Energy policies, not oil companies, drive prices

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By Angie Vogt, political commentary

This time last year, I got an up close and personal lesson in market economics.

My children had finally reached their goal of saving their money to buy the latest Nintendo game system. So, on that exciting day, off we went to buy the new game for the family. Except that we couldn’t find one. Every store was sold out.

The only way we could acquire one of these golden eggs from Nintendo was through ebay, but only if we were willing to pay about three times the retail value. This was a lesson in supply and demand. When demand exceeds supply, the value of whatever is in demand goes up proportionately. If we want lower prices, we have to reduce demand and/or increase supply.

Street-smart people know this. For Pete’s sake, even drug dealers and comic book collectors know this. Somebody needs to tell the Democrats this. Based on New York Sen. Chuck Schumer’s response to President Bush’s speech on energy policy last Wednesday, they seem ill-informed of this basic economic premise regarding the relationship between oil prices and supply and demand of oil products.

Washington State Attorney General Rob McKenna recently completed an investigation on “price gouging” by the oil companies and found that no such phenomenon exists. Oil companies are making record-breaking profits for the simple reason that the demand for oil continues to increase exponentially on a daily basis.

With India and China entering the foray as the world’s newest market economies, we can expect that demand to continue. The more oil that consumers (worldwide) demand, the tighter the supply and higher the price per barrel. The answer lies in simultaneously increasing our own supply (energy independence) while also reducing demand by reducing oil consumption.

Our own government has frustrated the process of increasing supply by blocking oil exploration and drilling on our own shores, citing environmental concerns, even though new technologies in drilling are much cleaner and environmentally friendly than 20 years ago.

These restrictions have caused American dependence on foreign oil to grow from 10 percent in 1970 to 65 percent by the end of 2004.

Last Wednesday, Schumer declared the president’s appeal for further exploration and drilling on our own shores, including the Arctic National Wildlife Refuge (ANWR), as foolhardy and useless. He asserted that it would take nearly 10 years before the U.S. would see any of the oil from ANWR.

While proponents of drilling ANWR argue that it would only take between one and three years, it’s noteworthy that President Clinton vetoed the first proposed legislation for drilling ANWAR in 1994 — 14 years ago.

The yield is estimated at a million barrels per day, about the same amount that we depend on from Saudi Arabia. Were it not for Democrats’ anti-drilling and exploration stance, our dependence on foreign oil would be significantly lower today.

In addition to finding untapped oil sources, we have to refine oil into gasoline and petroleum for the various petroleum products in demand, such as plastics, paints and agricultural products, such as fertilizer.

In the 1980s, due to environmental restrictions, refineries began shutting down. Most could not comply with the expensive environmental demands. The United States has not built any new refineries since 1976, in spite of skyrocketing demand for petroleum and petroleum products.

Besides increasing our supply, we could reduce our demand for oil by pursuing other inexpensive and clean energy sources, such as nuclear energy. Once again, environmentalists have successfully scared the public away from this worthwhile endeavor through Hollywood fear tactics (remember the movie “The China Syndrome?”) and aggressive anti-nuclear campaigns. Even ultra-liberal France knows how valuable a resource nuclear energy is, as a significant portion of their energy is nuclear based.

The hoopla around corn-based biofuels, specifically ethanol, has proven to be more harmful than helpful to our economy and environment. As demand for corn has increased 250 percent in the past few years, prices affecting food production have soared.

While President Bush may be getting the blame for increased food prices, the real culprit is the double whammy on taxpayers in the form of government subsidies to corn growers and increased prices of anything that depends on corn (animal feed, cereals, breads, dairy farms).

The government has caused this supply and demand crisis by creating obstacles to increased energy independence and forcing an unsustainable alternative (ethanol) on the market.

Let American ingenuity do what it does best. Hybrid cars, oil exploration, refinery expansion and nuclear energy are all valuable options that have emerged from private initiative, but continue to face government-imposed obstacles.

Federal Way resident Angie Vogt: vogt.e@comcast.net. For past columns and further commentary, visit www.soundupdate.com.

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