Americans Feeling Effects of Higher Oil, Gas Prices

Memorial Day, celebrated by Americans on the last Monday of May, marks the unofficial beginning of summer and, for many, the beginning of travel season.

As schools let out for summer, many American families take vacations and most drive to their destinations. The American Automobile Association (AAA) estimates 31.7 million Americans will travel 80 kilometers or more from home over the May 24-May 26 holiday weekend.

But that number is down from 2007: With gas prices at a record high, many Americans are rethinking their travel plans. AAA predicts fewer Americans will travel this Memorial Day weekend compared to last year – the first decrease in travel since shortly after the September 11 attacks.

The high price of gas affects both road and air travel. With the cost of oil rising as high as $135 per barrel, airlines face significantly increased costs for jet fuel and have hiked fares while cutting service.

High gas and oil prices are affecting Americans’ pocketbooks in other ways as well.

AAA estimates that the cost of regular gas is $3.80 a gallon, 19 percent higher than in May 2007 and four times as high as five years ago. The cost of a gallon of diesel fuel, used to run most trucks, is $4.54 a gallon. As it becomes increasingly expensive to fill a truck’s tank, the cost of transporting goods, particularly food, to markets also jumps. This means that as Americans pay more for gas they also are paying more for groceries.

Voters are looking to candidates running for all levels of office for solutions to curb rising gas and food prices.

The presidential candidates, talking to voters concerned about both the future of the economy and the environment, have proposed a number of short- and long-term solutions to lessen the effect of high gas prices.

Both Senator John McCain, the presumed Republican nominee and Democratic Senator Hillary Clinton, in the race for the Democratic nomination, have said that Americans would get some relief if the 18.4 cents-per-gallon federal gas tax is suspended during the summer travel season.

Opponents of such a suspension, including Senator Barack Obama, the front-runner for the Democratic nomination, say lifting the federal gas tax will save Americans very little money. Obama, who has accused McCain and Clinton of supporting the gas suspension for political purposes, says the plan would save each American only a few dollars at the cost of reducing the funds needed to repair roads.

Each of the presidential candidates has proposed different ways of reducing American’s reliance on foreign oil, which now is about 60 percent of oil used in the United States. These proposals include ways of encouraging companies to develop alternative fuels that would both reduce use of oil and help the environment. (See “Candidates on the Issues: Climate Change ( http://uspolitics.america.gov/uspolitics/elections/issues.html#climate ).”)

Politicians Debate Potential Solutions

With voters frustrated about gas prices, the Senate and House judiciary committees asked executives from the top American oil companies to provide their explanation for the high costs. The executives said the main cause is that global demand for oil is rising while supply remains limited.

Congress recently passed legislation to halt filling the national Strategic Petroleum Reserve, a law it says will increase supply. The reserve, the world’s largest supply of emergency oil, is reportedly 97 percent full.

President Bush, despite his criticism that the legislation will not have an effect on gas prices, signed the bill into law. Filling of the reserve will not resume until oil prices stay at or below $75 per barrel for at least 90 days.

The House of Representatives recently passed a bill calling on the Justice Department to sue the Organization of Petroleum Exporting Countries (OPEC) for limiting supplies and collaborating to set prices. The Senate has not yet voted on the measure. Bush has threatened to veto the legislation, saying it would spur retaliatory action against the United States. Two-thirds of the House and Senate must vote to override a president’s veto for a vetoed bill to become law.

Even though leaders from both parties helped pass this legislation, Republicans and Democrats disagree on other ways to solve the problem.

Some Democrats propose imposing a new tax on certain profits earned by the five biggest U.S. oil companies unless they use the profits to expand their refineries or develop alternative fuels. Some propose a federal law preventing price gouging, although such laws exist in many states. Opponents say it is unlikely these measures would have any serious effect on prices.

Some Republicans want to allow drilling in Alaska’s Arctic National Wildlife Refuge and off the coasts of American shores where drilling currently is prohibited. Opponents say that drilling in these areas will cause environmental damages and would not provide any oil for at least 10 years.

Source: U.S. Department of State

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