Q:Bush said if he could wave a magic wand and say, 'OK, drop price,`' he'd do it. But he added, ''There is no magic wand to wave right now.'' Is there nothing he can do?
A: One step that could have an immediate impact would be to fill the Strategic Petroleum Reserve with heavier, sour crude oil. Right now, the SPR is being partially filled by light, sweet crude, which is lower in sulfur. This is the variety most sought by refiners. Taking it off global markets and putting it into the reserve makes it more scarce, thus higher priced.
Q:What would this switch achieve?
A: Philip Verleger, a noted oil industry analyst, believes this move could help lower the price of gasoline, and diesel fuel could fall by $1 a gallon.
Q:Why would switching what goes into the SPR make a difference?
A: The heavy crude oil sells for a lower price globally, so this makes economic sense. A switch would make more light, sweet crude available and thus cheaper.
Environmental rules require diesel fuel to contain 15 parts per million or less of sulfur, and that's easier to meet with the light, sweet crude. The government could relax sulfur standards temporarily; that, too, could lower prices.
Q: Could Bush suspend any other rules to ease prices?
A: Recent congressional mandates for ethanol to be blended into gasoline effectively replaces about 4 million gallons of gasoline production, Verleger said. That reduces the amount of hydrogen -- a byproduct in refining -- available for making low-sulfur diesel. Temporarily relaxing ethanol requirements could help bring down diesel fuel costs.
Q: Bush said that another reason for high prices is the lack of refining capacity. Is this true?
A: He's correct that no new U.S. refineries have been built in 30 years. But refiners have significantly expanded U.S. facilities, and new refineries are sprouting up all over the world, especially in China, India and the Middle East.
Global refining capacity is clearly on the rise.
Q: Bush repeated his call Tuesday that new U.S refineries could be built on military bases. Why hasn't this happened?
A: Most military bases are far from the source of oil production in the Gulf of Mexico and the pipeline infrastructure that leads from there. It . . . isn't a real-world solution.
Q: Presidential candidates John McCain and Hillary Clinton have suggested temporarily waiving the federal fuel tax of 18.4 cents per gallon. Would this help motorists?
A: Bush said he'd ''take a look'' at the idea. It might give a little relief to consumers, but would carry some big costs. It would presumably add to deficit spending. It would reduce funds for the Highway Trust Fund, which pays for infrastructure repair. And to the degree it drives gasoline prices down, Americans would drive more, which would reduce supply and push up prices, said Len Burman, director of the Tax Policy Center.
QUOTE OF THE WEEK
`We won't know until the end of this year whether we are technically in a recession, but it's irrelevant. Whether or not you call it a recession, people are hurting. Businesses are hurting.'
-- Joel Naroff, of Naroff Economic Advisors in Holland, Pa.
