The Wrong Path to Reducing Gas Prices

Fire of Liberty

William F. Buckley Jr. has a great column out today which notes that while various members of Congress(from both sides of the political spectrum) are squawking in front of the TV cameras about how oil companies have possibly joined in some grand "collusion conspiracy" and are recommending the passage of some new laws to deal with the price of gas, they fail to notice that their efforts and actions will make the situation far worse than the purported crisis at hand. Even more, these populist crusaders are so stuck on appeasing the crowd by taking on the oil companies and avoiding other factors, that are out of Congress's reach, that cause the prices of oil to go up. Just read what Mr. Buckley has to say and you'll see that Congress's current efforts on dealing with the price of gas are definitely the wrong ways to go:

And indignation at oil prices is not intelligently exercised by legislative action.

Factors here to be considered are varied.

-— In the past 20 years, profits from oil and gas investment have been lower than the profits from many alternative economic enterprises. Ten percent profit is normal (and normative). Oil and gas investments have tended to run two or three points lower than that ten percent.

-— To effect an increase in supply requires a lot of investment and a lot of patience. Five to ten years, significantly to increase supply.

-— The stranglehold of OPEC is not easily dealt with by normal economic responses, given that it is a politically controlled oligopoly.

-— The causes of significant shortfalls in oil production are often political. Mexico is off on another nationalistic excess. Nigeria is in turmoil, reducing production. Iraq is almost one million barrels a day under what it used to produce. Iran is a day-by-day disrupter. The Saudis, who in the past, have with their huge reserves acted as a kind of federal bank, are needing to do more development.

There isn't anything the U.S. can do — except keep its legislative fingers out of the stew. And open its blinded eyes to the possibilities of nuclear energy.

Along with expanding nuclear energy, the members of Congress should free up the oil companies and energy producers from excessive regulations, taxes and restrictions the prevent domestic exploration. The best solution to our gas woes is to increase the supply-side of the matter.