En­ergy? Here’s the drill

The Washington Times Weekly - - Com­men­tary - Don­ald Lam­bro

The law of sup­ply and de­mand is the old­est and wis­est ax­iom in free-mar­ket eco­nom­ics. Ex­ceed the de­mand for some­thing by over­pro­duc­tion and the price will fall. Sharply re­duce its sup­ply in the face of very ro­bust de­mand, and the price will go up. Congress, well-mean­ing en­vi­ron­men­tal­ists, gov­ern­ment reg­u­la­tors and as­sorted Malthu­sians seem to have for­got­ten this sim­ple, fun­da­men­tal rule, and the re­sult is $120-a bar­rel-oil and $4-a-gal­lon gaso­line.

The United States and the global econ­omy will need a great deal more en­ergy in the decades to come. It is said that within the next two decades we’ll need about 40 per­cent more en­ergy than we used in 2005. No one dis­putes this, and that fig­ure is prob­a­bly wildly un­der­es­ti­mated. For the present time there are only a few ma­jor en­ergy re­sources that can meet our needs un­til we de­velop new sources of power.

Oil is one area where we can sig­nif­i­cantly, safely and cleanly boost our sup­ply in the years to come if we set our­selves on a course to en­cour­age more oil ex­plo­ration and more re­finer­ies. I to­tally agree with eco­nom­ics writer Robert J. Sa­muel­son’s com­mon­sense, long-term sup­ply and de­mand so­lu­tion to the prob­lem of ever-ris­ing oil prices: “Start drilling.” In the murky, dem­a­gogic de­bate over en­ergy, his words were a fresh breeze amidst an over­abun­dance of hot air.

“Any un­ex­pected rise in de­mand or threat to sup­ply trig­gers higher prices,” Mr. Sa­muel­son re- cently wrote in The Wash­ing­ton Post. “The best we can do is to try to ex­ert longterm in­flu­ence on the global bal­ance of sup­ply and de­mand. In­crease our sup­ply. Re­strain our de­mand,” he wrote.

It prob­a­bly comes as a shock to most peo­ple that the United States is the world’s third-largest oil pro­ducer. (Saudi Ara­bia and Rus­sia hold the top two spots.) We pro­duce a lot of oil and can pro­duce much more. But we have ham­strung our oil in­dus­try by for­bid­ding fur­ther drilling in Alaska, (where the Arc­tic Na­tional Wildlife Refuge could pos­si­bly pro­vide for as much as 5 per­cent of our cur­rent oil needs) or in off­shore oil fields in the At­lantic, Pa­cific and the Gulf where vast re­sources are be­lieved to ex­ist.

We have to get over this po­lit­i­cal my­opia about oil com­pa­nies and the money they make. Ex­plo­ration and drilling is enor­mously ex­pen­sive and re­quires vast amounts of money. The oil and nat­u­ral gas (is there a more abun­dant en­ergy source than nat­u­ral gas?) in­dus­try says it has spent $1.25 tril­lion since 1992 on ex­plor­ing, pro­duc­tion, refin­ing and dis­tri­bu­tion.

But in­stead of fo­cus­ing on how can we in­crease oil and gas sup­plies, the Democrats in Congress, sound­ing in­creas­ingly like Hugo Chavez, have been work­ing to re­duce sup­ply in the face of con­stantly ris­ing de­mand. To wit: They’ve said no to more ex­plo­ration, and have pushed for higher taxes on oil com­pa­nies to re­coup what they call “ex­cess prof­its.“ Such poli­cies make us more de­pen­dent on for­eign oil while throt­tling sup­ply, which in turn con­trib­utes to high prices at the pump.

There’s noth­ing wrong with the price of gaso­line that a few dozen new re­finer­ies can­not cure, but we haven’t built new re­finer­ies for sev­eral decades, and that’s why gaso­line in­ven­to­ries have been play­ing a costly, pre­car­i­ous game of catch-up with de­mand. Just the threat of a storm in the Gulf that might shut down a few rigs has traders bid­ding the price of lim­ited sup­plies higher and higher.

There’s a third source of cheaper en­ergy that would help make us less de­pen­dent on for­eign oil: nu­clear power. But here again the peo­ple who run Congress con­tinue to pan­der to en­vi­ron­men­tal­ists, who have set up one ob­sta­cle af­ter an­other to pre­vent build­ing more plants.

France gets most of its elec­tric­ity needs from nu­clear power. So can we. The Nu­clear En­ergy In­sti­tute says Amer­ica’s 104 nu­clear power plants are re­spon­si­ble for 54 per­cent of the elec­tric sec­tor’s vol­un­tary green­house-gas re­duc­tions. We need to build more nu­clear plants to pro­vide an in­ex­haustible sup­ply of elec­tric power for cen­turies to come. Power com- pa­nies have filed per­mits to build such plants in Vir­ginia, Texas, North and South Carolina, Mary­land, Mis­sis­sippi, Alabama and Ge­or­gia, but, here again, they face huge ob­sta­cles from en­vi­ron­men­tal­ists, and it could take years to over­come the le­gal and po­lit­i­cal hur­dles placed in their way.

Mean­while, Amer­ica is be­ing taken to the clean­ers by need­lessly high oil and gas prices caused by con­gres­sional ig­no­rance and in­abil­ity to come to grips with the only vi­able so­lu­tion: Start boost­ing en­ergy sup­plies and the cost to con­sumers will come down.

A do-noth­ing Congress that has been AWOL on en­ergy could prove a very ef­fec­tive is­sue for the Repub­li­cans in this elec­tion year. I can see TV ads, rem­i­nis­cent of the Repub­li­can ads in the 1980s, say­ing, “The Democrats are out of gas” as sum­mer prices shoot through the roof and an an­gry elec­torate de­cides to throw the bums out.

Sadly, John McCain is op­posed to drilling in the Alaskan Na­tional Wildlife Re­serve, but that shouldn’t stop the House and Se­nate Repub­li­cans from mak­ing this their is­sue in the con­gres­sional elec­tions.

In­deed, Robert Sa­muel­son has given the GOP its strong­est ral­ly­ing cry and its best bumper sticker for the fall cam­paign: “Start drilling.”

Don­ald Lam­bro, chief po­lit­i­cal cor­re­spon­dent of The Wash­ing­ton Times, is a na­tion­ally syn­di­cated colum­nist.

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