As public anger over soaring gas prices continues to build, members of Congress have noticed that their re-elect numbers continue to go down. And so they are scrambling to find someone or something to blame. Big oil companies are the favorite scapegoat, but the President, China, automakers, the Iraq War, and speculators are also popular targets.
Most senators and representatives should be looking in the mirror in order to find who is really to blame. Those who are complaining the loudest have voted again and again over many years for policies designed to constrict energy supplies and thereby raise energy prices. To take just one example, Sen. Byron Dorgan (D.-N.D.) recently said oil companies should be required to invest their record profits in new energy production in the United States. Yet Dorgan opposes opening federal lands and offshore areas to new oil production and supports ever higher government mandates and subsidies for ethanol, which will raise rather than lower gas prices (but will also benefit his state’s corn industry).
President Bush, noticing that his own poll numbers decline as gas prices rise, jumped into the blame game on April 25 when he ordered federal investigations into oil price manipulation and directed the attorney general to urge the 50 state attorneys general to conduct separate investigations.
While demagoguery and grandstanding is all that can be expected from the likes of Senators Chuck Schumer (D.-N.Y.) and Arlen Specter (R.-Pa.), Bush knows better. Until he told us in his State of the Union speech in January that we are addicted to oil, his proposed energy policies recognized that if we are going to continue to use a lot of energy we need to produce more of it in the United States.
The President needs to get back on the right track because the current situation presents a rare opportunity. Real leadership now could channel public anger into achieving important long-term solutions to America’s energy needs that have been stymied for decades by environmental pressure groups.
Here is what I think the President should do.
- He should explain that current high gas prices are the result of high economic growth (no apologies necessary), which increases demand, and continuing supply problems, some of which are caused by government.
- The President should defend profits. The only alternative to prices as a way of reconciling supply and demand is rationing (and rationing is why gas prices are so low in Cuba and North Korea). When demand is high and supplies are low, producers make large profits. This is good. If oil companies weren’t making profits, then investors would have no reason to invest in increasing supplies. As for a windfall profits tax on oil companies, it cannot be repeated too often that if you want less of something then raise taxes on it.
- He should barnstorm the country to build support for legislation to increase domestic energy production. Opening the Arctic National Wildlife Refuge (ANWR) in Alaska to oil and gas production is at the top of this list. If ANWR has as much oil as the U.S. Geological Survey’s mean estimate, this would increase America’s proven domestic oil reserves by approximately 50 percent. Within a few years, an additional million barrels a day could be flowing to West Coast refineries. And if President Clinton hadn’t vetoed ANWR legislation in 1995, that oil would be flowing today. Opening ANWR enjoys majority support in both the House and Senate, but was blocked last year by a determined minority. A strong push from the President now could overcome that opposition.
- Bush should direct the Department of the Interior to re-open its new five-year plan for offshore oil and natural gas production. The current draft includes very little new production. This is crazy. While the western Gulf of Mexico is now the U. S.’s largest producing oil and natural gas field, the eastern Gulf of Mexico and entire Atlantic and Pacific Outer Continental Shelf (OCS) areas are closed to production. OCS reserves are potentially enormous. Environmental concerns are unwarranted. The last significant offshore oil spill in the U. S. was in 1969. Hurricanes Katrina and Rita last summer destroyed many oil rigs and platforms in the Gulf, but did not cause any significant oil spills. To overcome opposition to OCS production in coastal States such as California, Congress should share the royalties 50-50 with the States, just as it does with royalties from production on federal lands.
It is true that these are long-term policies that will not drop prices this summer. But grandstanding to score short-term political points isn’t going to lower prices at the pump either—now or in the future.
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