Until Congress Expands U.S. Drilling Price Fluctuations Will be Caused by Other Countries
By Rachel Alexander
It is dj vu this year with gasoline prices which are currently hovering around a high of $4 a gallon.
Every couple of years or so the price of gasoline hikes up and politicians with elections looming scramble to explain why proposing how to bring them back down. High gasoline prices are a problematic issue because the cost of gasoline has not kept pace with inflation so keeping them low means some kind of intervention by the government will be necessary.
Whether that intervention means the Republican plan of allowing for more local drilling or the Democrats proposal to punish oil companies by eliminating tax cuts remains to be seen.
Compounding the problem is the dependency of the U.S. and other countries on foreign oil. The U.S. produces about 5 of the worlds petroleum while consuming about 20. Although the U.S. does not buy oil from the most unstable oil-producing regimes other countries do. When that supply is restricted those countries turn to our primary suppliers which drives up prices for everyone.
The wave of Middle East uprisings which began in January may be the factor most responsible for the current increase in gasoline prices felt all over the world.
Other significant contributing factors include:
- Increased demand from Japan for oil
- Nuclear plants being out of commission and
- Ever-increasing demand from fast-growing countries like China & India.
Venezuelan president Hugo Chavez just
announced in April that he is hiking taxes on crude oil exports. The U.S. is feeling the pinch even more than other countries due to the debasement of the dollar.
Senate Democrats ignore these underlying factors and instead blame the oil companies for high gas prices. They want to slash tax breaks for oil companies and direct the money instead to alternative
fuels essentially picking winners and losers in the energy industry. Oil companies already pay a
higher percentage of their income in taxes 41.1 than the average for all other S&P Industrials 26.5. Raising taxes on oil companies will not work because they will just pass the costs along to consumers.
Democrats blame the oil companies instead of admitting the higher prices are caused by Middle East turmoil because then they would have to acknowledge that drilling locally would fix the problem. Environmentalists in the Democrat Party prevent them from selecting the common sense solution of expanding offshore drilling.
Senate Democrats also blame Wall Street speculators for driving up the price of gasoline and the Obama administration has called for an investigation into energy speculators. But consumer reporter John Stossel
points out the last time there was an investigation into oil speculators driving up the cost of gas it uncovered nothing.
President Bush commissioned a review by the Commodity Futures Trading Commission in 2008 on the effect speculators had on market prices. The agency
found that speculators actually put downward pressure on prices. There is no free market in oil; the government picks and chooses how much oil to drill and which countries to buy oil from. Stossel
notes that in the past when government has banned speculation on commodities such as on onions it caused the price of that commodity to fluctuate even more.
There are signs that Obama may be figuring out that the Democrats proposals wont work leaving gas prices high which would hurt his reelection chances. After generally opposing offshore drilling he is now saying he will
speed up oil and gas drilling on public lands and waters in Alaska along the Atlantic coast and the Gulf of Mexico.
The reality is that gas prices have not kept up with inflation and until Congress expands drilling near our shores prices will be subject to fluctuations caused by other countries. The Republican-controlled House passed three bills last week to speed up offshore drilling.
As long as Senate Democrats and the Obama administration delay and block offshore drilling voters angry at the pump should direct their anger at them. A recent CNN/Opinion Research poll found that a substantial 69 of Americans favor increased offshore drilling for oil & natural gas.
Local drilling will not fix everything. There are not enough reserves for the U.S. to become completely
self-sufficient our energy usage will need to expand into nuclear power natural gas or other forms.
Windmills and solar power are not feasible options at this time due to their enormous cost. The U.S. also needs to
cut back on excessive EPA regulations which drive up the cost of gasoline.
Will Obama flip-flop and expand offshore drilling to aid with his reelection or cave in to the radical left in his party and continue to blame big oil and investors?
Meanwhile consumers should vote with their pocketbooks and buy more fuel-efficient cars.
Rachel Alexander is the co-editor of the Intellectual Conservative.
