The Price of Government Intervention

In the past few months we have seen gas prices jump to their highest levels since Hurricane Katrina hit. Consumers scramble to find ways to pay the price while others scramble to lay blame. Plenty of explanation exists for this most recent spike.


First is the problem of blends. Different environmental regulations for different parts of the country mean that gasoline refineries must produce a vast array of gasoline formulas, then must figure out the supply and demand for each version sent out over the country. Personally I wonder why they do not simply go with the most environmentally friendly formula for the whole nation.




Secondly, refining in the United States is almost an endangered species. Our domestic capacity has not expanded in decades due to the expensive and time consuming permit process combined with legions of environmental groups waiting to sue. Meanwhile current facilities continue to age and occasionally blow up. Increasingly we rely on foreign countries such as Mexico and Venezuela to help provide the fuel we need. The most recent price rises reflect fears that unless a short term reduction in consumption takes place, shortages will occur in some parts of the country. Yes oil companies profit from this and it is hard to work up much sympathy for them, but it is a market tool to ensure a continued supply everywhere.







Right now the supply of crude does not pose a problem. Actually oil prices have dropped recently due to increases in supply primarily from Saudi Arabia. That nation's authorities just foiled a major plot to destroy its oil facilities. We need stable domestic sources of oil and no reason exists to not tap reserves in the Alaska National Wildlife Refuge. In his infinite wisdom, President Carter created this sprawling reserve to prevent oil companies from drilling there, citing the potential danger to polar bear and reindeer habitats. Of course the presence of cities, interstate highways, coal mines, etc. have absolutely driven away the population of black bear and white tail deer from our region. We simply need more domestic supply in case of international turmoil.







Some want to blame the long term energy consumption of the United States, citing familiar statistics that say we use more than any other nation. This represents a typical example of America bashing with no suggested alternative. Environmentalists fail to point out that the US produces more goods and services more efficiently than any other nation. We use more because we produce more, but America also wastes less. The inefficient authoritarian Chinese economy among others wastes more energy due to their much lower productivity level.







As has been pointed out here before, that capability comes from the genius of competitive capitalism. In that philosophy lies the key to solving energy price problems. Governor Manchin called upon the president to declare a state of emergency, a move that would create panic and huge price hikes. He also asked Bush to create a national energy strategy, a policy that the president has attempted repeatedly and received no support. If the governor and others actually want an energy policy they must meet with President Bush, leave politics at the door, and work out a solution. For our economic stability and national security we need to free American industry to produce more in America for Americans.