Gas Price Demagoguery South of the Border

The Canadian press recently had a story about a think tank paper claiming oil companies are gouging consumers with overly high gasoline prices. From what I can tell, the author’s claim that there’s some optimal price for gasoline - not the one set by the market - has been demolished by most journalists.

Similar claims are being made in the US, as noted by George Will. These claims, with House Leader Nancy Pelosi leading the charge, usually come with demands for “energy independence.” But Will provides some interesting statistics and observes that energy independence would require Democrats above all to make some tradeoffs they themselves would be hard pressed to make:

As Steven Hayward of the American Enterprise Institute notes, there is no yearning for national self-sufficiency concerning other essential goods, such as food, automobiles, airplanes or medicines. Are Democrats worried about security of oil supplies? In some ways, Hayward says, America’s energy supply is more secure than it was in the 1970s, partly because “since 1975, energy consumption per unit of gross domestic product has fallen 48 percent.” Furthermore, “oil represents a shrinking share of total U.S. energy consumption — from 44 percent in 1970 to 40 percent in 2005.” The oil America consumes — only one-eighth of which comes from the Middle East — is used almost entirely in transportation, and accounts for about 40 percent of energy uses. Half of America’s electricity is generated by coal, of which America has a huge abundance.

America has about 22 billion barrels of “proven” oil reserves, defined as “reasonably certain to be recoverable in future years under existing economic and operating conditions.” In addition, there are an estimated 112 billion barrels that could be recovered with existing drilling and production technology. Make that, with existing drilling and production technology — and fewer Democrats like Pelosi who, while promising energy independence, are opposed to any drilling in the Arctic National Wildlife Refuge and much drilling offshore, where 87 billion of the 112 billion barrels are located, as is much of the estimated 656 trillion cubic feet of recoverable natural gas.

He goes on to document the ways governments force up the price of gas, with the particularly galling example of Wisconsin.

Ht: NLT