High oil prices ensure there won’t be shortages

U.S. Rep. Maxine Waters’ threat to nationalize the oil companies, whose executives didn’t grovel before her sufficiently, would be downright funny if it were not serious.
If you think gas is expensive now, just wait until it’s free, courtesy of demagogues like Ms. Waters (D-Calif.) who restrict oil production in America while simultaneously complaining about high prices.
The last guy who thought he had the right government prescription for the challenges of oil price inflation gave us gas lines around the block. No, it wasn’t Jimmy Carter. He only aped the policies of the real architect of our energy crises, Richard Nixon – with an assist to Congress and its Emergency Petroleum Allocation Act of 1973.
While complex geopolitical events focused around the Arab Oil Embargo and Iranian Revolution have precipitated oil shocks before, it was the straitjacket of price controls that frustrated the ability of the U.S. market to attract additional supplies.
The only thing worse than buying $5 per gallon gas is not being able to buy price-controlled $3 gas because it has all gone to countries willing to pay more.
In the wake of oil shortages in the ’70s, lawmakers would not acknowledge that government intervention had exacerbated the problem. Instead, Congress passed the Energy Security Act in 1980 with copious subsidies intended to guarantee that we would get 1.5 million barrels of liquid fuel a day made from coal and natural gas.
TIME reported in June 1979 that “Synthetic fuel is too expensive to compete with OPEC crude, but the Government’s guaranteed market for the product would encourage companies to invest and get the new industry off the ground.”
Sound familiar? Substitute “alternative” for “synthetic” and you could have lifted the quote from explanations of this year’s “energy” bill. But that was 30 years ago and billions of our tax dollars have been flushed down the synthetic fuel effort without getting us a single barrel.
The point that John Hoffmiester, president of Shell Oil, was making to Rep. Waters, when she had her Hugo Chavez moment, is that the main impediment to additional domestic oil supplies is the statutory bar to most offshore, interior and arctic drilling. Waters was asking for a guarantee that, if those restrictions were removed, oil prices would go down. Hoffmiester turned the question around to say they would go up if Congress did not lift these bans.
The whole thing was the side show it seemed; consumers should not fear $130-a-barrel oil. When oil is that expensive – or possibly higher – we’ll have all we need unless Congress prevents it. Those prices make reasonable investments of expensive deep water and arctic exploration and unconventional extraction, such as oil-sand refining currently constrained in Canada’s Saudi Arabian-sized reserves not by expense but by the Kyoto Protocol.
After all the pork that has been consumed by the synthetic fuels programs, we’ve finally reached the juncture where coal conversion could be a function of the market. Unfortunately, carbon dioxide worrywarts have now saddled that technology with debilitating restrictions too.
Government remains the main impediment to easing the energy pinch and local governments are no exception.
When a New York Court ‘ruled’ back in the 19th century that, “No man’s life, liberty, nor property is safe while the legislature is in session,” they weren’t kidding. With friends like this, who needs energy? But at least our ethanol output is ‘growing’ (please ignore people starving in Haiti and other developing countries). &#8226
Brian Bishop is a Fellow in regulatory and environmental policy at the Ocean State Policy Research Institute. The institute is focused on crafting sound policy based on the principles of free enterprise, limited government and traditional American values.