Who is to Blame for High Gas Prices?

With oil prices hovering around $100 a barrel, we are in store for plenty of political grandstanding from Democrats. This is sure to score points with constituents since liberals are all about emotion, and not about facts. History, however, tells us that oil companies aren’t the problem – government is.

It is awfully easy to blame the ones charging the high prices. In fact, Big Oil has repeatedly been investigated for price gouging, but each time investigators return empty-handed. Let’s just say we wave our magic wand and turn America into Hillary Clinton’s dream of “shared prosperity” by regulating CEO pay and Big Oil’s profits. Surprisingly, the price would almost remain the same. If CEO’s with their big salary and benefit packages were told to report to work free of charge, the price of a gallon of gas might drop one penny. If all of Big Oil’s profits were redistributed to where Hillary thought best, the price might drop a dime. I would call eleven cents a drop in the bucket, definitely not the place for consumers to fix blame.

Now, how about we look at the ones who are actually causing the high prices?

The government tried to regulate the oil industry in the 1970’s. Price controls produced disastrous results, which led to shortages across the country. Americans burned an estimated 150,000 barrels of oil per day waiting in line at gas stations – that is the ones that still had gas. Previously, the Middle East cut supply back in 1967, but since there were no price or wage controls, there was no crisis. During the Reagan years, the oil industry was de-regulated, resulting in remarkable increases in production, and a drastic reduction in price.

Demand for oil has increased significantly over the years, but again the government has got in the way. With a rising demand and a fixed supply, the result is higher prices. There have been no new refineries and virtually no increase in refining capacity in this country since the 1970’s. One reason is when they do try to put in a new refinery; environmentalists miraculously find a long-lost endangered creature living precisely in the spot they want to build. In addition, the process to obtain the required Federal permits to actually build a new refinery can take years.

It is estimated that 1.2 trillion of the world’s 1.6 trillion barrels of oil shale are in the United States. It is also estimated that 10 billion barrels of oil rest under the Alaska National Wildlife Refuge (ANWR). The footprint required to drill would be less than one-half of one percent of ANWR. Significant reserves have also been discovered in the Gulf of Mexico and off the coast of California, but all of these sources are prevented by environmentalists and Congress.

Different additives for different geographical locations, like California, can also play havoc on the pricing and supply, thanks to local or state government restrictions. Maryland has a law that actually sets a minimum price, thanks to industry lobbyists. The government’s share of the cost of a gallon of gas in September 2007 is 14% and 16% for diesel. Although the government did not help with any exploring, drilling, refining, or distributing, they still take in more revenue from something that they did not produce than the oil companies could ever dream of. More government, anyone?

Economist George Reisman says that our own domestic policies are what make us dependent on foreign oil. “Today, it is possible once again to bring about a dramatic fall in the price of oil – indeed, one even larger than occurred in the 1980s. And it could begin right away. All that is necessary is to abolish the U.S. government’s restrictions on domestic energy production inspired by the environmentalist movement.”

A solution actually came from someone in the government. Representative Ron Paul (R-TX) introduced H.R. 2415, the Affordable Gas Price Act. The bill would allow offshore drilling, eliminate federal restrictions on building refineries, promote free trade, and suspend Federal fuel taxes when the price reached a certain amount. The bill has been sitting in committee since May of 2007, the same place where it died during the 109th Congress. Apparently Congress is not interested in solutions.

There is no reason why we should restrict our domestic production, especially when it empowers OPEC. Imagine Wal-Mart and Kmart, who are in competition with each other. If for some reason Wal-Mart suddenly decided to not sell half of its merchandise, Kmart would sell more than Wal-Mart and gain control of the retail market. Kmart then could charge more for their merchandise, because Wal-Mart could not supply enough to meet the demands of the market. That would not make any sense in the corporate world, so why does it take place in the oil market? With our production artificially restricted, OPEC can cut back on its output and charge higher prices. Our own Congress and the environmentalists are in fact hurting us and helping OPEC. Perhaps the ones in need of investigation should be them.

We need to stop shooting ourselves in the foot. Like it or not, for the time being oil is the blood that runs our country, and in order for the economy to stay healthy, it is critical that we maintain a steady supply of affordable oil. We need to get the government (and environmentalists to a point) out of oil, not invite more government regulation.

Chris Carter is the host of “Unto the Breach.”
COPYRIGHT 2007 CHRIS CARTER