While OPEC ministers meet tomorrow in Saudi Arabia to ponder the consequences of $90 per barrel oil, New York’s gasoline prices are at $3.03 per gallon for regular, close to last May’s high of $3.13 per gallon. Meanwhile, Congress is in the home stretch of writing an energy bill. But rather than trying to help consumers, the lawmakers seem to be doing all that they can to drive up the price of energy.

Last May, refiners paid about $67 per barrel for oil, but the average price of gasoline in New York hit highs due to refinery shortages. Refineries in Wyoming, Oklahoma, and Texas were not producing at full capacity, and gas stations were switching from winter to summer gasoline blends and cleaning out their tanks. In contrast, refineries are now back on track, at least until the next hurricane or refinery fire, and today’s high gasoline prices are caused by high prices for crude oil. Demand is high and supply low.

China and India have increased their oil consumption to 7.2 million barrels per day from 1.9 million barrels per day in 1985. Over the same period, European consumption has climbed to 16.34 million from 13.7 million barrels. Americans are using 20.7 million, a one-third jump from 15.7 million. And compared with 2006, this year’s annual average world oil supply has fallen by 268,000 barrels per day.

Meanwhile, some important oil-producing resources are in the hands of governments, rather than private firms, and governments aren’t using these resources to bring more capacity on line. State-owned companies in Venezuela, Russia, Mexico, Nigeria, and even Canada are restricting companies’ returns on investment by raising taxes and royalties and terms of access. Naturally, investment is declining.

Oil prices, and therefore gasoline prices, appear especially high to Americans because oil is invoiced in dollars, worldwide. Since the dollar has lost much of its value against other currencies—9.5% in trade-weighted terms over the past year, 5.4% over the past three months—oil prices have risen to give producers higher real income. Whereas the price of oil has increased by 57% in the United States over the past year, it has risen less, 47%, in the Euro-zone.

Until the dollar stops falling—and some believe that the bottom is soon to come—the upward pressure on oil prices will continue, even if global production expands. The gradual depreciation of the American dollar has its roots in the fundamentals of American political economy, specifically the Federal Reserve’s decisions on interest rates and Congress’s fiscal and regulatory policies.

Foreigners who contemplate investment in America can see that the Bush tax cuts are on track to expire in 2010 if Congress does nothing, raising taxes on everyone who pays federal income taxes. Spending is likely to rise, with Congress aiming to spend $22 billion more than President Bush’s budget in 2008 and $205 billion more over five years.

The disincentive effects of higher taxes and government spending on economic activity are well-known, and some European countries, such as Germany, France, and Spain, have lowered their income taxes to match America. If Congress doesn’t maintain a welcoming investment environment by making the Bush tax cuts permanent, the dollar will continue to deteriorate and dollar-denominated oil prices will continue to rise.

With energy legislation now in House-Senate conference, it might be expected that the lawmakers would be striving to enlarge American energy supplies. But no. Both the House and Senate bills would have precisely the opposite effect. Most important, the disincentive effects would be strongest for oil and natural gas.

The House and Senate bills, and so presumably the conference report, would not allow increased exploration and development, even using environmentally-friendly technology, in areas that are now off-limits, such as parts of the Rocky Mountains, the Outer Continental Shelf, and the Gulf of Mexico, and the Arctic National Wildlife Refuge in Alaska. The House bill bans development in some areas currently open, such as the Roan Plateau in Colorado.

The House bill, taking a cue from Venezuelan President Hugo Chavez, would raise taxes on the oil industry by $15 billion over 10 years, discouraging production. In addition, it would impose extra fees and royalties in oil and natural gas leases in the Gulf of Mexico.

The Senate bill would require that a specified volume of renewable fuels, up from current level of 5.4 billion, be used in motor fuel and home heating oil sold each year. The mandated amount would rise in 2008 to 8.5 billion gallons, and would increase to 36 billion gallons in 2022. This would raise the prices of gasoline and heating fuels because renewables are more expensive than petroleum products. If they weren’t more costly, the government would not have to mandate them.

Curiously, the renewable fuels requirement would apply only in the 48 contiguous states. The senators from Alaska and Hawaii are obviously more clever than the senators from the lower 48. If this provision becomes law, energy in Alaska and Hawaii would be less expensive than in the rest of the country.

The House bill would require investor-owned utilities to produce 15% of their power from renewable sources by 2020. Oddly enough, Federal power authorities, such as Bonneville Power and TVA, as well as hundreds of municipal authorities, would be exempt. The House seems intent on following the example of Iran and Russia: these are good times to be an American utility, but only if you’re publicly-owned.

The OPEC ministers meeting in Saudi Arabia don’t want to help the American consumer. Sadly, it appears that Congress doesn’t want to, either.

Ms. Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. She can be reached at dfr@hudsosn.org.