Removing Barriers to Oil Supply is The Solution

Fire of Liberty

Walter E. Williams, John M. Olin Distingushed Professor of Economics at George Mason University, has a great column noting how instead of the US Senate holding hearings to browbeat the various oil executives and their respective oil companies on the record profits that they made in the 3rd quarter (remember their job is to make money, if you don't then you're out of the game.), they should be finding ways to help remove the various barriers that prevent these companies from increasing the supply of oil and LNG. Professor Williams pretty much sums up the answer to the problem at hand in the following paragraphs:

What prevents a robust supply response to changes in scarcity conditions in the gasoline market? U.S. oil refining capacity is now less than it was in 1980, and since that time there's been a 25 percent increase in demand. Because of costly environmental regulations, it's been 30 years since a new refinery has been built. According to the American Petroleum Institute, over the last 10 years, it has cost the oil industry $47 billion to comply with costly and sometimes useless environmental controls. There are restrictions on exploiting the huge oil reserves in Alaska, the Gulf and the Atlantic and Pacific coasts.

Speaker Hastert said, "These are extraordinary times that call for extraordinary measures. We expect oil companies to do their part to help ease the pain American families are feeling from high energy prices." Instead of mouthing platitudes and beating up on oil executives, Speaker Hastert should lead the effort to reduce restrictions on drilling and refinery construction. Sen. Dorgan should review our 1970s experience with an oil windfall profits tax that reduced American production and increased our dependence on foreign sources.

I couldn't have said it any better.

Also, check out what the editorial writers over at the Wall Street Journal pointed today about how it will be more beneficial for the members of Congress to succeed in their efforts of removing barriers to oil supplies and the reduction of regulations to the industry then it would provide these oil companies with a "Windfall supply" of oil to meet our demands thus in the long run causing the eventual fall in the price of oil and it's by-products. See for yourself:

Thanks to modern drilling technology, all of this oil and gas can be developed from a sliver of the state: fewer than 2,000 acres, or less than 0.01% of the wildlife refuge's acreage. If Alaska were the size of the front of this newspaper, that 2,000 acre footprint would be a single letter.

The evidence that this can be done is shown in the evidence of the minimal environmental impact from the drilling on Alaska's North Slope. To take one example: In 1977, when oil production began in Prudhoe Bay, there were about 5,000 caribou in the area. As of Alaska Fish and Game's most recent census, there are more than 31,000. Perhaps the pipelines are good for a caribou's libido. And let's not forget that the ANWR tundra set aside for drilling contains no trees, no deepwater lakes and no mountain peaks. Temperatures in winter drop to 30 below zero, which means it is not likely to be a vacation hotspot.

All of this evidence -- combined with the Katrina fallout -- finally seems to be making an impression on the Congress. In other good news, the House recently voted to make it easier to build oil refineries, and the House is also moving to lift the moratorium on drilling in the Outer Continental Shelf.

The latter could be especially useful for discovering more domestic natural gas, which was once cheap but is now hitting $13 per million BTUs, or among the highest prices in the world. Dry holes are always possible, but the far outer shelf could hold some 400 trillion cubic feet of natural gas, which compares with the 22 trillion cubic feet the U.S. consumes each year. Unlike oil, natural gas is difficult to transport, so every cubic foot produced at home means one less foot that has to be imported in expensive liquefied form.

Hopefully, members of Congress will realize that supply and not profits is the answer to our problems. But then again, we're talking about Congress. Go figure?