Whats the cause of $4 for a gallon of gasoline? To listen to Democrats in Congress and on the campaign trail and also some Republicans the answer is price gouging, speculation, oil companies or the failed policies of George Bush and Dick Cheney.
[IMGCAP(1)]Everything is getting blamed except the well-documented obvious: the law of supply and demand.
The history of U.S. energy policy is that Democrats have refused to increase supply and Republicans have refused to curtail demand. They are both to blame for $4 gasoline and theyd better get together to keep Americans from paying $200 a barrel to foreign oil producers.
Heres what the federal Energy Information Administration says: A variety of factors have caused oil prices to increase, including strong demand growth in non-OECD Asia and the Middle East, no growth in production since 2005 from the members of the Organization of Petroleum Exporting Countries, rising costs for oil exploration and development, across-the-board increases in commodity prices, and a weaker U.S. dollar.
Simple translation: China and India are buying lots more oil, increasing overall demand, and OPEC is not producing more supply. Under such circumstances duh! prices rise.
Additionally, the U.S., with its interest rates too low and chronically consuming more than it produces, has seen its currency lose value, so that every barrel of oil (and bushel of wheat) costs more.
The EIA analysis says not a word about oil company gouging, futures market speculation or refusal by U.S. oil producers to exploit the exploration leases they pay billions for all the reasons being bandied about by Congressional Democrats (and a few Republicans) and Sen. Barack Obama (D-Ill.)
The Democrats have an obvious motive for their denial of Econ 101 reality: They are so beholden to the environmental lobby that they cant advocate increased domestic oil and natural gas production.
To save the planet from global warming, the greens want to end mankinds use of fossil fuels, so they oppose drilling for natural gas offshore, for oil in the Arctic National Wildlife Refuge and exploiting Americas vast coal reserves. And Democrats obey, as do some Republicans, recently including Sen. John McCain (Ariz.).
The greens for years have also blocked new nuclear plants, although some have changed their tune because nuclear is carbon-free. Most Democrats remain opposed, while Obama is wishy-washy on the subject. McCain, to his credit, favors nuclear and always has.
McCains fellow Republicans also are to blame for $4 gas. It took ex-oilman Bush six years to discover that America is addicted to oil and begin promoting conservation and alternative energy sources.
If Democrats still refuse to increase U.S. supplies of oil and gas, Republicans for years have refused any measure to decrease demand by taxing gasoline to encourage conservation, raising auto fuel-efficiency standards or investing in non-petroleum alternatives.
Just suppose, when gasoline cost $1.71 a gallon as it did in 2001, when President Bush came to office that the federal government had increased gasoline taxes by $1 or $2 and used the money to build infrastructure and invest in alternative-energy research, rebating some to poor people.
For seven years, the public would have been buying more fuel-efficient cars as they are now and domestic auto companies would have had an incentive to develop hybrids and electric cars.
Americas transportation networks would have been more efficient, and promising alternatives such as wind, solar and biofuels would have been seven years further along than they are now.
Instead, a vast transfer of wealth is taking place with oil at $135 a barrel, and the beneficiaries are countries such as Saudi Arabia, Russia and Venezuela, with interests often hostile to ours, plus Asian makers of more fuel-efficient cars.
With the public justifiably furious at the price of gas, Republicans and Democrats are doing what they usually do finding excuses and pointing fingers at each other.
Republicans could have the better of it politically because polls show that the public favors drilling offshore, although because of the general political climate the public also prefers Obama to McCain on energy issues.
McCain has taken a half-step toward exploiting anger over gas prices and recognizing the law of supply and demand by dropping his previous opposition to offshore drilling. However, he still refuses to advocate drilling in ANWR.
McCain also has opened himself up to charges of election-year gimmickry by advocating a summer gas tax holiday that will save the average consumer about $30 and proposing a $300 million prize for development of an electric car battery which smacks of an earmark for entrepreneurs already working on the project.
The bottom line here is that the United States needs a bipartisan energy strategy thats simply stated: Do It All. Drill for oil and gas, expand nuclear power, promote conservation and develop alternatives.
The EIA says that for decades to come, 85 percent of U.S. energy needs will come from oil and gas. So, the U.S. ought to produce more of its own in the near term while developing alternatives for the long run.
And, according to the Wall Street Journal, another expert group, the International Energy Agency, is scheduled to report in November that oil-producing countries not only wont produce more oil they cant, because of aging oil fields and inadequate investment.
That means that the price of oil and gasoline is going to continue to rise. Its all the more reason for Obama and McCain, Republicans and Democrats, to agree to increase domestic supplies of all energy and to reduce demand.
If they were really serious, theyd even institute a carbon tax. If gasoline went to $6 or even $8, it would still be lower than it is in Europe.