America's supply of energy is being strangled by the policies of U.S. federal and state governments.
With American consumers currently paying the highest gasoline prices in recent history, and after another winter of high heating costs, many Americans are properly concerned about America's energy future. Predictably, many politicians and commentators blame the "greed" of U.S. energy companies for the soaring prices. The truth, however, is that prices rise when demand increases relative to supply, and that the American supply of energy is being strangled by the policies of U.S. federal and state governments.
A prime example of such strangulation is the moratorium on offshore drilling for oil and natural gas imposed on 85 percent of America's coastal waters for the past quarter century. Last week, when the House rejected an attempt to lift the moratorium, it sent a powerful message that the strangulation will continue.
Let us examine some of the other policies that have brought America — a country blessed with abundant natural resources and possessing the technology to produce energy more efficiently than ever — to a state of energy poverty.
In addition to the moratorium on offshore drilling, the federal government repeatedly refuses to permit oil drilling in Alaska's National Wildlife Refuge (ANWR). Geologists claim that ANWR holds seven billion barrels of oil, enabling it to add significantly to American energy production. Further, in large measure due to environmental restrictions, America has not built a new oil refinery for more than 25 years, meaning a diminished ability to refine crude oil into gasoline, diesel, jet fuel, heating oil, and other petroleum products. Our refineries run at capacity constantly, making repairs difficult, leaving them more susceptible to breakdowns and fires, and — with most centered in the Gulf of Mexico — leaving the country's supply of refined oil vulnerable to such natural disasters as Katrina.
Additionally, regulations have made building new nuclear power plants economically uninviting — despite the fact that nuclear plants, operated in free countries, where top minds are liberated to create advanced technology, have proven their reliability and safety. In France, for example, nuclear power provides roughly two-thirds of the nation's electricity. American nuclear plants have had, and continue to show, a superb safety record — and this includes Three Mile Island, whose 1979 partial meltdown led to no deaths or injuries.
Finally, environmental restrictions also limit production of natural gas, which currently supplies 25 percent of the energy Americans consume, a figure that will rise in the future. Huge natural gas reserves in places such as the Rocky Mountain basins, Alaska, and the Outer Continental Shelf are either "off limits" or have their development severely restricted. These unnecessary restrictions endure despite the fact that the wholesale price of natural gas has quadrupled since the 1990s. As an example of the hurdles placed in front of natural gas companies, producers in Wyoming's Powder River Basin, which holds 39 trillion cubic feet of gas, several years ago saw the federal government suspend the issuing of drilling permits pending the outcome of a second "environmental impact" study. Is this kind of treatment going to encourage more companies to get into the energy business?
The United States is a country rich in both energy sources and the technology necessary to develop them. But the policies of our own government are preventing such development from occurring. America needs to learn from the bitter experience of England. Last century, a popular expression, "taking coals to Newcastle" (a center of English coal production), was coined to indicate the absurdity of taking a product to a place that was plentiful in it. But in the late 1940s, when the British government nationalized the coal industry, shortages and rationing resulted, and taking coal to Newcastle became a grim reality. Similarly, the United States today, with its enormous supplies of oil, natural gas, and other energy sources, is suffering high prices because of restrictions imposed by our government.
If the U.S. government established freedom in the energy industry by removing environmental restrictions, we would witness a significant increase in domestic production of oil, natural gas, and electricity. This would do more than increase supply and lower prices for American customers. It would herald a new commitment by the U.S. government to economic freedom and capitalism. The relative freedom of the computer industry has led to an explosion of innovativeness and productivity. The same freedom in the energy industry will lead to the same result.
I guess the upshot of this article is that the environment doesn’t matter, and we should disregard any damage to it if there’s money to be made. However, we live not in the public-be-damned world of Ayn Rand’s novels, but in a real world where clear air is appreciated.
I hesitate to raise the capitialist bugaboo, global warming, but isn’t that getting harder and harder to ignore? Wouldn’t it be nice if we could just close our eyes and pretend that doesn’t exist? Maybe we should do that with anything we don’t like seeing.
Anyway, opinion aside, there’s some misleading info in this article. Yes, refineries are running at full capacity. But if they weren’t producing diesel oil for export to Europe, they wouldn’t be. With the new product tankers being built, it’s no longer necessary that refineries be close to their crude oil sources. Do you really want an oil refinery in your backyard? Well, surprise, no one else does either.
The oil companies have the knack of bringing public condemnation upon themselves. I recall after the Exxon Valdex fiasco, the Wall Street Journal reprinted Congressional testimony given by oil company executives to Congress 10 years earlier. The executives said that a large oil spill was impossible, and even if it was possible, technology existed to quickly clean it up.
If business executives would ever learn to level with the public, then maybe the public wouldn’t get so pissed off when they make huge profits off of the rising prices that consumers are forced to pay.
– Eric Balkan
ericbalkan
Perhaps if the gasoline tax was eliminated the price might come down. I don’t see the government doing anything to help the people.
Everyone wants clean air etc, and we have the technology to do this, why not do SOMETHING, to get away from dependence on foriegn sources of enery.
You cannot frame your discussion by saying “lift environmental restrictions.” We want to lift the restictions on drilling. We will keep the same stringent environmental restrictions that we follow in the Gulf of Mexico and the 30+ national wildlife refuges where we drill now.
The liberal media did the same thing when they attached the label “domestic spying” to monitoring Al Quida terrorist communications. We are monitoring our enemies communications where ever they occur. But the media set the framework for discussion by calling it domestic spying. By changing the label they skew the discussion away from the issue onto the topic they want.
Mr. Bernstein got it Right! Until We, the People, refuse the propaganda of Leftist-eco-nuts and elect statesmen to represent the People and our Country’s interests, the United States of America will remain the hostage–and victim– of the Left.
Those who cry “We must do more of the same, and faster, to prevent disaster” are most often wrong. We do not need more oil and gas resources to harvest. We need new approaches to energy. We only postpone the inevitable if we drill in ANWR. Necessity is the mother of invention as some say. The free market systenm will be our friend as others say. I believe we need to wean ourselves away from the mass distribution of power we have today and develop more local solutions that do not require gas or oil. Who will deliver it? Japan? Europe?
Yes, I agree with Dale, lets use wind power!, Oh, I forgot, lets use wind power were rich and powerful don’t live so we won’t spoil their view of Nantucket or Palm Beach!
Dale is so very typical of those who fail to understand the basic premise of the market, any market much less energy markets. Yes, new ways of powering machines need to be found and they will but it takes years to develop these neat and mostly theoretical energy sources. In meantime I bet Dale doesn’t know that oil literally seeps out of the ocean bottom polluting the California coastline and waters this very minute. In fact it has been doing that for millions of years. Same for oil in Texas and even ANWR. Drilling it is just an efficient means for getting mass amounts out of the ground so that it won’t leak out into the ocean bed. Maybe Dale could walk to work but where I live its 20 miles one way. I don’t have time to walk 40 miles a day and take care of my family as well.
Since Congress and Mr. Prez. have declared everything on the table when it comes to natl. security why not an extensive drilling program in ANWR and off both coastlines of the US. Including Nantucket and Pebble Beach!
To Erik Balkan,
Capitalism is not the bugaboo here, global warming is. Capitalism is a well understood mechanism with a long history behind it. Global warming is a vague theory with little to back it beyond the hysterical insistence that we ignore it at some peril. Repeated attempts to validate GW have fallen flat, with as much evidence to discredit it as credit. At best, we can say the jury is still out on GW, and will be for generations. The predictions of global catastrophe that should have already materialized have not and show little indication of doing so. What we do see is that the atmosphere and/or environment are more robust and vitiating than theorists credit. Rather than admit this, advocates merely revise theory to place the catastrophe a little further out.
I agree with the author that artificial restrictions are having some effect on our supply and prices, but not all that much. Oil and gas are fungible, and it doesn’t matter as much where it comes from so much as it comes. The current spike in cost is due to several things all happening at the same time. On the demand side, Asian consumption is up dramatically. In Kuwait, a number of wells have had to be closed down, putting a pinch on existing surplus production capacity. This will be corrected in time, but short-term has put production at or near its limit. Then Katrina and Rita took out production and refining capacity in the Gulf. Again, this will be rebuilt, but then we’ll be years paying off the rebuilding cost which must be paid for out of fuel sales.
Overall, oil has a limited capacity, limited by how much is still in the ground. The quality of oil still in the ground is also changing as we use up sweet oil and shift to tar-sand and shale oil. How much is still there is unknown. What is known is, baring some big new find, that what remains is harder to get out of the ground or harder to crack and refine. The deeper we have to drill, the more expensive it is to lift, the more we have to explore and develop new fields, and the more refining capacity we have to build, the more expensive energy becomes. The trend for fuel cost is ever upward, not down. This years spike was part disruption, part demand growth, and part ongoing market adjustment to an ever shrinking resource.
An awful lot of people are calling this a crisis. To me, a crisis is when people suffer undue hardship, even dying. Were talking about paying more for what we consume, not whether or not it will be there when we need it. No one has predicted we are that badly off just yet. There are no curtailments or rationing yet. No foreign power is threatening our supply (other than Venezuela, who’s just taking advantage of the situation to demanda higher price). Politicians are fanning the hysteria partly because they’re clueless and partly because this is, afterall, an election year. The current situation is serious, but let’s not all lose our heads over it.
Dean, your sarcasm is not appreciated. I made no mention of methods to produce energy, just commented that more of the same is not a solution. There have been no viable alternatives proposed yet. So if our National Energy Policy is to think that pumping more oil or gas faster is the ultimate solution then we are failing in our leadership. Leaders promote ingenuity, creativity, and problem solving. We could use some leadership on an energy policy that does the same instead of whining “more,please,sir”. Drilling has an important part to play in this solution,too. Just not the only part. Try to think along the lines of 1. reduce the demand of existing power users 2. reduce the losses of transmission and 3. increase power availability. More options may be open to us when we think like this.