Clinton Issues Proposal to Relieve Gas Pain

The New York senator's proposal includes relieving taxes for consumers and penalizing price-gougers.
By John Fout ,

Consumers have been increasingly hit hard in the pocketbook by soaring prices for gas at the pump. News Monday added to the gloom. Crude oil prices reached record highs, continuing the climb toward $120 a barrel, and AAA reported the national average price paid at the pump was $3.603 a gallon -- also a record high.

Sen. Hillary Clinton (D., N.Y.) capitalized on this pain Monday by unveiling a new policy proposal. Clinton,

like Sen. John McCain

(R., Ariz.), wants a gas tax break for consumers, in addition to other measures aimed at popping the speculative bubble in the oil markets.

Clinton's proposal differs from McCain's. McCain wants to suspend the federal gas tax and stop purchases to the Strategic Petroleum Reserve (SPR) during the summer. Clinton wants to suspend the gas tax, but she plans to pay for it by slamming big oil companies with a windfall tax. Clinton would use the windfall tax to ensure that the Highway Trust Fund continues to receive funds earmarked for repairs.

Those taxes appeared to be aimed at producers like

Exxon Mobil

(XOM) - Get Report

,

Conoco

(COP) - Get Report

,

BP

(BP) - Get Report

and

Chevron

(CVX) - Get Report

. It's not clear whether it targets refiners -- like

Tesoro

(TSO)

and

Valero

(VLO) - Get Report

-- who have fared worse than producers. Furthermore, Clinton would close $7.5 billion in oil and gas loopholes and use that money to help lower-income families pay gas and grocery bills.

Clinton's plan also includes the SPR but entails more aggressive government intervention. Not only does she want to stop purchases for the reserve, but she also recommends releasing oil from the reserve to mitigate market volatility when the market faces short supply.

Clinton wants to penalize those who gouge consumers at the pump. She proposes both civil fines -- up to $1 million -- and criminal penalties of up to five years in prison for "unconsciously excessive" price hikes. Clinton found 15 instances where this penalty would have been applied to price manipulation after Hurricane Katrina struck in 2005.

Clinton called on the Federal Trade Commission (FTC) to increase scrutiny on and take action against market manipulation. The 2007 energy bill boosted the FTC's power to investigate violators. Clinton points to a reported abuse in 2003.

Marathon Oil

(MRO) - Get Report

paid a $1 million fine to the Commodities and Futures Trading Commission to settle charges of market manipulation.

Other factors affecting the market concern Clinton. She thinks the "Enron loophole," meaning electronic traders in energy markets being inadequately supervised, has to be closed. She's slightly off base here. Enron traders traded derivatives related to the price of energy (electricity) in states like California and dealt with power production and transportation. These markets are more closely tied into natural gas than crude oil. Using the phrase "Enron loophole" creates unnecessary fear.

Clinton's proposal comes at a critical point in her campaign. She just came off a solid win in Pennsylvania and hopes to build on that momentum May 6 in both Indiana and North Carolina. A

Gallup poll

over weekend showed Clinton moving back into a near tie with Sen. Barack Obama (D., Ill.) and beating McCain in a general election contest.

Clinton and Obama have traded barbs over the influence of oil companies. In an effort to prove he's serious about reforming politics, Obama accused Clinton of taking money from oil companies and lobbyists. Clinton fired back. Her campaign pointed out the obvious: No candidate has taken money from oil companies because it is illegal under election laws. But Obama

reportedly

took in the most money from individuals employed by oil companies last month, including the head of two firms raising money for him. Clinton also criticized Obama for voting in favor of the 2005 energy bill, which some have called the Cheney energy bill.

As consumers continue to get creamed at the pump, voters in Indiana and North Carolina may like Clinton's populist plan to stop soaring gas prices.

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