.