In California where left coasters spend seemingly half a lifetime sitting in traffic jams on the San Diego freeway, and where cars are like exoskeletons, gasoline prices have now risen to $2.29 a gallon. Nationwide, premium gas is selling at $1.89 a gallon and this summer prices could easily shoot well above two bucks a gallon.
Are we running out of oil? Is the Club of Rome’s famous dire prediction of severe energy shortages finally coming true? The media seem to think so. One major publication recently complained that our energy sources are “running on empty.” Another news story talked about the highest gas prices ever. Time says that the world is “running out of oil.”
But the doomsayers are wrong. First, gasoline prices are still historically cheap. Gas at $2 a gallon seems expensive, but we need to adjust for inflation to determine whether today’s price is out of line with prices in the past. When we measure energy and gas prices correctly, we find that gasoline, although the price has risen by more than 20% in recent weeks, is still affordable in historical terms. The current “record high” price is quite moderate by historical standards: In real terms we had higher retail gas prices as recently as 1985, and significantly higher prices from 1979 to the mid 1980s.
Winston Churchill once said that to see the future, you have to understand the past. Let’s look at the long-term trend in gas prices. They have been on a steady rate of decline since the 1920s, with the obvious exception of the 1970s, when we faced an OPEC embargo and gas lines. In 1920 the real price of gas (excluding taxes) was twice as high as today. If the price of gasoline relative to wages were comparable today to what they were in 1920, we would be paying almost $10 a gallon.
The same is true, by the way, for the cost of electricity and oil. Oil is slightly cheaper today adjusted for wage growth than it was 50 years ago, and five times cheaper than 100 years ago. Residential electricity is about half as expensive as it was 50 years ago, and, despite the recent black outs, the service is more, not less reliable.
All of this is true, but I’m as annoyed as anyone that gas prices have spiked upward so quickly this year. Who’s to blame? First, environmental extremists are responsible for blocking offshore drilling and drilling for new oil in Alaska. Drilling in Alaska would substantially reduce U.S. dependence on foreign oil and help combat the OPEC monopoly. The ANWR oil reserves are thought to be the largest untapped reserves on the planet. With just a small portion of the money from the oil there, we could create a wildlife refuge in every state in the country.
With gas and home heating prices high now, Congress should vote immediately to begin drilling in Alaska for economic and national security reasons.
This brings us to OPEC. The United States has an ideal opportunity to protect American manufacturers and consumers from OPEC’s monopolistic pricing schemes. Iraq will soon once again be one of the five top producers of petroleum. American taxpayers have just spent some $50 billion to liberate Iraq and another $87 billion to rebuild the nation’s infrastructure, including its oil pipelines. Iraq should not be permitted to join OPEC for the purpose of gouging the very U.S. consumers and businesses who helped bring it freedom.
If there were a competitive world price for oil, the price would fall by at least half. High oil prices severely harm the U.S. economy, since we are the world’s premier importer of oil. It is a tax on American consumers.
Iraq can help lift this tax on Americans by staying out of OPEC and counteracting its monopolistic policies. Our government should insist on this.
The radicalized environmentalists — and many Democrats in Congress — don’t agree with any of this. Their idea of an energy policy is to get Americans out of the cars they want to drive SUVs, mini-vans, and mini-trucks — and into less convenient and less safe smaller cars, or better yet buses, and subways. It was only a few years ago that Al Gore wrote that the combustible engine was one of the worst inventions in the history of mankind. That is why many liberals long for a European-style energy policy, where gasoline costs $4 or $5 a gallon. That’s not an energy policy, it’s a recession policy.
More domestic oil production and a competitive world price would end the “energy crisis” overnight. The U.S. government can help achieve that with a pro-production energy bill. This would allow Americans to drive any type of car they wish, and say, “Fill ‘er up!” without the guilt of a dent in the pocketbook.