Who's to blame for high gas prices?
Politicians propose legislation that would increase regulatory scrutiny of Big Oil - but fail to mention that voters could maybe give up the giant SUVs.
By Nelson D. Schwartz, FORTUNE senior writer

LONDON (FORTUNE) - Spring is not even a month old but it's already promising to be a long hot summer for American drivers. Gasoline prices are surging toward highs not seen since the wake of Hurricane Katrina last fall - the national average now stands at $2.68 a gallon - and some experts are predicting $3.00 a gallon before long.

Consumers aren't the only ones feeling the heat, though - on Capitol Hill, politicians are scrambling to head off the anger of constituents furious about having to spend $50 each time they fuel up their Honda (Research) Accord or Ford (Research) Taurus and roughly double that to fill the tank of a maxi-SUV.

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Last week, Wisconsin Democratic Sen. Herb Kohl and Pennsylvania Republican Sen. Arlen Specter proposed legislation that would increase regulatory scrutiny of Big Oil, which Kohl says "has unquestionably enriched itself during this period of high prices."

Taking on Big Oil six months before November's election is a can't miss proposition for politicians, of course. Besides calling on the federal government to make OPEC liable under U.S. anti-trust laws, Kohl's Oil and Gas Industry Antitrust Act of 2006 would mandate the creation of a joint state-federal task force to investigate whether producers, refiners and marketers are sharing information in a bid to keep prices high. It would also ask the DOJ and the FTC to examine the consequences of the mega-mergers that have transformed the industry in recent years.

There's no harm in having the government keep a closer watch on the energy industry, and Kohl's sympathy for consumers is commendable, but blaming Big Oil for high gas prices is a little like blaming McDonald's (Research) for obesity. (Yes, I know that also makes for effective politics.)

Because while those profits might seem outrageous - ExxonMobil (Research) earned over $36 billion last year - Big Oil makes its money by pumping oil out of the ground, not refining and selling it as gasoline. Of Exxon's mammoth haul, only a tiny fraction came from making and selling gas in the U.S.

The idea that prices are set by Big Oil, not the traders at the NYMEX and other global bourses, is a misconception that seems to come into vogue whenever energy prices start making new highs. And putting the blame on OPEC, let alone trying to subject a foreign cartel to U.S. laws, seems to be doing anything but dealing honestly with the problem of too much demand and too little supply here at home.

Kohl's bill, alas, won't do much to lower gas prices. The real problem here is the reluctance of Washington to make more than modest improvements in fuel-efficiency standards for cars and trucks. At the same time, politicians and other leaders seem unwilling to at least jawbone more Americans into giving up their SUVs and Hummers in favor of more fuel-efficient cars. Suing OPEC under U.S. anti-trust laws may be smart politics, but what about actually telling voters that they, too, have to take some responsibility for the problem?

Last month, I spent a day on Capitol Hill watching Kohl, Specter and other members of Congress grill the CEOs of Exxon, Chevron (Research), Conoco (Research) and several other giants. It made for great theater but I was amazed that the Senators, including liberal Democrats, barely mentioned fuel efficiency and conservation in their public remarks.

Perhaps haranguing CEOs makes for better soundbites back home. But when oil CEOs like Chevron's Dave O'Reilly spend more time talking about conservation than our elected officials, you know we've got a real problem on our hands - one that will last well beyond the summer driving season.

Plugged In is a daily column by writers of FORTUNE magazine. Today's columnist, Nelson D. Schwartz, can be reached at nschwartz@fortunemail.com. Top of page